Without wishing to be holier than thou, we see the wisdom of the latest government pronouncement on the use of credit offered by the British Business Bank. We have no loans of this type, and are not involved in this sub-sector, but enjoy news of the latest excursion into the sector.
Agricultural bank Oxbury has secured a £25m credit facility from British Business Investments, which it says will help it lend an additional £250m to rural SMEs.
Tim Coates, co-founder and chief customer officer at Oxbury, said the new funding line would “help accelerate Oxbury’s support for the rural economy and help farmers and food producers address the twin challenges of food security and the transition to low-carbon nature-friendly production.”
“Oxbury’s relationship-led approach, enabled by our proprietary Oxbury Earth Agtech banking platform, is essential in serving the needs of the small and medium businesses that are the lifeblood of this crucial part of the British economy.”
In total, the bank has now raised £93m in debt and equity from investors including Frontier Agriculture, Hutchinsons Group and Hambro Perks.
To date, Oxbury says it has £650m worth of completed or in progress lending, and is well on its way towards lending £1bn by the end of 2024.
Historical Performance And IFISA Process Guide
That figure is the result of over £24 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.