Money&Co. Brings Together Established Businesses Looking To Raise Funds With People Looking To Maximise Returns On Their Capital
Money&Co. Brings Lenders And Businesses Together
Money&Co. is a peer-to-peer business lending platform which arranges senior debt for established businesses. Money&Co. brings together lenders looking to earn an attractive return on their cash with companies keen to borrow money without the expense and hassle of a bank. Companies make loan requests through the Money&Co. website and lenders then bid for the loan and the income it generates.
What Return Can You Expect On Your Cash?
Money&Co. attributes a credit rating to each company approved for a loan. These ratings range from A+ to C+ and provide a guide to the interest rate on the loan, with A+ companies expected to pay around 7 per cent and C+ around 11 per cent. A well-diversified portfolio of loans could therefore generate a gross interest rate of around 8 per cent per annum. After allowing for Money&Co.’s annual fee of 1 per cent and another 1 per cent for potential bad debts, you could expect to receive a rate of around 6 per cent per annum, although this return and the full return of your capital is not guaranteed.
How Does Money&Co. Select The Loans?
Money&Co.'s experienced credit team subjects each application to a rigorous financial stress test. All companies must be profitable and have at least three years’ filed accounts. Borrowers are good quality SMEs who would traditionally have received bank finance. All loans are ‘senior’, secured with a debenture, and range from £100,000 to £3 million or more. Money&Co. has a sophisticated credit analysis system and a robust Credit Committee.
How Is The Interest Rate Set?
Lenders set the interest rate via an auction. Once a loan is approved and rated, it is posted on the Money&Co. website and lenders can bid. When the auction ends, the company decides whether to accept the average rate. If the bid is successful, each lender receives the rate asked for, irrespective of the average rate.
What Are The Terms Of The Loan?
Companies can request loans from one to five years. Money&Co. has a loan market, which enables lenders to sell part or all of a loan before the end of the term, subject to demand. Companies make monthly repayments, which include part repayment of capital and interest. If a bad debt arises, Money&Co. will pass the loan to a debt recovery company. If no money is recovered, the loan will be written off and lenders will lose their money. Money&Co. would emphasise that it only expects this to happen with 1 per cent of loans.
Who Is Behind Money&Co.?
Money&Co.’s CEO is the well known fund manager, Nicola Horlick.
Visit the Money&Co. website for full details.
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Crowdfunding And Peer-To-Peer Risk Warning
When a platform has been assessed and approved by a SIPP or SSAS operator, this does not imply that any loan or investment opportunity is endorsed in any way. A SIPP or SSAS operator's due diligence review is limited to ensuring the processes and procedures of the platform are in line with both FCA and HMRC principles. It's entirely your responsibility for carrying out your own due diligence on any loan or investment opportunity before agreeing to lend or invest your pension money on a platform. As a SIPP or SSAS operator will continually review platforms from a regulatory perspective, it's possible for a platform to become 'unapproved' if something changes.
With peer-to-peer lending, your capital is at risk if you lend to individuals and businesses. You may lose some or all of the capital lent if the borrower defaults and is unable to meet its liabilities. Historic loan default rates are not necessarily indicative of future default rates. In addition, lending is an illiquid investment, which means you may not be able to access the capital you lend for the duration of the loan period, even if the platform offers a secondary market. Investing in any business involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Crowdfunding is generally targeted at investors who are sufficiently sophisticated to understand the risks and make their own investment decisions, based on their knowledge, experience and financial capacity. Neither crowdfunding nor peer-to-peer lending is covered by the Financial Services Compensation Scheme. The tax treatment of your investment is dependent on your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of crowdfunding investment or peer-to-peer lending, you should consult a suitably qualified independent financial adviser.
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