LendingCrowd Innovative Finance ISA

LendingCrowd took to releasing its innovative finance ISA (IFISA) in mid-January 2017 after achieving regulatory authorisation in November 2016.

LendingCrowd has made its mark, and is doing ever more so with the interest and uptake involved with its IFISA. If you are sifting through various ISA and IFISAs, especially since it’s the advent of the new tax year, we have provided a breakdown of LendingCrowd and what it is offering.

LendingCrowd overview

LendingCrowd was launched in 2014 at the behest of Bill Dobbie and Stuart Lunn. The company wanted to “offer businesses keener loan rates and investors better returns” through its online services. A couple of interesting facts about the company are that:

• In October 2016, LendingCrowd entered into a partnership with the Scottish Investment Bank (SIB). The latter agreed to invest £2.75 million in LendingCrowd, allowing LendingCrowd to invest into more qualifying Scottish companies
• LendingCrowd took another step into the world of fintech after launching the LendingCrowd app in 2015; purpose-made for investors seeking to lend

LendingCrowd IFISA

LendingCrowd’s offers three types of IFISA

• Growth ISA – 6% pa target rate – Repayments reinvested.
• Income ISA – 5.6% pa target rate – Capital repayments are reinvested. Interest paid as income.
• Self Select ISA – 8% average returns. For savvy investors. Build your own portfolio.

With LendingCrowd’s peer-to-peer growth ISA you must make a minimum investment of £1,000 to access the product’s tax free returns, which are at a target rate of 6 per cent return a year.

Security

LendingCrowd does state that it carries out a rigorous credit screening process, but there is always  the risk of borrower default. In the case of this happening, the company has a recovery process in place, although it doesn’t go much further in explaining what this recovery process is.

Automatic diversification

Whilst LendingCrowd generally allows customers to choose their own investments, with the option of using the company’s autobid feature, the IFISA is done differently. With its ISA, the firm has an instant diversification feature which splits your money automatically between at least 20 loans.

Please note that you have to perform your own diversification if you opt for the ‘self-select ISA’.

Secondary Market

To help free up you capital for withdrawal or reinvestment, LendingCrowd has a secondary market called the ‘Loan Exchange’. In the ‘my investments’ section of the company’s site, you get to see an alphabetised list of all the investments you hold, and the amount of loan parts of each of the loans you have. Whichever loan you wish to sell, you can set its loan exchange status as ‘Live’, and it is good to go.

Platform usability

To invest some, or all of your £20,000 ISA allowance, you:

• Go to the ISA page on the platform’s website and select the ‘Open an ISA’ button
• Provide your email address, set up a username and password, agree to terms and conditions
• Provide your personal details, i.e. name, address, date of birth, phone number, national insurance number and a copy of your passport or driving license
• Once you’ve provided all the necessary confirmations, you are ready add funds to your accounts and get investing

Considering investing?

This is an interesting platform for investors looking to apportion their money specifically to small businesses. LendingCrowd is very transparent in terms of its data and is user friendly, and with the level of diversification, risks arguably remain low, despite the lack of reserve fund.