Surplus cash

[WordIsBond]

What's wrong with that? Take out the money from Business in dividends (if that cause more tax so it is) and plan a better life. I did in my life so I see my fellow contractors should do as well.

Nothing is 'wrong' with it but there may be many reasons why it isn't the wisest course for OP, so it would be better to actually answer his question.

[GJABS]

One thing I did a few years ago was to lend the money out on FundingCircle.com (other peer to peer lenders are available), to generate a return of around 8% per year. It was easy enough to set up an account on there for the company.
The only problem was getting the money out before the loan terms were up, to pay taxes etc - the website says you can put your "loan parts" up for sale, which I did, but found there were no takers. So I engineered an elegant solution which was to set up a personal account on the site, and used it to purchase the loan parts that my company had for sale.

I am not sure I would recommend FundingCircle at the moment, because I have read a number of reports from lenders saying an increasing number of their loans are going bad - which if you think about it is a greater risk with peer to peer lending because unlike with a normal bank loan, the loss from a bad loan is not borne by the institution arranging the lending (FundingCircle), it is borne by the people doing the lending.

[northernladuk]

Funding circle has changed now. You can't pick and chose what you invest in now. It does it all for you so that technique won't work any more. It also means you are more likely to get thr 6% level as you can't keep away from the industries/loans that despite their rating are higher risk.

So if you sell the lot you just have to sit and wait and then you can't get it all out because the sheer number that go in to default and have to be recovered or go I to some measly repayment agreement.

[Lance]

One thing I did a few years ago was to lend the money out on FundingCircle.com (other peer to peer lenders are available), to generate a return of around 8% per year. It was easy enough to set up an account on there for the company.
The only problem was getting the money out before the loan terms were up, to pay taxes etc - the website says you can put your "loan parts" up for sale, which I did, but found there were no takers. So I engineered an elegant solution which was to set up a personal account on the site, and used it to purchase the loan parts that my company had for sale.

I am not sure I would recommend FundingCircle at the moment, because I have read a number of reports from lenders saying an increasing number of their loans are going bad - which if you think about it is a greater risk with peer to peer lending because unlike with a normal bank loan, the loss from a bad loan is not borne by the institution arranging the lending (FundingCircle), it is borne by the people doing the lending.

Have I read that right?

This is equity that nobody else wants to buy at the offered price, that is owned by your limited liability company.
And your solution is to buy them yourself????

I'm not sure where that is in the sensible investment guide... As "Elegant" as you think it is.


EDIT: thinking wider, why not offer them for sale at a really low price and then buy them yourself? And declare a loss on your company. I';m sure that's flawless.

[northernladuk]

Have I read that right?

This is equity that nobody else wants to buy at the offered price, that is owned by your limited liability company.
And your solution is to buy them yourself????

I'm not sure where that is in the sensible investment guide... As "Elegant" as you think it is.


EDIT: thinking wider, why not offer them for sale at a really low price and then buy them yourself? And declare a loss on your company. I';m sure that's flawless.

I don't think you quite understand how Funding Circle used to work. What he's done was perfectly viable. There were more loan parts than people.

The best way to avoid bad debt was to buy the new loan parts, hold for a number of months depending on risk factor and then sell them. Virtually non of the loans went bad in the first three months so you could get up to 12% by buying E rating loans (riskiest) and then sell in three months.

Problem was everyone was doing this so really difficult to sell your loan parts. So to counter that he just bought himself.to release the company money.

It was a pretty smart tactic to be fair. And the FC screwed all that up.

[dingdong]

i'm not sure putting any spare cash into peer-to-peer would be wise at this point given the massively increasing defaults across most platforms, likelihood of recession (at which point P2P lenders will get a nasty shock) and the imminent possibility of Brexit chaos.

[northernladuk]

i'm not sure putting any spare cash into peer-to-peer would be wise at this point given the massively increasing defaults across most platforms, likelihood of recession (at which point P2P lenders will get a nasty shock) and the imminent possibility of Brexit chaos.

Absolutely this. I've pulled out of all mine where I can which has raised the point that it's very difficult to do quickly. A very long term investiging method and with the crap thats going on an increasingly risky one, due to both the number of defaults and the length of time money is tied up in litigation. I've really not a fan of it anymore.

[gizzmo]

Absolutely this. I've pulled out of all mine where I can which has raised the point that it's very difficult to do quickly. A very long term investiging method and with the crap thats going on an increasingly risky one, due to both the number of defaults and the length of time money is tied up in litigation. I've really not a fan of it anymore.

What about shorter term P2P loans, E.g. Growth Street, which is max 30 days for each loan. I’ve put my excess ltd co cash in Growth Street. Granted the interest is lower at 5.3% but I feel it’s safer knowing I can get it out in 30 days or less. Or would you have similar concerns about Growth Street as well?

[northernladuk]

What about shorter term P2P loans, E.g. Growth Street, which is max 30 days for each loan. I’ve put my excess ltd co cash in Growth Street. Granted the interest is lower at 5.3% but I feel it’s safer knowing I can get it out in 30 days or less. Or would you have similar concerns about Growth Street as well?

Never heard of it but after having a quick scan through it looks exactly the same as Funding Circle. I'm no expert but the numbers worry me a little. Only 180 borrowers. You have to diversify across as many borrows as possible to net the average return and protect from losses. FC allows you invest as little £20, I didn't check what the minimum is but with 180 borrowers at £20 each that's only 3600 quid.

Some quite scary numbers in their losses. 363k to fraud?? They say they've tightened up but two frauds in 180 borrows isn't great stats. The money they are spending on LLP has gone up significantly as well.

The 30 days does sound attractive though. FC can be instant if there enough people with money waiting but having a guaranteed 30 days gives you some backstop. It does suffer the same problem as FC though in as much as if you've a load of loans in default you will have to wait until it's resolved before you get your money back. I've stuff in FC that's been going on nearly a year that I can't get out. Only a small percentage of the main amount but still annoying.

Looks ok from the blurb I guess but I'm personally getting more and more nervous about lending to small business's in the current climate.

All the above said, I'm pretty conservative when it comes to risk. 5.3% with risks against up to 2.25% with Aldermore with no risk is starting to look more attractive to me.

[gizzmo]

Some quite scary numbers in their losses. 363k to fraud?? They say they've tightened up but two frauds in 180 borrows isn't great stats. The money they are spending on LLP has gone up significantly as well.

Thanks. Wow. I wasn’t aware of those losses. Looks like I better do a bit more due diligence and re-evaluate.