Aug 22
Peer to peer lending service Lending Club will close a $10.26 million series A round of financing from Norwest Venture Partners and Canaan Partners tomorrow. This comes a few months after the company’s $2 million angel round. Coinciding wit the investment, Jeff Crowe and Dan Ciporin (former ceo of shopping.com) are joining Lending Club’s board of directors.
Similar to other P2P lending sites (Prosper, Zopa, Kiva), LendingClub matches borrowers and lenders. However, LendingClub doesn’t work through their own website, but solely through Facebook on the application they launched at the F8 platform launch conference. Borrows and lenders a linked up using their “LendingMatch” system, which recommends loans based on credit and their social relationships to each other. The idea being that trusted relationships make lending more likely and defaults less likely. The application currently has over 13,000 installs.
Unlike Prosper, interest rates aren’t determined through bidding, but calculated based on the borrowers credit score, debt to income ratio, and amount of the loan. There are no hidden fees, and the interest rate is fixed for three years. In July the service surpassed $100K in loans. They recently claimed a little more than 4 out of 5 loans get funded and haven’t reported any defaults or late payments.
It’s still the early days for this industry, and as TC commenters point out, it’s very much a case of Caveat Emptor.
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Source: Nick Gonzalez
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Aug 05
Peer to peer lending startup, Prosper, is expanding operations to Japan and other Asian countries as a shared partnership with Tokyo-based SBI Holdings, Inc. SBI will be helping prosper navigate the navigate Asia’s regulatory environment. SBI Group has a market capitalization in excess of $8 billion and consists of 65 consolidated subsidiaries and 12 affiliated companies, including 9 public companies.
Prosper handles loans of up to $25,000 (the average funded loan is $5,000), broken into smaller loans to distribute risk. Money for the loan is then supplied by Prosper lenders bidding for the most attractive interest rates. Prosper earns revenue by taking 1% of the loan amount in fees from the borrower up front, and charging a 0.5% yearly loan maintenance fee to lenders. Prosper currently has over $79 million in funded loans and more than 380,000 members. So far it appears a lot of those members are logging on to pay off credit card debt at a lower rate. Prosper’s backer, Benchmark, has also invested in another P2P lender, Zopa.
It’s ironic to see these peer to peer lending startups expanding at same moment domestic markets are reeling from the collapse of the sub prime lending market sends waves through the mortgage market. Similarly, these startups will be sink or swim based on their ability to effectively manage risk.
Prosper is managing risk by encouraging transparency, automatically deducting monthly loan payments, and tracking reputations. Borrowing groups are another risk management tool, both helping first time borrowers get some initial credibility (and lower rates) while encouraging the network to police itself by tying together their reputations.
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Source: Nick Gonzalez
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