FINANCIAL PRODUCT

Preference Shares Instant Finance Available now

Preference shares are equity which ranks ahead of ordinary equity, but behind creditors such as debenture holders. That makes them instantly something that requires more care when approaching. The offerer, Instant Finance, is a consumer lending finance company which specialises in lending to poorer people at high interest rates. While that says something that can’t be ignored about the risk on each loan, Instant Finance is no fly-by-night loan shark. It is a well-run company with many small loans, and survived the finance company meltdown without a crisis and losses for debenture holders, unlike its once great rival Geneva Finance. Instant Finance suffered a big run on funds during that period, which required it to find expensive backing from overseas, and voluntarily chose to pay all its debenture holders out, though its management felt rather let down by depositors.

The way Instant Finance runs its business. You may not like its interest rates and feel it is farming the poor, but it has proved its robustness. Also, the preference shares carry a dividend of 9 per cent, which have attached full imputation credits, which means that, for most New Zealand resident investors under current tax laws, dividends payable on or after April 1, 2013, are equivalent to a pre-tax return of 12.5 per cent.

These are highrisk investments, but Instant has earned trust.

There were not many finance companies which ceased to offer investments to the public (whether by choice or through their collapse) that would be missed. Instant Finance was one.

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