platforms

Ten Marketplace Lending Options for Accredited Investors

We review ten different investment choices across real estate, small business and consumer loans for accredited investors.

April 27, 2017 By Peter Renton 12 Comments

Last month Ryan provided this great rundown of marketplace lending investment options for non-accredited investors. Today, we will do the same thing but provide some options for accredited investors.

Before we get started let’s get clear on the definition of an accredited investor. This is from the SEC’s investor website:

An accredited investor includes anyone who:

earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

If you fit that description then you have many more investment options available to you. In this article I am going to run through ten different options across the three asset classes of real estate, small business loans and consumer loans. I am excluding Lending Club and Prosper from this review even though as an accredited investor you also have access to these platforms. They were covered in Ryan’s post mentioned above. Also, I am not covering any funds or aggregator sites – these are all platforms that originate their own loans.

I should also point out that this article is for information purposes only. I am not providing investment advice here nor am I recommending any of these investments.

Real Estate

There are more real estate options than any other category. Real estate is the largest asset class by far and one that has attracted a wide range of individual investors for many decades. So, it is not surprising that when it comes to marketplace lending it is leading the way as far as investor options go.

LendingHome (https://www.lendinghome.com/)

[Read more…]

Perspectives from Marketplace Lending Platform Founders at LendIt USA

At LendIt USA 2016, four founders shared their personal stories on how they came to start a marketplace lending platform.

April 27, 2016 By Ryan Lichtenwald Leave a Comment

I am just getting back after taking a vacation following LendIt USA 2016. While the lead up to LendIt USA, which is our largest conference is a busy time of the year, the conference always goes by quickly. I was able to catch just a few sessions throughout the event and plan to watch all of the recorded sessions in the coming weeks. I wanted to share my favorite panel that I was able to see live which was titled Platform Founders’ Stories.

We often hear about the successes of various platforms, but there is often a lot more to the story for entrepreneurs that have started platforms in the marketplace lending industry. In this panel several entrepreneurs shared how they got to where they are today. LendIt Co-Founder Jason Jones moderated the panel which consisted of David Klein (CommonBond), David Girouard (UpStart), Michael Solomon (CircleBack Lending) and David Gilbert (National Funding).

I enjoyed hearing the diverse background of each founder and how they came to get involved in the industry. It’s important to realize that success didn’t happen overnight for these companies and they faced many challenges in their journey of entrepreneurship. Hearing the details behind each of these companies is fascinating and newcomers can certainly learn a lot from these industry veterans.

Below you will find the full video of this panel which will give you the full picture, but below are the main points about each entrepreneur’s background. [Read more…]

The Canadian Marketplace Lenders Part 2

There are only a few marketplace lenders in Canada today, but it's a market that is poised for growth.

August 12, 2015 By Ryan Lichtenwald Leave a Comment

This is part 2 of our 2 part series on the Canadian marketplace lenders. Be sure to read part 1, which provides an introduction to the Canadian lending market and highlights two other marketplace lenders.

FundThrough

When I asked Steven, Co-Founder and CEO of FundThrough about the state of small business lending in Canada he said that many banks believe loans of $250,000 or even $500,000 aren’t profitable. Thus, banks try to convert these customers to personal loans collateralized by mortgages. He also stated that the traditional factoring or asset based lenders are all very old, paper based and ripe for disruption. In some cases, a borrower who is rejected by a bank would wait another full year to apply again due to lack of other options. FundThrough is trying to change this through their invoice financing product.

FundThrough’s goal is to reduce payments of invoices from 30, 60, or 90 days for businesses that sell to other businesses. The team at FundThrough realized that the biggest asset for a small business is their accounts receivables, not their inventory or equipment. Many small businesses completely fail or fail to grow due to the lack of growing capital. FundThrough offers a secured loan product as the loan repayments are tied to the invoice. They offer more risk appropriate pricing, which translates to lower rates for their borrowers. [Read more…]

The Canadian Marketplace Lenders Part 1

There are only a few marketplace lenders in Canada today, but it's a market that is poised for growth.

August 11, 2015 By Ryan Lichtenwald Leave a Comment

This is part 1 of a 2 part series on the Canadian marketplace lenders. In this series, you’ll learn about the state of lending in Canada and about the major marketplaces operating Canada.

What’s most interesting to me is that although marketplace lending is starting to become a global trend, each market has it’s own nuances. This is certainly the case I learned in Canada as I spoke to executives of several companies to learn about the challenges they face in their home market. Similar to Australia, there is an oligopoly of five stable, highly profitable banks that have between 70-80% of the market in Canada. One of the biggest challenges is consumer behavior, where consumers tend to be much stickier to the household names. The NPS score of these banks are not as low as in the U.S. The general positive attitude towards Canadian banks is partly due to the fact that Canadian banks were far less affected by the financial crisis.

This results in lack of competition to the banks, stagnant products, stifled innovation and high fees. Thus, the opportunity for these marketplaces is much larger. These new entrants must focus on educating consumers and offering them a superior product.

On the investor side, due to the regulatory environment in Canada, loans listed by any of these companies are not available to retail investors. For borrowers, the FICO credit score is based on a maximum of 900, not 850 as we have in the U.S. To give you a little perspective for comparison, a score of 690 in Canada would be equivalent to a 665 or 670 in the U.S.

As you’ll find out by reading about the biggest marketplace lenders in Canada, you’ll find that it is very much in its infancy in Canada with these lenders coming to life less than a year ago. They are several years behind the U.S. market. However, after talking with each company, it’s clear that the market opportunity large. [Read more…]

An Update on Peerform

December 26, 2014 By Peter Renton 14 Comments

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

[Read more…]

Peerform Making a Comeback With a New Underwriting Model

May 13, 2014 By Peter Renton 14 Comments

I first wrote about Peerform over three years ago. They had just launched and were looking to be the number three platform in the industry. But they failed to gain much traction and never established themselves as a viable platform.

But CEO and co-founder Mikael Rapaport clearly does not give up easily. Even though he never attracted the equity funding needed, he never closed his operation. And every few months he would contact me to reassure me that Peerform was still operational and one day they would get some momentum again.

Apparently that day has now arrived. Last month they closed on a new $1 million angel round and they now have a new Chairman, Gregg Schoenberg. I talked with both Rapaport and Schoenberg last month about the reborn Peerform.

Allowing Borrowers Down to a 600 FICO Score

This is the really interesting thing about Peerform now. They have created a new underwriting model that assesses risk in very different ways to Lending Club and Prosper. They call this approach the Peerform Loan Analyzer.

According to Rapaport their underwriting model will take a more holistic approach to assessing risk. Rather than having a strict 660 FICO score cutoff they believe that there are creditworthy borrowers all the way down to a 600 score.

“A borrower with a 620 FICO score does not necessarily mean they are riskier than someone with a 660 FICO,” said Rapaport when I spoke with him recently. “FICO score is not the best measurement for risk anymore.”

Two Products for Accredited Investors

[Read more…]

The Most Important Chinese P2P Lending Companies

May 2, 2014 By Jason Jones 6 Comments

Over the past nine months we have worked independently and in conjunction with our friends at Wangdaizhijia, a Chinese P2P lending media firm, to research the huge Chinese P2P lending market. As we mentioned in early December, the market is enormous, arguably larger than the US market, and it is growing rapidly. There are literally hundreds (or possibly thousands) of Chinese P2P lending platforms, which made it difficult to figure out where to start. So with every interview, we asked the simple question, who are the most important P2P lending companies in China? Not the largest or the oldest or the most popular but rather, who are the most important? We have received a variety of answers but after asking the question over and over, a clear group of firms have emerged. The following is our list of the most important Chinese P2P lending companies ranked in alphabetical order:

China Rapid Finance (formerly China Risk Finance)

China Rapid Finance is a 12 year old company that provides consumer credit management solutions to financial institutions to help manage credit card risk and to develop credit card decision solutions. They are experts in risk underwriting, and more than 50% of all credit cards that have been issued in China have used CRF’s credit risk underwriting models. In 2011, CRF launched a P2P platform and, at the end of 2013, the platform had an outstanding balance of approximately 1.5b yuan ($250m) with average loan size of $6,000. According to the Wall Street Journal, China Rapid Finance is in the preliminary stages of exploring a U.S. IPO.

CreditEase

CreditEase is the largest P2P lending platform in the world. They are also a wealth management firm that provides a suite of services to its investors including asset allocation guidance, insurance policies, and mutual fund investment advice in addition to access to their P2P lending platform. According to the company, CreditEase has originated over 60b yuan ($9.6b) in secured and unsecured P2P loans to date up from about 27b yuan ($4.3b) last year for a 122% growth rate. CreditEase relies on a huge sales force for offline borrower acquisition, which accounts for 99% of their originations, and they have a large secured lending business, which is mostly comprised of car loans. Their online lending originations represents a small fraction of their overall business.

Their average unsecured loan size is $8,000, the average duration is about 24 months, average interest rate of between 8-26%, and their average default rate is 2-3%. In 2011 the partnered with Fair Isaac (FICO) China to develop risk based scorecard for their underwriting decision making. Kleiner Perkins, Morgan Stanley, and IDG are venture backers.

Dianrong (formerly SinoLending)

[Read more…]

NoteX360 – Order Management and Execution for Institutional Investors

April 29, 2014 By Peter Renton 8 Comments

If you go into any major hedge fund or Wall Street firm today you will likely find graduates of Baruch College’s Masters of Financial Engineering (MFE) program working at the trading desk. The MFE program at Baruch is where many algorithmic traders learn their craft. But not everyone coming out of that program goes to work on Wall Street. Some choose a very different course.

Simon Hermiz, Kenneth Chan and Richard Postelnik all had an entrepreneurial yearning. Sure they could have made great money working at a big bank or hedge fund but they wanted to do something different. They started NoteX360 before they graduated from Baruch because they feel that p2p lending and the broader alternative lending market could benefit from efficient aggregation and execution technology that is available in other asset classes.

Hermiz, Chan and Postelnik have spent most of their careers in finance with backgrounds in lending, trading, and technology. They have a combined 20-years of financial industry experience working at companies like Bank of America Merrill Lynch, BNY Mellon, Fifth Third Bank, Houlihan Lokey, and Pico Quantitative Trading.

After hearing about p2p lending, Hermiz attended the LendIt Conference last year in New York to learn more. He saw there was a huge opportunity to bring equity style execution technology to this new asset class. And he realized he could help build the technology that would help p2p lending become a serious asset class.

So, the three partners went about building the NoteX360 software while continuing with their classes at Baruch. They attracted some angel funding although they would not disclose how much. Regardless, they had a very low cost structure because they did all the development themselves.

Order Management and Execution for Institutional Investors

What does NoteX360 do exactly? They help institutional investors access p2p lending by executing and managing orders for them. They offer both a semi-automated and fully automated service.

[Read more…]

Advice for New Lending Platforms

November 19, 2013 By Peter Renton 11 Comments

[Editor’s Note: Today we have something a bit different. Rather than discussing p2p lending from an investor perspective this article is for the platform operators, specifically those entrepreneurs looking to enter the space with their own platform. This is a guest post from Brendan Ross who runs Direct Lending Investments which is the General Partner of the first and largest peer-to-peer fund with an exclusive focus on short-term, high-yield small business loans.]

I have at least two conversations a week with entrepreneurs who want to start a lending platform.

I have another one to two conversations with online lenders who are not currently P2P, but who are interested in earning working-capital-free servicing revenue by selling loans to hedge funds like mine.

This piece, which Peter was gracious enough to offer to publish on Lend Academy, captures my beliefs about what it takes to start and grow an online lending platform.

My Background

In November, the Direct Lending Income Fund that I founded over a year ago will buy $5 million in small business loans originated by online lenders. While that is bigger than many entire lending platforms, it is still a very, very small part of the financial services industry.

These are early days for P2P lending. Those of us in the tent feel enormously privileged to be a part of it, and we are generally welcoming of new entrants.

Two Phases To A Successful Exit

Along the path to a successful exit, online lending platforms must go through two phases:

Phase 1: Need Lenders. You have borrowers but need capital to lend.
Phase 2: Must Scale Borrowers. You have an oversupply of capital and must scale your borrower origination.

Phase 1: Have Borrowers, Need Lenders

If you start a lending platform, it is because you believe that you can find borrowers. Initially, you will certainly find more borrowers than lenders, which will probably lead to a phone call with someone like me.

During this period in which you have little underwriting history, it is your fate to struggle to find lenders. You will feel enormously loyal to those lenders who first believe in you, and you should.

If those lenders are like me, they believe that in exchange for their early trust they will get a big seat at the table when you enter the sunny uplands of Phase 2, and lenders are begging for you to feed them loans.

Three Models for Attracting Lenders

There are generally three models for attracting lenders: [Read more…]

A New Lending Platform With a Singular Focus

August 27, 2013 By Peter Renton 23 Comments

The two main p2p platforms in the U.S. have split personalities. They have to because they are catering to two different sides of their marketplaces: the lender and the borrower. But it makes for a more expensive and cumbersome website that splits resources and forces a mixed marketing message.

Jonathan Ende has a different idea. He is focusing exclusively on borrowers and creating a company and a website built from the ground up with one purpose: to delight borrowers. He calls his new company BorrowersFirst and they have been in stealth mode for many months. Recently, they invited me to their office to meet their team.

If it’s BorrowersFirst What About Investors?

You may wonder why I am featuring this new online lending platform that doesn’t cater to investors. Obviously, there is going to be an investor side of this company, it is just not an area that will have a public face or one they will be devoting much in the way of resources. Say what?

Unless you are brand new to the blog and p2p lending in general you will know there is a large oversupply of investors on both Prosper and particularly Lending Club today. That, combined with the fact that Ende, the BorrowersFirst Founder and CEO, is a 20+ year veteran on Wall Street, means that they are very confident the investor money will come. Ende even said this to me in our conversation:

If I wanted to raise $250 million through my network of contacts to invest in this asset class, I believe I could do that with very little trouble. Today.

Now, this could be the irrational exuberance of an overconfident CEO or it may in fact be true. Time will tell. But given what I am hearing from institutional investors today there is huge unmet demand for this asset class.

[Read more…]

Ten Marketplace Lending Options for Accredited Investors

We review ten different investment choices across real estate, small business and consumer loans for accredited investors.

Real Estate

Perspectives from Marketplace Lending Platform Founders at LendIt USA

At LendIt USA 2016, four founders shared their personal stories on how they came to start a marketplace lending platform.

The Canadian Marketplace Lenders Part 2

There are only a few marketplace lenders in Canada today, but it's a market that is poised for growth.

FundThrough

The Canadian Marketplace Lenders Part 1

There are only a few marketplace lenders in Canada today, but it's a market that is poised for growth.

An Update on Peerform

Full Loan Descriptions Available for Investors

Peerform Making a Comeback With a New Underwriting Model

Allowing Borrowers Down to a 600 FICO Score

Two Products for Accredited Investors

The Most Important Chinese P2P Lending Companies

China Rapid Finance (formerly China Risk Finance)

CreditEase

Dianrong (formerly SinoLending)

NoteX360 – Order Management and Execution for Institutional Investors

Order Management and Execution for Institutional Investors

Advice for New Lending Platforms

My Background

Two Phases To A Successful Exit

Phase 1: Have Borrowers, Need Lenders

Three Models for Attracting Lenders

A New Lending Platform With a Singular Focus

If it’s BorrowersFirst What About Investors?

About Lend Academy

Recent Posts

Real Estate

FundThrough

Full Loan Descriptions Available for Investors

Allowing Borrowers Down to a 600 FICO Score

Two Products for Accredited Investors

China Rapid Finance (formerly China Risk Finance)

CreditEase

Dianrong (formerly SinoLending)

Order Management and Execution for Institutional Investors

My Background

Two Phases To A Successful Exit

Phase 1: Have Borrowers, Need Lenders

Three Models for Attracting Lenders

If it’s BorrowersFirst What About Investors?

About Lend Academy

Recent Posts

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