Last year we featured GROUNDFLOOR who was the first p2p lending firm to leverage Regulation A+ in Title IV in the JOBS Act. Now about a year later there have been many companies who have taken the same path, but GROUNDFLOOR remains unique in their structure. Today, GROUNDFLOOR announced that they are opening lending to 12 more states. I had the chance to talk with Brian Dally, Co-Founder and CEO to learn more about the news and what the company has been up to.
GROUNDFLOOR previously only offered loans in Georgia, Alabama, Florida, Illinois, Maryland, New Jersey, North Carolina, South Carolina, Virginia, Tennessee, and Texas.
They have now added Rhode Island, Massachusetts, New Hampshire, Michigan, Missouri, Minnesota, Colorado, Arizona, Utah, Nevada, Oregon and Washington. The states chosen were ones that met their underwriting criteria and they also focused on states that were not too far away for a control group.
What’s important to understand about GROUNDFLOOR is that they are different from many of the real estate crowdfunding companies that exist. They are focused only on retail investors and the platform is open to both accredited and non-accredited investors. When I spoke to Brian he said that the best source of capital next to depositors are non-accredited retail investors.
Loans are fractionalized where investors purchase pieces of loans similar to that of buying a loan on Lending Club. This is structured differently than the REIT products that have been launched recently under Regulation A+. Investors from the following states can invest in projects, with a $10 minimum per deal: Georgia, California, Illinois, Maryland, Massachusetts, Texas, Virginia, Washington State and D.C.
Brian noted that they have carefully controlled growth as they learned about losses, default rates etc. Now that they feel confident, the next step was to expand to these 12 states. Currently just under 2,000 lenders have invested on average $6,000 for a total of $12.5 million across over 100 loans. Loans average $125,000 across loan terms of 6-12 months and 45 loans have now been repaid. The platform has experienced no defaults and zero loss of principal. Investors have earned a weighted average annual rate of return of 14% over the 9 month average term. [Read more…]