French p2p lending service Prêt d’Union raised 3.3 million EUR (approx. 4.2 million US$) in a new funding round from new investors (including Weber Investment, the holding of the two founders of la Financière de l’Echiquier and AG2R La Mondiale) and from its previous shareholders. The company has raised a total of 8.1 million EUR since its inception in October 2009. Along with PRÊT D’UNION’s founders, employees and private investors, the company shareholders are CREDIT MUTUEL ARKEA (34.9%), KIMA VENTURES (5.2%), Xavier Niel and Jeremy Berrebi’s fund (4,2%), Weber Investments (6.4%) and AG2R La Mondiale (2.9%).
“The launch phase was successful. With more than 2.5 million EUR of loans granted in less than six months, we are currently at a rate of over 1 million EUR of credit granted per month, which amounts to a monthly growth of 40%. This new round of financing, … , is an important milestone for PRÊT D’UNION. It will enable us to accelerate our business development through new recruitments, improve our customer service and reach for new customers,” explained Charles EGLY & Geoffroy GUIGOU, respectively CEO and COO at Prêt d’Union.
On Wednesday the new p2p lending marketplace Squirrl.com launched. For an introduction on the concept read the article ‘Squirrl Launch – Secured Loans to Suppliers‘. Now Sophie Coles, Squirrl’s Director of Business Development answers my questions.
What is Squirrl about?
Squirrl.com provides an online finance platform for well established commercial organisations (Suppliers) that have a business model where assets are provided to their customers and paid for over a period of time through Pay for Use Agreements. Examples are the motor industry, industrial machinery, office equipment etc…. If this type of organisation has no other financial arrangements it must pay for the assets at the start of the contract, and only receive its money back over the life of the agreement. Few commercial organisations can suffer the impact of this negative cash flow, yet customer demand for this service model is growing. Investors using the Squirrl.com platform can lend money to this type of Supplier in return for higher interest rates than they would get from the high street banks and have their loans secured.
How did you get the idea for Squirrl?
Since the banking crisis of 2007/2008 the flow of money available to commercial organisations to finance Pay For Use Agreements has almost dried up yet there is a huge demand from all sectors for such contracts. Traditional funders have become increasingly inward looking and preservation of their balance sheets their primary concern. There had to be another way to fund these contracts that are often underwritten by high quality customers and supported by highly reputable Suppliers. If someone was prepared to lend to another person on an unsecured basis as demonstrated by the P2P marketplace then surely that same person would lend to a good quality business secured against the cash flow of the Pay For Use Agreements. That was the trigger moment that occurred in 2011 and for the last year the site has been under development.
What are the three main advantages for lenders?
Squirrl savers can achieve higher interest rates than saving through high street banks typically between 5-15%.
Loans are made to established commercial organisations and then secured against the cash flow from a pool of a minimum of at least 20 Pay For Use Agreements. There is always a substantial buffer built into the security so that on average there is £2 of cash flow available to repay £1 of loan.
A 13 point risk mitigation programme is designed to reduce risk to the investor as much as possible.
What interest rates do you expect to see on the marketplace?
Typically the interest rate savers receive will reflect the level of risk associated with the investment opportunity. Initially Squirrl.com will only accept the lowest risk organisations so interest rates will vary between 5-7%, which is still a great return compared to what the high street banks are currently offering.
Which marketing measures do you plan to attract lenders?
Initially we are planning a very soft launch for Squirrl.com and will not be over promoting the concept. Savers do not have to pay any fees to join and start bidding apart from a one off £5 fee to cover the costs of user identification to comply with Squirrl.com security and Money Laundering Regulations. We want to stick closely to the community feel of social saving so we want to make the user experience as good as possible and Squirrl.com will continue to evolve through user feedback. After the initial launch we will start to seek other suppliers who could benefit from gaining finance using Squirrl.com, but we will only work with reputable companies who have high quality, structured Pay for Use Agreements in place. We can also act on a consultancy basis to help companies develop their structure to meet our criteria. Ultimately we want Squirrl.com to represent high quality, low risk, high return saving for the community so finding suitable suppliers to fit the bill will be crucial in maintaining this quality and reassurance to our squirrl savers. Continue reading →
Exclusive breaking news: In the UK Squirrl.com launches today. Squirrl provides an online finance platform for well established commercial organisations (Suppliers) that have a business model where assets are provided to their customers and paid for over a period of time through Pay for Use Agreements. Examples are the motor industry, industrial machinery, office equipment etc…. If this type of organisation has no other financial arrangements it must pay for the assets at the start of the contract, and only receive its money back over the life of the agreement. Few commercial organisations can suffer the impact of this negative cash flow, yet customer demand for this service model is growing. Investors using the Squirrl.com platform can lend money to this type of Supplier in return for higher interest rates than they would get from the high street banks and have their loans secured.
Lend as little as 25 GBP
Lenders can lend as little as 25 GBP (approx 40 US$). Aside from a one time identification fee, Squirrl currently does not charge lenders any fees (but in the T&C there are terms for fee structures, so fees may be coming later). Loan terms range from 3 to 5 years with repayments are conducted quarterly. Squirrl has a secondary market allowing lenders to sell of their loan parts to other lenders.
Two auction models
Supplier offers are auctioned with lenders bidding either on auctions that close on 100% funding or time auctions where the interest rates are falling if more bids come in than the asked loan amount.
Multiple measures to reduce risks
Aside from the fact that loans are secured by assets, Squirrl has multiple further measures to reduce risks for lenders. For example lenders do not bid on loans that finance one single asset but rather on loans that finance 20 similar assets. An example could be a loan to a supplier that finances 20 printers for 20 government schools. Each portfolio is given a risk rating which ranges from 1 for low risk (such as schools, health care and other public sector agreements) through to 7 for higher risk (such as small businesses agreements). Squirrl.com initially accepts only the lowest risk levels (1, Public Sector and 2, Major Listed Public Companies). The risk rating of the portfolio, rather than the Supplier, enables lenders to make an informed decision as to how secure invested money is. A feature of Squirrl.com is the ability to select an “interest group” to support. These are linked to the risk rating so for example a portfolio may be based on education or health, or any other defined interest group. Continue reading →
German Smava, launched 2007, yesterday announced that it will offer more products and evolve into a marketplace where borrowers seeking loans get multiple offers. The site logo and layout have been redesigned to reflect this change. Smava said p2p loans will be continued to be on offer and the new products (bank loans) added will give the borrower more choices.
My take on this – what does Smava achieve with this change?
Smava’s new loan volume was static since mid-2010. With the current change Smava:
can increase revenues. Since borrowers can be offered more loan terms and get multiple offers from banks, the probability of a sale increases. That bank loans need less explanations than innovative p2p loans further spurs this. Smava earns lead and sales commissions from the banks.
can justify high marketing costs to acquire the borrowers better now as the resulting traffic is more efficiently monetized. Unlike before Smava no longer needs to balance demand and supply (borrower growth versus lender growth) but instead can totally focus on marketing to borrowers.
decreases costs, as the intense vetting of loan applications (of which about 90% were rejected) is no longer necessary in most cases, since the bank does it for the referred applications
Why does Smava still keep p2p lending?
The question is not if Smava will continue p2p lending (the announcement said they will), but rather if Smava will continue development on that offer. That is unlikely since little happened in the last years. My assumption is that Smava keeps p2p lending on offer mostly for PR and marketing purposes.It allows Smava to position itself as different to loan brokers and loan comparison sites and keep a little of the image of financial innovation attached to the site. Continue reading →
Zopa will add more loan term selection for borrowers starting in the second half of May. So far Zopa was offering loan terms of either 36 or 60 months. In the future there will be Shorter Markets (24 and 36 months) and Longer Markets (48 and 60 months). While borrowers can elect the exact loan duration, lenders can only choose between those markets.
Asked how this action might contradict the removal of 12, 24 and 48 months loan options by Zopa in 2008 (see article) , Zopa CEO Giles Andrews replied ‘… The main problem before was that lenders chose to lend mainly over 12 and 24 months while most borrowers were looking for 36+. So we had a real mismatch in supply and demand. We should avoid that this time by not allowing lenders only to choose 24. We think it’s reasonable to do that given that lenders charge an extra premium for longer loans currently, so on that basis they will be getting a “premium” for loans made in the 24 and 48 month markets using their 36 and 60 month rates. …‘
