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Composite Lending: Evolving the Balance Sheet Lending Model

Risk exposure, funding sources and scalability are the main differences between the marketplace and balance sheet lending models. By using the composite lending model, loan originators enjoy the benefits of both models.

March 11, 2016 By Ryan Lichtenwald Leave a Comment

Views: 1,501

 

Composite_Lending

[Editor’s note: This is a guest post from Oleg Seydak, CEO at Blackmoon Financial Group, an emerging leader in the marketplace lending ecosystem.]

Marketplace lending and balance sheet lending are the main business models in the world of alternative lending.

Marketplace lending for lower risk

Marketplaces are financial intermediaries that originate loan portfolios for sale to investors. Marketplace lenders collect a service fee throughout the loan’s duration, and an upfront origination fee, while giving up the interest on the portfolio, reducing their overall return. But in exchange for a reduced return, they reduce their exposure to risk of loan defaults, as this is passed to the investors. Beyond reducing both risk and profit, these transactions bring in new capital, allowing the lending companies to originate more loans and grow their business.

Marketplace lending companies typically focus on long-duration loans, such as unsecured consumer loans, small and medium enterprise (SME) loans, and real estate property financing. These are generally low-margin deals, so these companies often require lengthy and substantial capital investments from VC firms to ramp up operations to a breakeven point.

Balance sheet lending for higher return

[Read more…]

Filed Under: Peer to Peer Lending Tagged With: balance sheet lending, Blackmoon, composite lending, marketplace lending

Views: 1,501

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LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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