Chonchol Gupta and Xavier Cabo, two graduates of the Tulane University’s A.B. Freeman School of Business, founded RebirthFinancial.com to enable small businesses from Louisiana easier access to loans.
Interested businesses are screened and once approved can apply for loans between 5,000 and 100,000 US$ with loan terms ranging from 5,000 to 100,000. There is only a small fee of 100 US$. Apart from that fee, the business model of Rebirth Financial bases on earning from the interest rate spread.
Any US resident can lend. Minimum amount is 50 US$. Rebirth Financial is not subject to SEC registration.
It will be very interesting to see how the first p2c lending service in the US develops. Funding Circle in the UK had a good start. Rebirth Financial has already announced that Louisiana is only the start and that they plan to expand nationwide.
Money360 offers a first in p2p lending: To my knowledge they are the first live p2p lending service applying the concept to financing real estate loans.
Loan sizes are much bigger than seen before in p2p lending. Minimum loan amount is 200,000 US$, maximum is 5 million US$. The minimum a lender can invest in an individual loan is upscale too: 50,000 US$. This does fit the target audience though as only accredited investors residing in California can join as lenders.
Loans are secured: Each Lender is listed with an undivided fractional interest on the promissory note and deed of trust.
When the transaction is complete and the loan is closed, Money360 will receive a closing fee of 2% of the loan amount. This fee is paid by the Borrower, typically out of the loan proceeds. Money360 charges the Lenders an annual servicing fee of 1.5% of the loan amount for providing all loan servicing functions.Continue reading →
Quakle.co.uk launched in summer as a rare bird in p2p lending. Instead of using credit rating data to gauge the borrowers Quakle set out to base its rating on social connections tied online. Quote from then: “The trustworthiness of the borrowers is assessed by the lenders only. Quakle believes that social bonds strengthen confidence and make borrowers more likely to repay. In addition we are convinced that getting dozens of people to trust you is, at least, as much difficult as building yourself a high credit score. It is then the responsibility of a lender to choose whether to lend money to borrowers who are active members of user groups and have a good social rating.”
Recently Quakle reconsidered and adapted its approach. Now the site uses Experian data to credit score the borrowers. Director Josselyn Digny told P2P-Banking.com: “We changed the information collected on borrowers after we’ve got some feedback from lenders and potential lenders that they would not lend out money to borrowers if their credit history was not reviewed at all“.
A recent press release phrases the new message: “Quakle, the online peer-to-peer lending community, allows people to lend money to each other in a friendly and structured way, while cutting out the banks. Quakle credit checks its borrowers but is different from other peer-to-peer lending websites in that members also have a ‘reputation score’. This score is based on their individual behaviour and that of any group they may be part of within the site. This peer group system encourages people to be financially responsible.”
The company still suffers from a shortage of lenders and offers a 30 GBP reward on first bid for new lenders as registration incentive. Furthermore there are no fees for lenders. Continue reading →
British P2P lending site Ratesetter.com launched recently. Ratesetter uses market approach dominant in the UK (rather then individual listing).
A novel approach is the “Rolling Monthly Loan” Ratesetter introduces:
One of the two types of loan RateSetter offers. For a borrower, this is a bit like borrowing with a credit card. At the end of the month, they pay the interest and a minimum repayment amount. The balance of the loan is then rolled into a new contract (with a new lender). Lenders only lend their money for one month at a time. They lend their money again at the end of the month, but to a new borrower with a new contract.
This is an interesting concept. For lenders it solves the problem with other p2p lending markets (unless they have a secondary market) that they cannot cash early. For borrowers this comes with mixed blessings. While the rolling monthly loan comes with lower rates than a credit card, the rate will change each month (for better or worse).
I do wonder what happens should the lender demand dry out? How will Ratesetter refinance the Rolling Monthly Loans then?
Provision Fund
Ratesetter builds a fund as partial shield against bad debt:
Money invested in shares and corporate bonds isn’t covered by the Financial Services Compensation Scheme. Money lent with RateSetter isn’t either, but we’ve set up a Provision Fund to reduce the risks to lenders. Borrowers pay an amount each month into the Provision Fund based on their creditworthiness. The fund is managed by RateSetter so a lender can be compensated if their borrower doesn’t pay their loan on time. All payments from the Provision Fund to the lender are entirely discretionary – we can’t guarantee to compensate lenders from the fund and it isn’t an insurance product. If RateSetter builds up a surplus in the Provision Fund (if we’ve been overly conservative) RateSetter pays bonuses to its lenders (this is paid annually based on how much money they’ve lent over the year).
The height of the payment into this fund (called credit rate) is dependent on the credit score of the borrower. The website quotes a 1% credit rate as example. The Provision Fund by Ratesetter is the second construct to diminish risks from defaults to lenders after the Anleger-Pool concept by Smava (see articles on Anleger-Pool).
I see two downsides to the Provision Fund concept:
It is (currently) not tranparent. The market view section gives no information how much money is present in the fund
Should defaults rise above an expected limit the fund will be empty. While lenders with loans that defaulted first will be protected in full, the ones after could be left empty-handed. However Ratesetter could react to this scenario by raising the credit rates on the monthly rolling loans
The market view shows, that Ratesetter matched funds currently at about 6.3% APR for the rolling monthly and at 8.6% for the 36 month loans.
Ratesetter charges borrowers a 115 GBP upfront fee (for the 36 months loans); 5 GBP per month for the monthly loans and lenders 10% of the interest they earn.
The company was founded by Rhydian Lewis (CEO) and Peter Behrens (COO).
This social lending company differs from the ‘standard’ ones as it does not provide lending auctions. Instead, the borrower sets his/her own interest rate, amount (1, 000 – 10,000 EUR) and duration of the loan. Then a Finnish credit scoring company processes the data and the borrower gets a one-to-five star rating. If a borrower is marked for payment issues in the past, the loan request automatically gets rejected.
… investors can also diversify their investments through different loans in 100 EUR lots. …
The company operates totally free of paper as it uses the local banks’ identification systems, a kind of e-signature. The investors can invest directly online and the borrowers can sign their contracts.
If a loan does not get fully funded the borrower can choose after 14 days from the first investment to accept a part of it, or reject it as he or she sees fit.
Currently investors pay 4 Euro for each withdrawal. Fees for borrowers are
5% origination fee
2% annual fee
4 Euro per transaction
Compared to other p2p lending services these fees are rather high.
Funding Circle has launched it’s peer to company lending service in Britain. As reported by P2P-Banking.com in February the startup received 1.1 million US$. Any UK resident can lend either by individually selecting businesses or by using the autobid feature and spreading the investment over several matching businesses. While loans last for 1 to 3 years FundingCircle – unlike other p2p lending sites – allows lenders to access their money easily: Selling of parts of loans funded to other lenders is possible (secondary market).
In 2010 lenders are not charged any fees to use Funding Circle (in 2011 there will be a 1% annual servicing fee and a 1% sales fee).
All businesses applying for loans are screened by Funding Circle’s underwriters using data supplied by Experian to ensure they are creditworthy. A business may apply for a Funding Circle loan amount between 5,000 and 50,000 GBP. Continue reading →
