News Briefing - Crowdfunding, SME And Alternative Finance

crowd concert

The essentials are here and will be regularly updated. If you want to be well-informed about the investment crowdfunding scene, and you're short of time, this is the place to visit.

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1.UK – P2P

 

Freak statistic of the week comes from Zopa, swallowed whole by P2P Finance News.

 

“ZOPA investors have funded enough car purchases to fill a traffic queue stretching from London to New Delhi, the platform claims.

The peer-to-peer lender, which reached £3bn of loans last week, has been disclosing where the funds have ended up.

Its loanbook has helped get 147,000 cars on the road, the platform revealed in a blog post on its website on Friday.

In 2015 the number of car loans funded would have gone as far as Istanbul, it said, but the number would now would reach near New Delhi.

As well as car loans, the platform said it has provided finance for 95,000 home improvement projects and has helped consolidate 129,500 debts into a more manageable form.

“In practice this means that, once they’ve been approved, our customers can trade in their expensive credit cards for a better value Zopa loan, swapping the monthly management of multiple card and loan payments for just one transaction,” Zopa said.

“So, it makes it easier for people to get debt-free and lightens the admin load on the way.”

Zopa hit the £3bn lending milestone last week just after reopening to new investors.


2. UK – EIS

 

Recent key information document-inspired criticism of the EIS sector is based on a fundamental misunderstanding of how EIS managers can benefit their investee companies, argues Andrew Aldridge in Professional Adviser.

“There has been some discussion in the media recently about the nature of key information documents (KIDs) and, in particular, how they relate to Enterprise Investment Scheme (EIS) products - with some critics suggesting there is lack of transparency with regard to this sector…

The biggest issue with transparency then, and perhaps now, is that managers disclose what they charge the investor but not always what they charge the investee company. For our part, we have always disclosed what and how we charge investee companies and believe it is important to do so.

Most of the media ‘noise' at the moment though is coming largely from those providers that charge the investor a fee, with parallels being drawn between the fees charged to an investor and those charged to the investee company. In my view, however, there is a huge and significant difference between the two - in effect, those attempting to criticise are choosing to compare apples with pears.

As an example, the fees charged to an investor are binary. Let's say we have someone investing £100,000 via an EIS and, for simplicity, let's say they make a three times return on that investment. If they are charged 5% on the way into the investment, they could claim £28,500 (30% of £95,000) in income tax relief and their three times return would return £285,000 (three times £95,000, excluding any performance fee).

If there is no charge on the way in, however, they could claim up to £30,000 (30% of £100,000) in income tax relief and the three times return would return £300,000 (three times £100,000, excluding any performance fee). There is therefore a potential difference to the investor of £16.5,000.”

3. UK – Equity

 

FT Adviser on a “challenger” bank’s launch of a crowdfunding platform.

 

“Triodos Bank has launched its own crowdfunding platform, offering a range of bonds and equities issued by organisations focusing on positive social and environmental impact.

The platform, www.triodoscrowdfunding.co.uk, is the first to be launched by a bank, and will allow investors to hold the investments in an Innovative Finance Isa (IFISA).

It will launch with bonds paying between 5 per cent and 7.5 per cent a year, including an investment in a community-owned solar farm.

People can invest as little as £500 in the bonds on the platform.

Triodos said the investments “have been extensively screened by Triodos for social and environmental impact, the viability of their business model and the credibility of the management team”.

Bevis Watts, managing director of Triodos Bank UK, said: “We’ve been crowdfunding since before it became a well-known term. With the new Triodos Crowdfunding platform we’re recognising the huge potential of crowdfunding and responding to demand for Innovative Finance ISAs.

"Investors are looking for opportunities that allow them to support progressive companies, social enterprises and charities making a positive impact, while also receiving good long-term returns."

The three current investments include Mendip Renewables, which pays 5 per cent a year, increasing in line with RPI inflation and repayable over 17 years. This project aims to take a 5MW operational solar farm in Somerset into community ownership. An estimated £1.4m of profit will be contributed to a community benefit scheme over the life of the project.

Investors can also back Thera Trust, which provides home for people with complex learning disabilities, which offers 5.5 per cent interest per year over a 6-year term.

The third investment is Rendesco, which is rasing £5.5m to develop green energy from ground source heat pumps and is paying 7 per cent interest per year over a 7-year term. The aim is to develop 100 sites, with a focus on retirement homes and providing low-carbon heating to keep the elderly warm.”

 

 

4. UK – AltFi

 

Adrian Boulding blogs on open banking in Professional Adviser.

 

“'Open banking' could mark the start of a new era of digital financial transparency that will impact every corner of personal finances from retirement savings to life assurance and beyond, predicts Adrian Boulding

On 13 January 2018, ‘open banking' went live in the UK, underpinned and indeed required by the EU's second Payment Services Directive - or ‘PSD2'. So what, I hear you ask, is open banking and what should it mean to consumers and financial advisers?

Open banking is a framework of standards and protocols that has been thrashed out by the Open Data Institute on behalf of HM Treasury to enable specified data to be sent between banks and FCA-regulated third parties - and all authorised by customers themselves.”

  

5. International – FinTech

Crowdfundinsider reports:

“Fintech and cryptocurrency solutions company Tech Bureau noted that that Japan’s first online bank, Japan Net Bank, Limited is testing blockchain technology integrations using mijin and Hyperledger and has initiated a proof-of-concept project to evaluate to utilize the cryptocurrencies for paperless contract administration, scheduled to be completed end of March 2018.

Crowdfund Insider awaits comments from both parties.

The innovation will relieve Japan Net Bank’s cumbersome drafting process which  involves abundant back-and-forth of emails and paper documents during the agreement process. Such a process increases the opportunity for document falsification. By integrating blockchain technology, Japan Net Bank aims to create an unfalsifiable ledger of file views, edits, approvals, and rejections to massively improve contract drafting.”