Crowd2Fund Innovative Finance ISA
Crowd2Fund does not operate a reserve fund, however loans are typically secured against personal guarantees or business assets. In the event of a borrower defaulting on their loan, Crowd2Fund will work on behalf of the lender to recover as much of the debt as possible.
Target Rate8.7% p.a.
Crowd2Fund was one of the first peer-to-peer platforms to get regulatory approval for the innovative finance ISA (IFISA). In fact, it received full approval in March 2016, before the IFISA was even officially launched a month later.
The speed at which it received its approval was down to the fact that it had already been authorised by the FCA as far back as October 2014 (the year of its launch), whilst many peer-to-peer lenders still seek approval to this day.
Crowd2Fund ISA Overview
Crowd2Fund operates on the premise of providing investors with better value returns by connecting investors and borrowers directly, and effectively cutting out the banking middleman.
It also works on the principle of making investment products available to the masses, not just the super-rich. Here are some of the things it’s achieved in its few years of existence:
- In 2014, Crowd2Fund attained membership at the Crowdfunding Accreditation for Platform Standards (CAPS) in a bid to ensure that it adheres to best practice crowdfunding
- In 2014, the business also became a member of Innovate Finance, a membership trade body, introduced to promote fintech innovation in the UK financial services
- Other associations the platform is a part of are the UK Crowdfunding Association, the Information Commissioner, the European Crowdfunding Association, UK Business Angels Association, the Westminster Crowdfunding Forum
- Crowd2Fund was the world’s first ever regulated five-model platform (i.e. offering five crowdfunding models under one roof) across both debt and equity crowdfunding investment vehicles
- In March 2016, Crowd2Fund welcomed the global market to its platform. The doors were opened for lenders from 163 countries around the world to register to invest in pioneering UK businesses
- In July 2016, the company launched ‘Smart-Invest’, an intelligent feature allowing investors to automate their lending
- Crowd2Fund’s statistics include: 0 per cent average late payment calculations from July 2015 to June 2016, a 0 per cent default rate since launch, estimated default rate of 0.5 per cent for 2017 and around £4 million has been lent since the platform’s launch
Crowd2Fund launched its IFISA in April 2016, soon after the product was launched officially by the government, and the firm’s borrowers consist solely of UK businesses.
The ISA lets you invest up to £20,000 in a tax-free wrapper, and has an estimated APR of 8.7 per cent.
There are no fees to open up an account, whilst there is a 1 per cent annual fee on interest and capital payments to the investor. You also face no fees in withdrawing your funds.
How to invest in Crowd2Fund’s IFISA
There’s a pain free process in setting up your IFISA, whereby you must first fill in your name, email address, confirm the country you’re based in, followed by setting up a password.
You must then activate your ISA by confirming your national insurance number, after which you’ll have to option to transfer in any old ISAs you may have, and set up automated investments through ‘Smart-Invest’.
You’ll then be able to view your portfolio, browse investment opportunities and even look at investments available for purchase from other investors. The whole set-up is very engaging and rather good at making the investor feel involved and part of an investment community. This is particularly evident in the social media style layout, much like a social media home page, showing recent investor activity such as who’s joined, who recently invested in what and so on.
Whilst the investments aren’t automatically diversified, investors have the option to opt-in to the platform’s aforementioned ‘Smart-Invest’ program. Borrowers are chosen based on your desired savings plan as well as your risk appetite. After you choose your investment amounts and desired interest rate, Crowd2Fund will then invest for you.
Crowd2Fund’s secondary market is called ‘The Exchange’. It’s another very engaging part of the website which will allows you to trade your investments to other investors, and means that access to your cash is flexible – depending on whether someone is interested in that particular opportunity.
Those who wish to liquidate their loans early through The Exchange will be at the mercy of the market, meaning a fast sale would require a worse deal on your part.
Crowd2Fund’s has a team of credit analysts reviewing the creditworthiness of businesses before allowing them onto the platform. Additionally, credit reporting agency Equifax checks the risk ratings for each business.
If a business you have invested in fails, there is no regulatory protection from the FSCS, and there is nothing in place to ensure that the company or Crowd2Fund will repay your capital.
Although there is nothing in place to protect against things such as default or non-repayment, the historic performance of Crowd2Fund’s default rate (0 per cent) is compelling.
However, it is important to note that historical trends are not a good indicator of future performance, and there are still other risks to consider when engaging in peer to peer lending.
For many, peer to peer lending is an exciting opportunity to get involved in stimulating the economy by supporting some interesting small businesses with your investments. From tech firms to quarries, gaming companies to cookery schools – choose what growth you’d like to be a part of and hopefully, reap some great rewards.
Updated: Friday, November 30th, 2018