Richard Litchfield, Head of Operations at peer-to-peer lending platform Lending Works, talks you through the details.  

Still keeping your cash locked away in a savings account? Recent figures have shown that over 99% of saving accounts aren’t keeping pace with inflation — meaning that those looking to maintain or grow their wealth may need to look to investing instead (Mirror).

While the risks of investment can be daunting for some, there are low-risk opportunities out there. Peer-to-peer (or P2P) lending is a relatively low-risk investment which can offer much better rates than the interest on the average savings account (our current rate is 6.5% over five years). Not only can P2P be lucrative, but it can also be much less hassle than complex investments like stocks or shares, so it’s an excellent choice for those who are looking to start a portfolio. And, with the FTSE 100 hitting a six-month low after the IMF slashed global growth forecasts back in October (Guardian), the stock market is rapidly beginning to look like a less appealing option.

Here, I’ll explain the basics of peer-to-peer lending, along with a few tips for getting started and maximising your profits.

How does peer-to-peer work?

Peer-to-peer lending is a new sort of platform which matches up investors with borrowers looking for a personal loan, all of whom been vetted in advance for creditworthiness. This platform essentially takes the middleman out of the lending process (the role which would traditionally be played by a bank or building society), meaning that both investors and borrowers benefit from better rates. Investors can kickstart their P2P portfolio with Lending Works from as little as £10, and can choose how long they want to invest their money for.

Some platforms also allow you to select your own borrowers, or you can let the platform handle this on your behalf. More experienced investors might prefer the control that this offers, while others just like to sit back and let the P2P platform handle the finer details.

What sort of returns could I make?

Returns are linked to the length of your investment term: the longer you invest for, the higher the returns will be. Currently, we offer investors 5% per annum over 3 years, but this figure rises to 6.5% p/a over a 5-year term. While long terms are best for profits, you may want to choose a shorter term if you want more flexibility or need to see returns more quickly.

What are the risks? Is there any protection?

Of course, there’s no form of investment which can ever completely guarantee you’ll make a profit, nor is there any investment strategy which doesn’t involve some form of risk. But, because peer-to-peer lending diversifies your investment across lots of different loans, your losses are balanced by your profits if a borrower defaults on their repayments.

In addition to diversification, there are also other protections in place for investors. Some platforms have a reserve financial fund, which helps to cover any losses caused by borrowers defaulting. Peer-to-peer lenders are also regulated by the Financial Conduct Authority, which means that they must consider how to safeguard investor’s money in line with official regulations.

How can I maximise my profits?

If you want to see competitive returns, then there’s one rule to bear in mind: invest for the longest possible period you can afford. While many P2P lenders will allow you to withdraw your money earlier for a fee, it’s always better to leave it for as long as possible, as you could potentially see much higher returns this way.

I’d also recommend re-investing your earnings straight back into more loans: after all, there’s little point leaving your profits to sit in a savings account, as they won’t keep pace with inflation. Many platforms allow you to automate this process to make it even easier.

If you’d like to learn more about peer-to-peer lending, take a look at the government website to find more information, including details on how any earnings you make will be taxed.

Consumer trust in banks has plummeted in recent years. The 2008 financial crisis, as well as recent examples of bad practice such as TSB’s IT meltdown which compromised millions of accounts, has led to many consumers questioning whether their bank really has their best interests at heart. Indeed, RBS chief Ross McEwan recently predicted that it could take up to a decade to rebuild lost customer trust following decades of poor treatment.

In fact, as many as one in five customers (20%) no longer trust banks to provide them with a loan – ostensibly one of a bank’s primary functions.

Despite this mistrust, consumer appetite for credit remains high. We’re therefore seeing a rise in alternative lenders offering customers the flexibility and transparency customers desire - and which many traditional banks have conspicuously neglected – which could spell the end of the traditional banks’ role as leaders in the lending sector.

But how has the lending process evolved and what does this mean for traditional banks?

The rise of new consumer lending models

While consumers are willing to borrow outside of traditional banks in the wake of these institutions having cut back on unsecured lending, they will no longer trust a provider which does not operate transparently or ethically – as evidenced by the collapse of Wonga. This, combined with recent regulatory action from the FCA, has heralded a wave of change within the financial lending sector.

Following the lead of disruptive, digitally-focused providers such as Uber and AirBnB in other sectors, a number of fintech disruptors - such as Atom and Monzo - have materialised. These brands have analysed the day-to-day banking issues customers face – such as a lack of transparency and poor user experience (UX) - and designed their services from the ground up to mitigate these issues.

From taxi apps that invite you to register a payment mechanism, to autonomous vehicles that pay for their own parking or motorway tolls, “banking” without the need for a bank will gradually become a more everyday experience. In this vein, so too will consumer lending change through organisations that offer finance at the point of sale itself – both online and in-store - moving from traditional pre-purchase credit to a far more seamless service.

Flexible point-of-sale lending is changing the nature of financial transactions across a range of sectors, including how to fund a holiday, buy a house, and even pay for medical treatments at a rate which suits the customer. The potential of this lending method is huge, with more than three quarters (78%) of consumers saying they would consider using point-of-sale credit in the future.

What does this mean for traditional banks?

People seldom wake up in the morning thinking “I must do banking”. Banks don’t tend to inspire the levels of consumer loyalty seen in other sectors, and they must therefore work far harder to retain customers. Given this, the ongoing reticence of banks, to both lend and offer customers what they want, has created a gap in the finance market, which could be the death knell for traditional banks if left unchecked.

As frictionless point-of-sale lending businesses and customer-centric fintech brands continue to thrive, several key banking functions – such as money management and consumer lending - may be replaced entirely by newer, more agile providers. For example, could the fact that providers are now offering finance in the property sector put an end to the traditional mortgage?

If this growth of smaller, more agile disruptors continues, banks are highly likely to see reduced customer numbers. It was recently predicted that banks could lose almost half (45%) of their customers to alternative finance providers, and if banks do not adapt their offering there is a real danger they may be driven out of the market altogether.

Simply put, if banks do not place a greater focus on what customers want – flexibility and transparency – their status as the stalwarts of the lending market may soon be a thing of the past.

A bridging loan is very different from a standard bank loan, but how so? Financing expert at ABC Finance, Gary Hemming explains the ins and outs of a bridging loan for Finance Monthly.

A bridging loan is a type of short term property backed finance. They are often used to fund you for a period of time whilst allowing you to either refinance to longer term debt or sell a property. Finding a bridging loan can be difficult, but leading online comparison sites can help you compare types of loan and the best loan for you and your needs.

Bridging loans are usually offered for between 1-18 months, with the loan repayable in full at the end of the term. Unlike other forms of borrowing the monthly interest is often rolled into the loan, meaning there are no repayments to make during the term of the loan.

The application process is usually far simpler than for other types of borrowing and applications can complete very quickly, usually in 5-14 days.

Bridging finance can be offered against almost any property or land and can be used for a number of different reasons. The main uses are:

• Purchasing a property quickly – such as auction purchases
• Buying uninhabitable property
• Funding property restoration or conversion work
• Repossession prevention
• Buying property under market value

Other than that, it can be used to secure the end life of seniors by buying senior life insurance policy. Such policy can be found in Seniors Life Insurance Finder.

The pros and cons of bridging loans

Bridging loans are undoubtably a very useful tool when looking to raise finance, but they can be riskier than other forms of finance. As such, it’s important to carefully consider your options before proceeding and specialist advice is always recommended. There are a number of pros and cons to consider before committing to a loan and online jobs for college students.

Pros

• Applications are usually completed in under 14 days, making them ideal when funds are needed quickly.
• As there are often no monthly repayments to make, bridging finance can be used to raise capital where cash flow is tight, but you have the assets to comfortably repay the loan.
• The bridging market is very competitive, and this is leading to a reduction in interest rates. With rates starting from as little as 0.37% per month, bridging finance has never been cheaper.
• Where properties are being purchased under value, lending can often be based on the full value of the property, meaning it’s possible to purchase a property without a deposit.
• Bridging loans can be used to purchase properties that would be ineligible for borrowing using other types of borrowing, such as property that is not habitable.

Cons

• Bridging loans are more expensive than traditional mortgages. Although rates are dropping, traditional mortgages are still by far the most economical option for most property transactions.
• As most loans are very short term, if you have problems with your chosen method of repayment, you can face major issues. Failure to repay the loan at the end of the term would eventually lead to repossession, and most likely significant costs.

Things to consider before taking out a bridging loan

There are a number of key things to consider before taking out a bridging loan, taking the time to consider:

Always Consider Total Cost

When comparing products from different providers, always consider the total cost of the loan, rather than just the interest rate. People often chase the lowest interest rate, but many lenders will charge large exit fees, fund management fees and other ‘hidden’ costs.

Always ask for a breakdown of the total cost of taking the loan before proceeding as this makes it much easier to compare different providers.

Is Your Repayment Method Viable?

The main danger when taking out a bridging loan is that you will be unable to repay the loan at the end of the term. Always consider how the loan will be repaid upfront and make sure the proposed exit is viable.

If you’re planning to sell your property, make sure the term of the loan gives you sufficient time to find a buyer and for the sale to complete. If you’re forced to pursue a quick sale, you could end up receiving far less for your property than you would like.

If you plan to refinance onto a longer-term loan, you should check that your application is likely to be accepted. Where possible, aim to get an agreement in principle from your chosen lender before completing on your bridging loan.

Am I Getting the Best Possible Deal

The difference in cost between different providers can be significant. In addition, some lenders can only be accessed through a limited number of brokers, meaning you may not be able to access the lowest rates.

By checking with 2-3 providers, you will give yourself the best possible chance of securing the best deal.

In recent years a new way of investing has emerged, Peer to Peer (P2P) lending, and although this sector is growing fast, many people have yet to properly understand what it has to offer, how to participate and what risks are involved. This week Finance Monthly has heard from Relendex, a P2P commercial real estate lending platform on the myths surrounding P2P lending.

The first important thing to grasp is that Peer to Peer lending is a new way of investing and not an asset class in and of itself. It provides the opportunity to access investment returns that are not necessarily available elsewhere. The whole point of the structure is to bring together a number of people to meet a funding requirement via an online platform. The operating costs of the platforms are typically much lower than other types of Investment Company, this often provides a better deal for lenders and borrowers.

Though P2P is perceived in some quarters as “new”, the UK’s oldest P2P lender started business in 2005 and has now lent in excess of £2 billion. The Financial Conduct Authority (FCA) took over regulation of the sector in 2014 and most serious players are fully regulated through a rigorous process developed by the FCA to make sure that these businesses are regulated just as robustly as any other financial services business, in order to protect the interests of their customers. Since 2012, the UK Government has been supporting the P2P sector by lending large sums of public money through various platforms.

There are an increasing number of players in this market and they tend to focus on different types of proposition. It is important to remember that P2P platforms are as different as chalk and cheese. Some are fully-authorised by the FCA, reliable and professionally run with a good track record and reporting. Others are not. Platforms cover a wide range of asset classes. The most common areas are those lending to small to medium sized businesses (SME Lending) (mostly unsecured), consumer lending (unsecured) and property lending (usually secured). As we’ve said, P2P is an enabling structure not an asset class so it’s really important to understand where your money is being deployed. You will also find that some P2P platforms allow you to choose an individual opportunity and others will invest your money across a range.

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One of the fastest growing parts of the market is property lending, which grew by 88% from 2015-16. This part of the market has grown significantly as it seems the High Street banks, are unable to meet the demand from developers to deliver new and refurbished homes at a rate the current housing crisis demands.

Relendex was one of the first P2P lenders to enter this market and it allow individuals to select which projects they are attracted to and they choose how much money they want to invest – from as little as £1000. All of their loans are secured by a First Charge over property and they have returned an average of just over 8.5% per annum and although they will lend up to 65% of the value of a particular property, the average since they started business is actually below 60%.

As the established bricks and mortar banks pull out of many areas of lending, especially the making of development loans to SME house builders, Michael Lynn, Relendex's CEO, confidently predicts that if the UK is to have any chance of building the homes it desperately needs, the P2P sector must step into the financing gap. It seems that the future is bright for P2P financing with the prospect of continued dramatic growth over the next decade.

So a few tips on what to consider when looking at getting involved in P2P:

• Is the company FCA regulated? The Platform itself should be regulated. Be wary of platforms that cite a 3rd party's regulated status.
• Does it have a track record?
• Are the claims it is making for its rate of return evidence based?
• Does the management team have the expertise relevant to their sector, or are they relying on an algorithm untested in a downturn?
• Are the loans secured on assets?
• Are asset valuations and LTVs conservative?
• Does the platform offer an Innovative Finance ISA wrapper?
• How easy is it to withdraw funds and what, if any, are the costs?

PSD2 had been previously described as a game changer for the financial industry, that was set to have a substantial impact on how mobile payments are conducted and authorised. Along with the challenges that face the mobile payments industry, there are also sizeable advantages to the new payment services directive that offer increased security for its users and a level playing field for payment providers. Shane Leahy, CEO of Tola Mobile, explains for Finance Monthly.

Since its inception in January 2018, many businesses which already operate within this space have argued that PSD2 hasn’t made an immediate and significant impact within their processes like they thought it would. Having said that, it is clear that PSD2 has bought a whole host of benefits and opportunities for new players to enter the market and produce a strong, customer-centric offering.

Whilst it was initially reported to be disruptive, the new regulation update has allowed for a real opportunity to move out of digital services and into a new era of payment services. PSD2 is helping to standardise and improve payment efficiency across the EU fintech industry, all whilst promoting innovation and competition between banks and new payment service providers.

PSD2 not only encourages the emergence of new payment methods in the market, it also creates a level playing field for new and existing service providers to innovate, create and ultimately give customers increased choice and availability. It puts the customer back in charge and offers a secure protection of data regulations that merchants will have to abide by.

One of the biggest impacts for mobile payment providers has been the imposition of spending limits on the Mobile Phone Network Operators (MNOs). For them, and companies who are operating under the PSD2 exemption, the maximum transaction amount a subscriber can be charged is £240 per month. This is all for voice, SMS, data and third party products either offered and available to the subscriber.

Another impact has been the requirement for a two-factor authentication process on every payment, and the restriction on the ‘billing identifier’ being taken by the payment provider from the network. In this instance, the billing identifier is the mobile phone number, and this has to be provided by the subscriber during the discovery phase of the acquisition of the mobile payment. This aligns the process more closely to credit card payment acquisition. By having a two-factor authentication, a new level of payment authorisation and transparency not previously seen in mobile payments has been discovered. This brings new levels of trust that is more commonly associated with credit cards, but with more ease of use and convenience of using your mobile phone number to make purchases for goods and services.

Some banks within the industry have grasped PSD2 with both hands, including Dutch client bank, RaboBank. RaboBank is creating its own mobile ecosystem around mobile payments with a rich choice of value-added services, as it looks to move its customers from a SIM-based mobile payments model into the cloud - and becomes one of the first banks to tap into what PSD2 allows banks to do.

Recent reports from MobileSquared have seen that ticketing could be one of the biggest industries to be affected by PSD2, with a third of customers in the UK being keen to start using charge to mobile to buy low-value tickets such as bus fares and train tickets. PSD2 opens up the market to a full transformation that will allow big ticket items to be sold using direct carrier billing. This brings a whole host of benefits for ticketing merchants and its customers, that can benefit from a seamless payment system, quicker processing times and easily accessible.

With the continued effects of the new directive set to be felt across the next 24 months, payment providers in the European Union must ensure they are compliant with the regulations of this well anticipated update.

The customer is at the core of PSD2, and banks, merchants and new payment providers will be looking to become completely compliant with the changes to suit a more customer-centric offering. Payments via any IoT devices will become a more popular method for customers and merchants will look to push more mobile payments due to lower processing fees, subsequently empowering the customer even more. As the industry sets to move towards a more open and intelligent banking ecosystem, financial institutions and fintech companies should embrace the impact PSD2 is having and understand that it will continue to have an ongoing significant impact on their offering throughout 2018.

To hear about Nucleus’ asset based lending facility, Finance Monthly speaks to Corporate Sales Director Ian Bath, who joined the company in July last year and has been working on developing their mid-market ABL business since then.

What is the Nucleus approach when providing asset based lending (ABL) to companies?

At Nucleus, our approach always starts with getting a good understanding of the business we are dealing with, the people behind it, and what they are looking to achieve. With the benefit of this understanding we can start to tailor a package of facilities that not only covers the anticipated needs, but the inevitable bumps along the road that every business experiences as well.

The Nucleus ABL offering includes not only invoice finance, but extends to stock, plant and machinery, and property as well. We have no hard and fast rules around the mix of assets that comprise the borrowing base, and will often fund assets that others may exclude, making our solutions truly flexible.

A particular specialism within Nucleus is funding contractors who operate within the construction sector.

What are the advantages of asset based lending for companies?

Asset based lending frequently enables companies with a strong asset base to get more leverage out of their Balance Sheet than traditional senior debt can provide. It is particularly appropriate for businesses going through a period of change - when they need to invest in growth. Cases where EBITDA is still modest, but the outlook shows an improving trend would be a good example of this. In these situations, it is difficult for a senior debt provider to get comfortable with lending against next years’ income in the same way as a secured lender can. Additionally, ABL facilities typically have fewer covenants than traditional types of lending, making the availability and predictability of funding more stable in times of uncertainty - as we are experiencing at the moment.

Can you talk us through some of the recent trends that Nucleus has observed in the ABL space?

The number of players operating in the space has increased significantly in recent years. Whilst Nucleus has traditionally focused on SME businesses, we have seen an increasing demand in the Mid-Market, and increased our funding threshold to £50 million in 2017. This is a factor of the so-called Alternative Lenders focusing on smaller opportunities and the American Banks hunting out sizeable cross border deals. Increasingly ABL within the High Street banks is working in conjunction with their leveraged finance teams and the basis on which deals are structured is heavily influenced by them, rather than more traditional ABL values.

We have also seen ABL and Private Equity working much closer together as their understanding of our offering, and the value we can bring to a transaction, has improved.

What are Nucleus’ goals for the future of your ABL practice?

We are committed to continuing our support for businesses in a range of industries and sizes, with our flexible offering of products. In 2017, we doubled the total amount that we have lent to businesses to £700m and this year, our ABL product will continue to play a significant role in Nucleus’ growth plan over the next 12 months and beyond.

CASE STUDY:

Key Stats:

Type:  Invoice Finance

Borrowed: £8m

Industry: Manufacturing

EXPERT TOOLING AUTOMOTIVE LTD.

Expert Tooling Automotive Ltd. came to Nucleus because they needed to replace their existing ID facility whilst retaining the same pre-payment and funding limit.

Established in 1972, Expert Tooling Automation Ltd. is a highly respected supplier and manufacturer for the British automotive industry. Expert is the largest Automation System builder in the UK, supplying specialist assembly line components to clients including Jaguar Land Rover, Aston Martin and Nissan.

The business has gone from strength to strength in recent years, increasing turnover by five times in under seven years. Previously funded by a bank, they needed to replace their existing Invoice

Discounting facility when their provider pulled back funding. Although still retaining a solid balance sheet and order book, after several overseas contracts ran into difficulty. Expert were asked to seek alternatives.

After consulting their broker, Expert was recommended to several finance providers. The deal was complex, with a high concentration needed for one of the debtors and it required a specialist understanding of the industry to structure the facility appropriately and support the client’s operations. Nucleus was the only funder who were able to fully meet their requirements and was able to match the previous provision and deliver the bespoke £8m Invoice Discounting facility that Expert needed.

Nucleus team spends time getting to know all the businesses that the company funds and this client chose them because of the flexibility and the direct access to decision makers that they offer.

Angelo Luciano, CEO: “Nucleus took the time to understand our business and the challenges around the nature of our project related trading. Nucleus offered a flexible solution that allows us to have other sources of funding where appropriate.”

Chirag Shah, CEO, Nucleus: “It’s personally rewarding to support businesses that represent the heartland of the British manufacturing and construction industry, a profitable sector that contributes to job creation and driving the UK economy.”

Contact details:

Email: contact@nucleus-cf.co.uk

Website: https://nucleuscommercialfinance.com/

Starting a small business is the ultimate working dream for many. When you take the plunge to finally make it happen you’ll have lots to think about. One of the major considerations will be securing funds.

If you’re starting off a new business you may need a hand to get your vision off the ground. An organisation like SCORE could provide the support you need; it’s a Small Business Administration that has helped thousands of small businesses launch and grow.

Bear the following tips in mind as you start the process of securing investment for your small business:

1. Start early

If you have savings that you can put towards launching your business or expanding it, make it one of the first things you do. If you’re looking to secure investment and raise funds for your business, you’ll be impressing potential investors by showing them that you’re committed to your idea and backing it with your own money.

2. Have a plan

If you want to be taken seriously by investors, you need to make sure you have a growth plan in place so that you’re able to demonstrate a realistic outlook for further expansion.
This will give investors the confidence that you are serious about your plans. Investors will expect a long-term plan for development, with detail and forecast revenue; a good idea in isolation isn’t enough.

3. Recruit well

If your start-up is larger than a one-person operation it’s essential you have a solid team of people behind you. An experienced, enthusiastic and knowledgeable team around you provides potential investors with confidence. Choose wisely!

4. Approach experienced investors

Background research will prove whether or not a potential investor has experience when it comes to companies similar to you. You should ideally approach those who have a good track record when it comes to helping businesses comparable to you. They may offer more than just money - their knowledge and previous experience could be extremely valuable for you.

5. Point of Sale System

A Point of Sale System is where your customers make payments for items that they buy from your company. Such a system allows you to have much better control over your business operations as you know exactly what’s been sold on a daily or monthly basis, how many products you have in the warehouse and how much money you’ve made. You can keep track of your inventory through analyzing sales processes, sales reports and other data.

6. Be patient

Raising funds is never going to be straightforward and it most certainly won’t happen overnight. It takes time and patience so stick with it and don’t give up - honestly, it will be worth it in the end.

7. Be flexible

Investors want to see a return after offering you funding, so make sure that you’re flexible with the level of control that you are giving them when it comes to the decision making process. If they’re able to see that you can easily be a success without too much legislation and paperwork, they might be likely to invest.

8. Showcase your best pitching skills

If you’re looking to gain investment, you really need to possess strong pitching skills. Investors need to see a clear and concise plan of the future direction of your business, exactly how their money is going to help, and when they might see a return on their investment. Practice makes perfect so make sure that you don’t neglect the preparation stage.

Securing investments can be a daunting process, but it can be done. Prepare thoroughly, do your homework, be confident, explain your vision clearly, and you’ll have a great chance of succeeding.

Brexit is edging closer every day, and equally everyday risk and opportunity float in a volatile sea of decisions for every business. Below Luke Davis, CEO and Founder of IW Capital, talks Finance Monthly through the complexities of alternative finance post-Brexit.

With a new tax year now underway, the first two weeks of April have also brought the revelation that investment spending in the UK grew more than in any G7 country in the lead up to 2018. Following outstandingly favourable conditions for British business in 2017, the first quarter of 2018 has held form for the new tax year. With the first round of Brexit terms agreed, and the passing of the Finance Act earlier last month, investor reactions to the events of 2018 steadily come under a time-sensitive microscope.

The government crack-down on asset-backed EIS opportunities and the significant expansion of new-age sectors such as med-tech, biotech and fintech has also significantly increased the focus on investor portfolio decisions for the 2018/2019 tax year. In a recent report from Mayfair-based private equity firm IW Capital, the high net-worth facing data found that one in five UK investors were turning away from traditional stocks and shares and instead choosing to invest in to new-age tech sectors such as energy tech and med-tech. Equally significant, the doubling of the EIS investment cap for knowledge-intensive companies, and the launch of a government consultation into a knowledge-intensive fund ensures these sentiments are duly supported by the infrastructure that supports the alternative finance arena.

The research further unveils that a post-Brexit climate in the investment arena is far from a bleak one, as over seven million investors say SMEs are more attractive as a result of increased trade prospects on the back of Brexit. Furthermore, over a quarter of investors say that they feel more encouraged to invest in SMEs after the formalization of Brexit has run its course.

This data comes amidst a more cautious outlook from the UK’s SME business leaders who previously predicted that smaller business would suffer a slow-down in the post-Brexit business climate. Seventy-five percent of small business owners said that they faced rising business costs, while the Federation of Small Businesses Quarterly Confidence Index also reported negative figures for the second time in five years.

Investors, on the other hand, have maintained a firm and optimistic perspective on both pre-and post-Brexit investment agendas in relation to the UK private sector. While the disparity between investors’ positive outlook and SME leaders’ scepticism reflects the UK market’s preparation process for Brexit, the discord also presents an opportunity for leaders on both sides of the investment spectrum to develop a symbiotic relationship.

Supported by one in five investors believing that Brexit will lead to higher quality and more frequent deal flow, and almost a third predicting that Brexit will improve SME productivity, the UK’s upcoming exit is an opportunity to drive new trading opportunities that could mean more SMEs seeing beyond Europe and proactively engaging more with the rest of the world. Moreover, many retail investors are keen to allocate funds in high-growth UK companies, and now have a much stronger chance of doing so due to the ongoing disintermediation of the alternative finance industry.

In order to leverage the growth in opportunities investors—particularly those in the alternative investment space—must transfer their optimism to SME business leaders. Government regulations on EIS investments, and other fiscal adjustments made in the Chancellor’s 2017 Autumn Budget, further provide a pre-and post- Brexit roadmap that can bring investors and business owners closer together. With this infrastructure in place, closing the disparity in Brexit perspective hinges on transmitting not only resources, but confidence. While many see Brexit as a challenge to both business leaders and investors, it is much more likely to provide opportunity instead.

Iwoca has found that female applicants are 18% more likely to repay small business loans on time than their male counterparts. Women-led small businesses make up an estimated 20% of iwoca’s customers and it has supported an estimated 2,400 women business owners in the UK with almost £50 million in lending since its launch in 2012.

iwoca uncovered the data in response to a study by the Federation of Small Businesses (FSB), which found that a quarter of female small business owners cite the ability to access traditional funding channels as a key challenge, with many relying on alternative sources, such as crowdfunding, personal cash and credit, for growth.

While this technology-driven risk platform draws on thousands of data points to make credit decisions, gender is not included. iwoca’s data scientists were able to calculate gender-based statistics on loan repayment rates by checking customer application forms for self-identified female titles and then comparing the approximate default rates for both cohorts.

Christoph Rieche, Co-founder and CEO of iwoca, said: “More can be done to narrow the entrepreneurial gender gap in the UK. Making it easier for women to access business funding would go a long way to achieving that. Sadly, the reality is that banks are withdrawing critical finance from across the entire small business sector and unless the Government takes action to encourage greater competition that will allow alternative providers to fill the hole, women will continue to be at a greater disadvantage from an unfair system, regardless of their higher propensity to repay on time.”

(Source: iwoca)

There's no doubt that these are strange times in the digital age. Whilst the advent of technological innovation has made it easier than ever for individuals to access products and launch businesses, for example, stagnant economic growth and global, geopolitical tumult has prevented some from maximising the opportunities at their disposal.

Make no mistake; however, the so-called “Internet of Value” has the potential to change this and create a genuine equilibrium in the financial and economic space. In this article, we'll explore this concept in further detail and ask how this will impact on consumers and businesses alike.

tellhco.com

So what is the internet of value and how will it change things?

In simple terms, the Internet of Value refers to an online space in which individuals can instantly transfer value between each other, negating the need for middleman and eliminating all third-party costs. In theory, anything that holds monetary or social value can be transferred between parties, including currency, property shares and even a vote in an election.

From a technical perspective, the Internet of Value is underpinned by blockchain, which is the evolutionary technology that currently supports digital currency. This technology has already disrupted businesses in the financial services and entertainment sectors, while it is now evolving to impact on industries such as real estate and e-commerce.

What impact will the Internet of Value on the markets that its disrupts?

In short, it will create a more even playing field between brands, consumers and financial lenders, as even high value transactions will no longer have to pass through costly, third-party intermediaries to secure validation. This is because blockchain serves as a transparent and decentralised ledger, which is not managed by a single authority and accessible to all.

This allows for instant transactions of value, while it also negates the impact of third-party and intermediary costs.

What will this mean for customers and businesses?

From a consumer perspective, the Internet of Value represents the next iteration of the digital age and has the potential to minimise the power of banks, financial lenders and large corporations. In the financial services sector, the Internet of value will build on the foundations laid in the wake of the great recession, when accessible, short-term lenders filled the financing void that was left after banks choose to tighten their criteria.

Businesses and service providers will most likely view the Internet of Value in a different light, however, as this evolution provides significant challenges in terms of optimising profit margins and retaining their existing market share. After all, it's fair to surmise that some service providers (think of brokers, for example) would become increasingly irrelevant in the age of blockchain, while intermediaries that did survive would need to seek out new revenue streams.

The precise impact of the Internet of Value has yet to be seen, of course, but there's no doubt that this evolution will shake up numerous industries and marketplaces in the longer-term.

All beginnings are difficult. Studies show that, on average, nine out of ten start-ups fail (1), and the shark tank that is the financial industry isn’t exactly renowned for allowing tender start-up shoots to flourish. The risk of failure and the fierce competition should not, however, deter you from launching your own FinTech. Instead, you can learn from others’ mistakes. Anyone seeking to start a successful FinTech company should carefully examine why others fail and avoid making the same mistakes.

So how do FinTech entrepreneurs meet the demands of a competitive and turbulent market, while trying to make it out on top? Tobias Schreyer, Co-Founder of PPRO Group reveals for Finance Monthly.

1. Thoroughly analyse your market

The crux of any start-up is the business idea. The fact that an idea initially looks promising, however, is no guarantee that it will work in practice. The key here is for FinTech start-ups to begin analysing the market as early as possible to determine whether there is an appropriate and suitably large target audience for their business. By far the most common reason for the failure of a start-up is that there is no market for their idea. You must know the size of target market, what the competition is like, and what prices comparable products and services are fetching. Never ignore market analyses and align your business plan precisely with the results.

2. Secure your funding in advance

Even (and sometimes, particularly!) FinTech start-ups want to attract financial backing. As with any other start-up, the issue of funding is right at the top of every FinTech start-up’s list. This issue can be roughly divided into two sections. The first is self-explanatory and covers the considerations which should be part of a traditional business plan and the questions which should ideally be resolved before the company is founded. These include things like how much capital is needed, the outgoings expected, and the potential profits. This is where you should investigate loans for company founders or appropriate grants and subsidies. The second part of the funding issue is more FinTech-specific. As, in most cases, you will be competing with banks or other FinTechs with a lot more money, so attracting partners and potential investors early on in the process is important. You should look for people who are excited about your idea and ready to invest.

3. Always keep an eye on your finances, particularly post-launch

After the business idea, finances are the highest priority for any start-up, including FinTechs. This is a very broad subject. Not only should the company be liquid, it should also have a handle on accounting and taxes. Seemingly simple tasks like setting up a business bank account or applying for a company credit card can be a challenge initially. What if you have a business trip coming up, but your bank won’t give you a company credit card? What if it’s simply not available soon enough? Nowadays there are many clever financial products on the market which can also be used directly and easily by start-ups. Prepaid credit cards with associated online accounts are quick to set up, but are also secure and flexible to use. The centralised company account provides an overview of all expenses at all times, as well as the requisite flexibility when expenses arise. You must never lose sight of your company’s financial status. This may seem obvious, but failure to manage finances has spelt the downfall of many a start-up.

4. Determine the appropriate form of organisation for your company

Choosing the right legal form of organisation is an important decision for a new company, and one that start-ups need to consider very carefully. Although, once selected, the legal form is not set in stone, changing it later can involve some effort. The form of organisation defines the legal and taxation framework conditions for a company, so your choice must suit the needs of a FinTech start-up.

5. Apply for licenses and register in good time

Start-ups should focus much of their attention on their product offering and customers, but even the best product and customer service can be at risk if you don’t have a handle on your day-to-day business operations. Start-ups must perform a great many administrative tasks, including registering with the tax office, listing the company in the commercial register, accounting, sales tax, and more. But to add to that already extensive list, FinTech’s are also subject to additional regulatory pressures. The second Payment Service Directive (PSD2) will, for example, come into force at the beginning of 2018 and can mean major changes for providers of alternative payment methods. Any financial service which can make automated payments at an end-user’s request while collecting and transferring data must obtain a PSD2 licence from the national financial regulatory authority.

(1) forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/#915f29c66792

(2) cbinsights.com/blog/startup-failure-reasons-top

(3) crosscard.com/solution/crosscard-expense

For Finance Monthly, Nic Beishon, Head of Commercial at Equifax, the consumer and business insights expert, below comments on the new Standards of Lending Practice for small businesses, which came into effect last week, 1^st July 2017.

As major contributors to the ongoing success of the UK economy, SMEs will benefit from the new Standards of Lending Practice. The standards will drive good practice for lenders when assessing different types of business, protecting those borrowing money and delivering fair customer outcomes. Evaluating a borrower’s capacity to meet their ongoing repayments is increasingly important to safeguard them against over indebtedness, and to identify businesses at risk of falling into financial distress.

The standards now apply not just to the very smallest business, but to any business with a turnover of up to £6.5 million. In order to meet their responsibilities to both clients and regulators, lenders need a 360-degree view of the applicant to understand their financial health. They should not just look at the businesses financials, but also the individuals behind the business. In particular, lenders should consider information such as the business current account turnover data and the use of overdrafts to assess whether, for example, a loan is appropriate. This should be the case no matter the size of the SME, whether the person being dealt with is a sole trader or a director of a company.

This information is not just important at the time of application, it should also be assessed on an ongoing basis to identify any change in circumstances, and in the case of financial difficulty, the best way to assist the business owner.

The SME sector is vital to the UK’s continued economic recovery and the standards are designed to create fairer lending for these important businesses. Integrating a mix of commercial and consumer analysis into lending decisions will allow lenders to commit to responsible loans while helping the sector to grow.