An Update on Peerform

Peerform-logo

In an industry dominated by Lending Club and Prosper it is easy to stay focused on the top two players. But there are other alternatives in the unsecured consumer loan space and one of the up and coming players is Peerform.

To call Peerform up and coming is probably a bit of a stretch because they have been around almost four years now. I have written about them several times before, most recently back in May after they re-launched their platform.

Since then Peerform has been making slow but steady progress. They have a long way to go having just re-launched in April of this year but they are starting to build a track record. When I spoke with CEO Mikael Rapaport and Chairman Gregg Schoenberg this past week they were happy to provide an update on Peerform’s progress. They have now issued over 500 loans at a total loan volume of around $2 million. This included $600,000 of new loans issued in November and they are on track for $700,000 in December.

Peerform’s loan book is a little different from many other platforms. Here are some details of their loans made in 2014:

  • Average Interest Rate: 19%
  • Average APR: 23%
  • Average FICO: 675 (minimum FICO is 600)
  • Average Income: $82K (all loans are fully income verified)

Full Loan Descriptions Available for Investors

As investors would expect Peerform makes available a full spectrum of credit data. There are over 100 data points in their downloadable data file. They also have something that the big two platforms don’t have: loan titles and loan descriptions.

There were many investors who were disappointed with Prosper and Lending Club when they did away with loan descriptions. Some investors had done a great deal of analysis on the semantics of these descriptions and had built predictive algorithms based on this data. Now, you can dust off those algorithms and put them to work at Peerform.

Investors can use the Peerform API, invest manually, or download the CSV file of in-funding loans to do analysis before investing. And while the loan volume at Peerform is only a tiny fraction of Lending Club or Prosper when I downloaded the available loans file earlier this week there were 65 loans to choose from and most of them were high yield.

A Healthy Supply of Borrowers

One of the advantages that Peerform has over other newer platforms is that it gets a lot of free traffic from Google each month. This is partly due to the fact that their website and blog have been around for almost four years now. Consequently, its borrower acquisition costs are low and its borrower supply is very healthy. In fact, they have an oversupply of borrowers today and Rapaport says Peerform could easily do $5 million per month just based on current traffic. Currently, they are available for borrowers in 23 states.

An Opportunity for Accredited Investors

Peerform has a fractional and whole loan platform that operates in a similar way to Lending Club and Prosper. But one of the big differences being that there are far fewer investors on Peerform, which means much less competition for loans, although they are only available to accredited investors.

While Peerform is still working to get established they are making all the right moves. They recently hired a new Chief Risk Officer, Fred Smadja, who has a long history in risk management. Their Series A, which was originally expected to close by the end of 2014, should now close early in Q1 next year. Once that happens they will be able to start building some scale.

While I am not endorsing Peerform I think for accredited investors looking for high yield opportunities they are worth considering. Particularly when given the fact that yields have been coming down at the two big platforms over the last 12 months.

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Sarfaraz Sadruddin
Dec. 28, 2014 5:54 pm

Good post. As investors are “seeking alpha” a new P2P platform such as peerform probably does have greater returns for early investors than at LC or Prosper. Think of early investors in securitized/leveraged loans at Sofi – probably got great ROI

Joseph Hogue
Dec. 28, 2014 7:57 pm

Got an email from Josh Reback of Peerform a few days ago to connect with Chairman Schoenberg. Seems like they are pretty aggressive with the outreach and I would put good money on an IPO in 2015. It’s a good platform though it would also be nice to see them enter the p2p space for non-accredited investors.

Sarfaraz Sadruddin
Dec. 28, 2014 10:02 pm

Volume is no where near IPO level or their valuation. They have originated what 2 million? at current rate they will still only be around 10-15 million (700k-1million per month).

Paul
Paul
Jan. 3, 2015 11:20 pm

Peter,

Why are they limited to Accredited Investors? Is this a strategic choice?
Or are Prosper and Lending Club customer simply grandfathered under older rules?

I am disappointed with Prosper’s listings, but I maintain the account for lack of diversification options among platforms. Besides, It allows me to comparison shop.

Sarfaraz Sadruddin
Jan. 4, 2015 5:20 am
Reply to  Paul

Paul if you don’t mind me asking, what is the reason of your disappointment with Prosper’s listings.

Sarfaraz Sadruddin
Jan. 4, 2015 2:55 am

Hello Paul,

I am sure Peter will get back to you but I can tell you as a co-founder of a peer to business lending platform, that LC and Prosper have immense regulatory expenses as they file S-1 to allow non-accredited investors to invest. Also this way they create the secondary market for note trading.

I suspect Peerform is following exempt securities registration that most other platforms are using to sell these notes. Another prominent one would be Dealstruck that is restricted to accredited investors only. This is “easier” to implement and less burdensome.

Paul
Paul
Jan. 4, 2015 3:35 am

Thank you so much for you insight. So, it may just be a matter of reaching critical mass before they re-evaluate their model and try to get capital from smaller investors.

On a side note, a source has told me that a small(ish) bank with a nationwide footprint is about to use bricks and mortar locations for origination but will use peer investors as the funding source.

Sarfaraz Sadruddin
Jan. 4, 2015 4:05 am
Reply to  Paul

That was fast reply Paul! Are you in the USA? It’s 4:00 am in the morning CST where I am 🙂

I believe so and it makes sense. Again, I can speak from challenges that we encounter as a start up and where we see this going. Creating a marketplace is NOT the biggest issue, its the underlying network effect of borrower base and creating the necessary investor base. I believe LC and Prosper have borrower “issues” in their maturity – they got plenty of investors. Peerform approach makes sense: if you cannot get accredited investors who can evaluate investments are retail, non-accredited investors worth it? I think not.

I have not heard of any such bank, but why increase the cost with brick and mortar distribution when internet is there? May be they got some smart Mckinsey consultant to tell them it is a better route then the millions LC spends in marketing?

Paul
Paul
Jan. 4, 2015 4:22 am

I don’t think LC is spending enough. Though yesterday, I saw the first junk mail loan solicitation from LC.

I think the bank’s entry had something to do with its rather disadvantaged position in the capital markets: 1) not being in the top 10 2) bank funding rates will be going up soon thanks to the FED. So, fee generation is the way to go. They got the credit models and they have the tech infrastructure. it’ a natural extension. Besides, who makes money opening checking accounts…..

Sarfaraz Sadruddin
Jan. 4, 2015 4:34 am
Reply to  Paul

Well said. QE coming to and end. Free money no more banks!