Ask any investor if they’d like a better return and the answer is always the same. Ask the same question and balance it against risk of capital loss, and the answer isn’t quite so clear. So what will investors turn towards with BREXIT on the horizon?
There’s an added complication of second guessing the Bank of England, as it moves to balance the economy or stave off inflation. Investors will need to decide if taking a piece of a 5 year loan at a fixed rate of return today will still stack up as offering a worthwhile return tomorrow or in three years time.
Questions which all investors in peer-to-peer must be asking themselves, and good news for the platform that cracks the puzzle of earnings balanced with security - and returns that keep pace with a changing economy. Better news if that platform can wrap it in a tax free Innovative Finance ISA.
It may be that invoice finance offers the answer, with returns on investment as short as 30 days. To the investor they offer liquidity and choice where investments of such short terms will always keep in step with a changing economy.
Risk is always the balancing factor, and investing over the short term means risk is assessed on current trading terms and the ability to repay now, not on unknown market conditions as they may be in a couple of years. Risk is mitigated further by taking security over an asset, but in the case of invoice finance this is only as good as the platform’s due diligence in making sure the invoice financed is formally assigned, and the debtor has confirmed the goods or services are confirmed as received. A risk mitigation strategy some platforms have learnt through trial and error.
Invoice finance products were once the reserve of the wholesale funder, but with speed of fintech innovation it won’t be long before retail investors get a slice of the pie.
Malcolm Piper
Managing Director
Peer Funding Limited
