Small business lending platform Funding Circle announced last week it has opened its Innovative Finance ISA (IFISA) to new investors. The online lender reports that the Funding Circle ISA now offers a tax-free projected return of 7.2% or 4.8% per year. to quickly build a “unique and diversified portfolio.” It was also reported that approximately £80 million has already been lent to thousands of businesses through a Funding Circle ISA since opening to existing investors last December.
Funding Circle then explained that there is the option to access funds early by selling loans to other investors at no extra cost. Currently, 98% of loans put up for sale are sold to another investor within 24 hours. To date, over £197 million in interest, after fees and bad debt, has been earned by investors. James Meekings, UK Managing Director and Co-Founder of Funding Circle, stated:
“We’re proud of what more than 79,000 investors have achieved over the last eight years by lending through Funding Circle. On average investors have earned 6.4% per year after fees and bad debt, creating tens of thousands of jobs by supporting businesses all over the UK. We’re excited to now offer tax-free access to this stable and attractive investment option.”
In terms of long growth, Funding Circle reported that if an investor uses their full ISA allowance of £20,000 to lend to businesses for five years at the current projected return of 7.2%, they could earn an estimated £8,635.77 in interest, resulting in a total portfolio of £28,635.77. By setting up a standing order for £150 a month, after 15 years this portfolio could have grown to over £100,000. Funding Circle then added:
“The Funding Circle ISA is an Innovative Finance ISA, a new type of ISA separate to Cash and Stocks & Shares ISAs. It is also a flexi ISA, allowing investors to take their money out of their account and put it back later in the tax year without losing their tax-free entitlement. To help investors diversify and spread their risk, there is an initial minimum investment of £1,000. Investors will be able to transfer existing ISAs into a Funding Circle ISA later this year. By bringing together industry-leading risk management policies and cutting-edge technology, more than £3.4 billion has been lent to 35,000 UK businesses. This has provided access to finance for the businesses responsible for 60% of UK GDP and 50% of UK private sector employment.”