P2P Main Market Listing Announced - Plus 8% Loan Yield Latest
Mon 3rd September 2018

Followers of our peer-to-peer (P2P) lending sector of the alternative finance market may well know that the biggest P2P player, Funding Circle, has announced that it will list its shares on the London Stock Exchange's main market. Cornerstone investment will come from Danish billionaire Anders Povlsen, who has pledged to buy at last 10 percent of the company. According to Reuters, "the deal could be valued at around £300 million, according to one banker familiar with the situation". This is good news for the profile of the P2P sector, but only if the deal is properly priced. An aggressive valuation would have aftershocks very damaging to investor confidence in the P2P sector (just Google "Lending Club" for what happened to the US sector). We'll be commenting further on this later in the week.

Money&Co. Lenders' 8 Per Cent Yield

Our lenders have achieved average returns of over 8 per cent on the more than £12 million facilitated by Money&Co. in the past four years. Our latest loan offering is A-rated and property-backed with a fixed-rate yield of 8 per cent, and a term of five years. It's proving popular, and is currently 67 per cent filled. All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (ISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income.

A Process Guide To Innovative Finance ISA Investment

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:

Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.

The ISA allowance for 2018/19 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.

Tags: Funding Circle, P2P investment, risk analysis

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