Money & Co. Mini-Bonds Inbound

By AltFi on Wednesday 16 July 2014

Alternative Lending

Money & Co. appears to be on the verge of entering the mini-bond market.

A blog post written by Nicola Horlick – acclaimed fund manager and Founder of Money & Co. – confirmed that the platform’s first mini-bonds are on the way. Mini-bonds have been the subject of some controversy since they first arrived on the alternative finance scene, but Horlick points to the cross-border successes enjoyed by mini-bonds as cause for UK alternative finance providers to embrace the product. In particular she highlights the German “Mittelstand” (SME space), where mini-bonds have become very popular with investors and small businesses alike. That same popularity, she argues, can be found in Italy.

Said Horlick:

“Mini-bonds allow companies to borrow substantial sums of money for a fixed term, usually three or five years. Investors receive regular interest payments and then the capital is returned at the end of the loan period. Mini-bonds are not tradable on an exchange, and so investors have to be prepared to leave their money in the bond for the full term. In the UK, mini-bonds can be included in SIPPs, but not ISAs (although this may change following a period of public consultation that is about to begin over including private company loans in ISAs).

In the current environment, where interest rates remain extremely low and government bond yields are also very slim, mini-bonds offer an attractive source of income for savers. In addition to Hotel Chocolat, John Lewis, the Jockey Club and upmarket travel company, Mr. & Mrs. Smith, have issued mini-bonds. Offering interest in kind is a bit of gimmick and, if the market is to grow as predicted by the Capita research, companies will have to make cash interest payments.”

The prediction referenced by Horlick comes courtesy of research commissioned by Capita – which states that the mini-bond market in the UK will swell from £1 billion last year to £8 billion by 2017. It would appear that Money & Co will contribute to that growth:

“There are many companies that would prefer to borrow for a fixed term – and so Money & Co. will be entering the mini-bond market shortly.”

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