Sponsored post: time to think outside the bank?

LendingCrowd explains how it has moved into the mainstream with TV and ISA success.

Two years ago, a new type of Individual Savings Account (ISA) was unveiled by the Government, aimed at increasing choice for investors and broadening the sources of finance for borrowers.

The Innovative Finance ISA (IFISA) enables investors to lend up to £20,000 each tax year directly to businesses or individuals – known as peer-to-peer (P2P) lending – with no income or capital gains tax to pay on their returns*.

Banks have been lending their customers’ money to businesses for centuries, but now you can get in on the act thanks to online P2P platforms such as LendingCrowd, which is fully authorised by the Financial Conduct Authority.

LendingCrowd was one of the first companies to launch an IFISA, aimed at those willing to take additional risk when seeking higher returns than cash savings.

Official figures from HM Revenue & Customs show that Cash ISAs, which have been available since 1999, are falling out of favour.

Savers subscribed to 8.5 million Cash ISAs in the tax year ending 5 April 2017, down from 10.1 million the previous year, while the total amount saved tumbled by a third to £39.2 billion.

Why has the popularity of the Cash ISA declined so sharply?

Well, rock-bottom interest rates mean the average return for savers stands at little over 1%, according to personal finance data provider Moneyfacts.

That’s well below the current rate of inflation, which means that savings held in many Cash ISAs are actually falling in value once the rising cost of living is taken into account.

LendingCrowd’s original IFISA product, the Growth ISA, is designed for those who want a quick and simple way of creating a diversified portfolio of secured business loans.

By automatically reinvesting their interest and capital repayments, the Growth ISA has actually delivered an average return for investors of 8.5% – more than three times the rate of inflation – as shown in the chart below.

Please note that past performance does not guarantee future returns. As an investor, it’s important to remember you are lending to businesses so your capital is at risk.

The platform’s new Income ISA works in a similar way, with the key difference being that investors can take their interest as income while their capital repayments reinvest automatically.

This makes it ideal for those who want to generate a consistent level of income from a lump sum without eating into their capital. The target return for the Income ISA is 5.6%**.

Savvy investors know that diversification is the best way to help manage risk – in other words, don’t put all of your eggs in one basket.

The longer an investor holds a Growth ISA or Income ISA, the more diversified their portfolio will become, as the platform automatically invests in new loans on their behalf.

Spreading investments across as many businesses as possible means the impact is reduced if a borrower can’t repay their loan.

Small firms are the backbone of the economy, accounting for more than 99% of the business population, and they are increasingly thinking outside the bank when it comes to their finance options, creating more opportunities for investors.

Research published in February by the Government-owned British Business Bank showed that the total value of peer-to-peer business lending across the UK rose by 51% to almost £1.8 billion in 2017.

LendingCrowd more than trebled its lending to small businesses last year and is on track to maintain that momentum in 2018, thanks to its rapidly growing community of individual investors.

As the platform continues to grow, it recently launched its first television advertising campaign, designed to bring the opportunities available through P2P lending to an even wider audience.

LendingCrowd broadcast advert from LendingCrowd on Vimeo.

If you open an account with LendingCrowd and invest between £5,000 and £20,000 before 30 April 2018, you can receive a bonus of up to £400 on your investment.

By joining thousands of other LendingCrowd investors, you can lend to creditworthy British businesses, providing them with much-needed support and generating real benefits for the economy.

In return, your money has the opportunity to work harder for you. Find out more at Lendingcrowd.com or call 0345 564 1600.

This is a paid promotion by LendingCrowd. The views expressed do not necessarily reflect those of loveMONEY

*As an investor, it’s important to remember you’re lending to businesses so your capital is at risk. Tax treatment depends on the individual circumstances of each investor and may be subject to change in future.

**Capital at risk. Target rate is variable, net of ongoing repayment fees and bad debt.