Peer-to-peer lending sites: MSE guide discussion

bigadaj

elephantrosie wrote: »

jamesd- apart of isa, do you use ltd company to lower your tax on investment earnings? what is your daily job tax level?

How does the limited company work?

jamesd

elephantrosie wrote: »

jamesd- apart of isa, do you use ltd company to lower your tax on investment earnings? what is your daily job tax level?

No. I have considered it to allow higher pension contributions after retiring. I don't have income tax to pay at higher or top rate because I use high pension contributions and VCT buying to reduce my income tax bill to only a few hundred Pounds a year.

elephantrosie

what is VCT?

taylornj

elephantrosie wrote: »

what is VCT?

https://en.wikipedia.org/wiki/Venture_capital_trust

gingercordial

Pentirebob wrote: »

I'm new to all this forum thing, so not sure if I'm "in the right place". If I'm not, please advise where I'm best able to get the information I'm looking for.
I'm looking to invest in a start-up that is raising funds via Crowdcube.
Has anybody had any experience of this operation?
Thanks and regards,
Bob
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I've used Crowdcube several times for investments in shares and corporate mini-bonds. I can confirm the process seems to work well in terms of them taking the investment and issuing share certificates. For my bonds, I have received all interest payments on time plus a tax certificate e-mailed out promptly for each payment. I also received EIS certificates where appropriate although some were faster than others.

I have not (thankfully) experienced anything going sour yet so I cannot comment on how they would handle that.

One of my share investments was bought out and again communications were good and the sale proceeds came through in the stated timescale.

As I'm sure you're aware under normal circumstances there's no ability to get your money back out on demand. There is no secondary market facility on Crowdcube (Seedrs, a similar platform, does have a monthly secondary market though I have not used it). You'd have to wait for the company in question to get bought out or something similar - the documents should include the current owners' plans for an exit strategy but of course these may never come to fruition. There are also not likely to be dividends paid by small start-ups in the first few years or potentially ever, so effectively nil cash return for some time. I've therefore treated my share acquisitions more as a cost of supporting a small business I'd like to see do well (sometimes there are perks such as discounts on the product which offset this, plus the (S)EIS relief) rather than proper "investments". The bonds, however, are giving a decent return and the capital is supposed to be paid back after a set period so there is an exit strategy with those (obviously not FSCS protected so risky).

Jordan_Stodart

Has anyone got any thoughts on diversification at a platform level? Have you seen good performance investing across multiple platforms - if so, how many in the portfolio and what has worked well? Thanks!

jamesd

Jordan_Stodart wrote: »

Has anyone got any thoughts on diversification at a platform level? Have you seen good performance investing across multiple platforms - if so, how many in the portfolio and what has worked well?

There are a some risks that happen at the platform level, rather than for individual loans:

1. Platform business failure, which could leave your money invested until the normal end of the loan terms instead of giving you the chance to exist through the secondary market. This could also reduce debt collection effectiveness. The FCA requires runoff plans to be in place and suitably funded but a drop in returns is quite likely.
2. Fraud against the platform by borrowers. While some degree of fraud attempts is normal, occasionally there have been signs that a platform might have been targeted by criminal groups who discover weaknesses in its checks. An example may have been the Bondora lending in Slovakia, which had an approximately 100% default rate, mostly apparently very early in the loan term.
3. Fraud within the platform by employees or owners. A common way to steal money from a lending business is to invent fake borrowers and normal banks have had issues with this, as have a range of other lenders, though I don't know of a case in UK P2P.
4. Entirely or mostly fraudulent platforms. Very unlikely in the UK for any platform which is going through the FCA authorisation process but it's been a huge issue in China. Make sure that any place you look at which claims to be a P2P platform really is a genuine one using the information in the FCA register.

For fund investing the funds do have protection from much of this sort of risk via the FSCS, though not for the underlying investment performance. P2P doesn't even have that level of FSCS protection, it has none at all. So it's vital to diversify non-trivial amounts of invested money across several platforms to reduce the chance of a big loss due to issues that have affected just one platform.

Having started in 2008 I currently use seven P2P platforms for a total amount in or designated for P2P in the £100-200k range, with two of them just having loans left until end of term and no new money going in and a third likely to join them.

Aggregators like investUP might be interesting but it seems that their charge would take about ten percent of your total returns and not be a tax deductible expense. Maybe a way to explore but I wouldn't really want to be paying one £1-3k+ a year that a 1% charge would imply for me. Maybe play and explore but if the amounts get serious it's time to go direct to the end platforms. So far as i know there's nothing to stop you from finding deals at investUP then investing directly with the underlying platform if it gets to the point where the fee effect would become substantial.

takesyourchances

Any thought on the new Ablrate loan today and anyone going for it?

Been reading the P2P forum with regards to the security. Been awaiting new loans on Ablrate.

takesyourchances

Also see the supercar loan defaulted on Moneything today, hopefully the recovery process and sale of the asset comes through.

taylornj

takesyourchances wrote: »

Also see the supercar loan defaulted on Moneything today, hopefully the recovery process and sale of the asset comes through.

There are two super car loans from the same borrower that are moving to the defaulted loans at 14%, and suspended from SM.

The Birkenhead loans come to end of term tomorrow, and could soon be joining the supercars in the defaulted loans.