US

Lending Club’s Cost Advantage Over Banks

wiseclerk 1 Comment

If you are not totally new to p2p lending then you probably already heard the list of competitive advantages the p2p lending services have over banks: They don’t need branches, they don’t have old legacy infrastructure/software they need to maintain, they need less staff, their processes are faster, …

But how can this advantage be quantified?

On the Lendit 2013 conference Lending Club CEO Renauld Laplanche told the audience about a study conducted by McKinsey that calculated the cost advantage Lending Club has compared to a typical bank. He showed this chart:


(Source Lending Club /Lendit 2013; view larger image)

For 2015 the chart projects a cost advantage for Lending Club of over 400 basis points over banks. This is huge. Not surpisingly Lending Club has the biggest advantages by maintaining no branches and in collection and origination. or marketing Lending Club will have higher costs than banks.

Banks will eventually embrace p2p lending

Laplanche foresees that more and more banks will actually make use of p2p lending services as platforms to invest or to fund their borrowers to profit from the faster processes and the lower costs. At the conference Laplanche announced the first cooperations with banks and says he expects more to come.

His reasoning is that p2p lending like many other innovations will pass through 3 stages: rejection, adoption and then acceptance by the incumbents. Following this argument, p2p lending could right now be early in the stage of adoption by the industry.

He showed this chart to illustrate how the music industry reacted to disruption by Apple:


(Source Lending Club /Lendit 2013; view larger image)

Funding Community Launches P2C Lending in the US

wiseclerk

Last week the p2c (peer-to-company) lending service Funding Community launched. P2P loans in the US so far were done nearly entirely to individuals. Funding Community wants to change that and enable loans to local businesses. Funding Community is open to lenders from most states (and not restricted to accredited investors). All loans are 9 months loans. In addition to interest payments lenders may get rewards from the company (e.g. discounts). One example is a fitness company that offers 9,7% interest plus 2 personal traing sessions as reward.

Note that technically lenders at Funding Community do not lend directly to the company that seeks the loan. Instead, lenders lend to Funding Community, which, in turn, lends money to small companies, including the particular ones the lender selected.

Secured loans

Funding Community states that all loans are secured

The interest rates we provide, as well as a security interest in our assets are designed to decrease the risk to lenders. In addition, we take a security interest in small businesses to whom we make a loan and also generally require a personal guarantor to support repayment. We also set aside a small pool of capital to cover a portion of loans that default. It bears repeating, however, that you may not lend to us or use Funding Community expecting a return or profit. You may only use Funding Community if your primary purpose in making the loan is to help us overcome short-term cash-flow considerations in supporting small business growth in the United States.

For now, Funding Circle started with making loans to businesses located in New York and plans to expand into other areas later.

Fees

Funding Community charges companies a 2.5% loan origination fee and lenders a 0.5% service fee.

Prosper Raises $20M from Sequoia; Appoints New CEO

wiseclerk 1 Comment

Prosper has raised 20 million US$ from Sequoia Capital. Prosper also announced it has appointed Stephan Vermut as Chief Executive Officer and member of the board of directors. Prospers management team is undergoing change after several persons left in December (e.g. David Silverman, Larry Cheng, Jeffrey Jacobs). The SEC recently approved Prospers new ProsperFunding LLC, a legal structure set up to offer bankruptcy protection for investors in the event of an bankruptcy of Prosper Marketplace Inc.

(Sources: press release & other)

The Lending Club Story

wiseclerk

‘The Lending Club Story‘ is the new Kindle ebook written by Peter Renton. It covers the interesting development of Lending Club from a p2p lending startup to a company that has issued 1 billion US$ p2p loans. The process is explained for new lenders and borrowers and the story of selected borrowers and lenders is shared.

Best of all: You can download it free for the next four days at Amazon.com and Amazon.co.uk.

Peter Renton writes the very informative blog LendAcademy where he shares advice for Prosper and Lending Club lenders.

Win a Copy of Zidisha’s New E-Book

wiseclerk 10 Comments

Zidisha has just published the Kindle E-Book ‘Venture: A Collection of True Microfinance Stories‘. Authored by Zidisha staff and volunteers, the book is a rich and readable collection of real-life portraits of Zidisha entrepreneurs worldwide.
Venture is written for Zidisha supporters and anyone else who would like to better understand the realities faced by the poor and the aspiring middle class in the world’s least developed countries, the range of factors that affect their prospects for working their way out of poverty, and how microfinance can impact their lives. There are 34 stories of individual borrowers.

Zidisha founder Julia Kurnia told P2P-Banking.com that all proceeds will go to cover Zidisha’s operating costs.

Note to other p2p lending/p2p microfinance services: Do you have interesting inside stories to tell? Have you considered distributing them in e-book format? The marketing effect could be good compared to other marketing channels. For maximum exposure you might even offer the e-book for download free of charge. If you tried this method, tell us, so we can write about your experiences.

Here is how you can be one of 10 winners of a free copy of the new E-Book

Are you interested in Microfinance? Maybe you have used Zidisha already? Regardless of what triggered your interest in the subject, you have a good chance to win, because the only thing you have to do is: be quick!

The first 10 readers to leave a comment (any comment) under this blog post will win a free copy, courtesy of Zidisha. You need to leave your email address when commenting in the designated field. The email addresses will NOT be publicly visible. The email addresses of the 10 winners will be given to Zidisha. Zidisha will distribute the copies. And after you read it, please do come back and post a comment here how you liked it, so other readers can have some guidance on whether they should go ahead and purchase it. Thank you.