Alternative lender HNW Lending is looking to enter the controversial Innovative Finance Isa market, following a bumper year.
In 2016 the company financed £14.4m loans, 334 per cent up on 2015, and HNW Lending announced today (22 June) it is now keen to increase the amount it can lend after receiving the go-ahead from HM Revenue & Customs and the Financial Conduct Authority to offer Innovative Finance Isas.
The minimum investment required for HNW Lending's Innovative Finance Isa is £5,000 and the lender plans to offer returns of between 7 per cent and 15 per cent a year.
To date HNW Lending has drawn on funds provided by its founder Ben Shaw and other high-net worth investors.
The lender specialises in providing personal loans of between £50,000 and £2m to clients against their valuable assets.
The average loan size is £160,000, while the largest was for £2.1m.
Since its formation in 2014 the company has lend £30m and recorded no loss of capital or interest.
Mr Shaw said: “A number of high net worth individuals have been struggling to raise funds from banks, but many of their valuable assets such as classic cars and property have been rising in value, which has made it easier for them to use this as collateral to secure loans.
"Now that we have approval to offer an Innovative Finance Isa, we are confident that we can raise more funds and increase our loan book.”
Stuart Jefferies, an IFA at Singular Financial Planning, said: "I'd be very surprised if there is anything like universal take up of Innovative Finance Isas.
"I just can't see many IFAs wanting to get on-board. For a start it is potentially risky, given the lack of track record of many peer to peer firms, for example, and secondly many of the investments won't be backed by the Financial Services Compensation Scheme.
"I think it'll attract specialist firms, and a particular kind of investor, but it's not something I'll be advising on."
Last year Simon Massey, director of wealth management at MetLife, warned the Innovative Finance Isa may well attract many investors through the higher potential rates of return, but without them understanding the risks involved.
He said: “A major concern of advisers is the launch of the Innovative Finance isa will encourage people to use peer to peer lending (P2P) for their retirement saving.
“The P2P sector is growing strongly and offering attractive returns, particularly when interest rates are at an all-time low, and likely to remain there.
“This could put pressure on cash Isa savers to find alternative investments.”
dan.moore@ft.com
