Looking beyond “Pensioner Bonds” – FOLK2FOLK, a real alternative

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Almost four years ago, Chancellor of the Exchequer George Osborne announced plans to ease the pain that had been felt by older savers in the UK since the financial crisis. Osborne’s “Pensioner Bonds” were launched a few months later, in early 2015, and offered what were at the time attractive interest rates.

The one-year bond paid 2.8%, while the three-year version returned 4% a year. Unsurprisingly given the paltry yields available elsewhere, Pensioner Bonds – or National Savings & Investments Guaranteed Growth Bonds, to give them their official title – were a big hit with the over-65s who were eligible to invest and they soon sold out.

The government’s figures indicate that almost 900,000 over-65s put a total of £9 billion into these bonds – holdings were limited to £10,000 per person – between January and May 2015. But over the coming few months, all those who took out three-year bonds will be facing a choice over what to do with their cash when it matures.

There are two options on the table: the money can be rolled over into new Guaranteed Growth Bonds, which run for a further three years but pay just 2.2% per annum. Or the bonds can be cashed in, and the money used to save or invest elsewhere.

Back in 2015, and with the benefit of hindsight, the 4%-a-year bond was clearly a good deal given that savings rates available elsewhere have been nowhere near as good in the intervening period. But with the base rate having risen for the first time in more than a decade late last year and inflation running way ahead of target, it is not so easy to say the same about the 2.2% which is on offer at the moment.

For people who are willing to take on a little more risk  there is an alternative way. Peer-to-peer lending involves people making some of their capital available for loans to businesses or individual borrowers: Lenders and Borrowers are matched by alternative finance platforms such as FOLK2FOLK, but because this effectively cuts out the middle-man – that is, the banks – the rates available on both sides are much more attractive and provide a fair and transparent exchange.

FOLK2FOLK offer lenders annual interest of 6.5%pa on loans that are made to businesses in local communities around the UK. Loans are between 6 months and up to five years, and the capital is repaid at the end of the term. Lenders’ capital is at risk but to reduce the risk involved, all loans are secured against UK property and money can be lent among multiple borrowers in order to benefit from loan diversification.

A further advantage is that loans can be held in an Innovative Finance ISA, which means that any interest is free of income tax – the annual ISA limit is currently £20,000, which is also the minimum investment level at FOLK2FOLK, but ISAs can be added to in the new financial year which starts on April 6. FOLK2FOLK is now open for ISA transfers, meaning Lenders can move funds in historic ISA wrappers to FOLk2FOLK and continue to enjoy tax free returns.

For Lenders, the inflation-busting interest rate is only one part of the picture: being able to help support communities, especially those in rural areas, by offering much-needed finance to local companies is another significant benefit of participating in the Local Lending Movement.

For more information about becoming a Lender, please visit https://www.folk2folk.com/lend/invest-in-a-loan/

 

How P2P finance can help the UK’s farming industry

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Farmers are set to be some of the hardest hit workers as Britain negotiates its way out of the EU. But local lending through a peer-to-peer platform can provide a valuable form of finance so that farmers can access funds to grow, diversify or refinance  amid the uncertainty of Brexit.

A recent study of 172 farms by the Prince’s Farm Resilience Programme, found just 16 per cent made a profit from their farming activities over the period assessed. Recent analysis found that instead many farms are now relying on alternative income streams to turn a profit, such as tourism, renewable energy and selling their products directly to consumers.[i]

But diversification and moving into alternative areas of business requires capital. And, with the average farm in the study making a loss of more than £20,000 from its farming activities, it may be capital that farmers require to invest in their business to prevent a loss.

Peer-to-peer finance could be a lifeline to the UK farming industry. It allows landowners to raise much-needed funds to help diversify their business. Meanwhile, local lenders can enjoy the produce and services their money has contributed towards creating.

The farming industry has already had to tackle a number of significant challenges in recent years. Supermarket giants have squeezed profit margins and demanded ever-increasing output levels.

It is estimated that the number of dairy farmers has more than halved over the past decade, unable to keep up with cost cuts. A survey by the National Farmers’ Union[ii] earlier this year found confidence among farmers on the outlook over the next three years had plunged, with many concerned about rising costs and an increase in trade tariffs which could eat into profits. A recent report by the Agriculture and Horticulture Development Board (AHDB) estimated that the average farm could see its income halved after Brexit.[iii]

EU subsidies have provided a much-needed boon to many farms, providing a £2.5 billion funding lifeline[iv]. Leaving the EU will likely leave a major gap in many farms’ balance sheets and local lending could provide the plug many farmers may require.

Many small businesses are turning away from the high street lenders when they are looking for funding or finding banks unwilling to lend to them. At the same time, many investors are looking for a more social and sustainable way to earn interest on their cash. It is estimated that in 2015 some 12 per cent of lending to small and medium sized businesses came through peer-to-peer platforms and the proportion is only growing.[v][LD1]

The appeal is easy to see: investing money in local businesses means not only do lenders have the chance to earn an inflation beating rate of interest but they can also see exactly how their cash is being used on their local communities.

Folk2Folk champions local lending because we believe in creating financially and socially sustainable communities by matching local businesses with local lenders. With  headquarters in Cornwall and hubs across the UK in rural communities, we’re well aware of the importance and impact farmers have on their local communities, and all of the challenges and opportunities they face during the Brexit transition.

To learn more about how finance solutions from FOLK2FOLK could help with your business and farm, be sure to visit www.folk2folk.com/loans

[i] http://www.princescountrysidefund.org.uk/who-we-are/latest-news/post/91-one-in-five-family-farms-unable-to-survive-on-farming-alone

Dartington Dairy

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What does it take to produce an award-winning ice cream?

A lot of dedication, taste-testing, early mornings plus a decent herd of goats and cows.

At the Dartington Estate in Devon, farming couple Jon and Lynne Perkin took on the tenancy at Old Parsonage Farm in March 2015 and set about transforming the farm into a commercial dairy via their herd of goatlings and the management of the Sharpham Jersey herd of cows later that year.

In 2016 the Dartington Dairy was launched in 2016, working with a local specialist to make ice cream from their first batch of goats’ milk.

Excited by the opportunities that they felt were available at Old Parsonage Farm, through diversifying away from more traditional farming practices, they developed the idea of starting a goat dairy, selling the milk and other products locally and directly to the customer. For Jon and Lynne it is also important that the farm provides public access and education around farming, enabling people to understand the farm environment and the provenance of their food. Currently, this is through farm open days and the different ‘Milking’ and ‘Farmer for the Day’ experiences on offer.

After a lot of frustration in trying to secure finance through government funding initiatives and speaking to their bank, Jon and Lynne spent close to £10k in professional assistance in gathering documents and information to be told that the goalposts of their loan had moved. After speaking to a family friend, Jon was introduced to FOLK2FOLK as a possible solution to provide the £75k as a business loan to help with the business.

“I wish I had come to FOLK2FOLK at the very beginning as we would’ve saved a lot of money and time. I couldn’t believe how simple the loan process was. It was a breath of fresh air working with a company that uses common sense and listens to you as a business. We got a decision in under two days and the money was in our account three weeks later. I had given up on the high-street banks completely. It was a totally easier, better and happier experience dealing with FOLK2FOLK.”

Jon and Lynne used the funds to develop the dairy by purchasing essential processing equipment and investing in the brand to make it more marketable to potential buyers and consumers.

Dartsington Dairy’s product range varies from ice cream to milk and kefir yogurt. Their unique and secret way of making ice cream has landed them with a Great Taste Gold Star Award for their chocolate ice cream. Having tasted it ourselves we can see why! The other flavours are also delicious.

The produce is currently sold across 40 local retail outlets in the south west, but Jon and Lynne have ambitions to sell across the UK and through larger supermarkets over the next 2 years as the business matures and gains more awareness.

Jon takes a trial approach to new business partnerships and challenges shops to help change perceptions about goat’s milk products. So far, he has not had to refund any of his 40 retail customers as they all continue to increase their orders.

“We are investing in the business for the long-term. Our team of six, is super dedicated but we are always keen to get talented and hard-working staff to help grow the dairy and get as many people trying and buying our products. It’s reassuring to know that our lenders believed in us and we want to ensure that we use their money wisely to build a profitable business.”

The future of the dairy is certainly looking mint and with more flavours and products in the pipeline, we can expect even more exciting developments to come from this hard working team in Dartington.