News

March 23rd 2016, Daily News Digest, Lending Times

  • Marketplace lending: easy money is gone and that’s a good thing.
  • Zopa, founded in 2005 had profitable 5.9% yield in 2008 recession.
  • How maturity changed the p2p companies in the UK.
  • HomeUnion raises $16m. Offer a lot more than a marketplace.

Has the Rise of Marketplace Lending Reached a Peak?, (Orchard Platform), Rated: AAA

A year or two ago you could have a cool idea for an online lending platform and have VCs lining up at your door. Every funding round seemed to be at double the valuation of just a few months before. And as for debt capital, most platforms had a waiting list of investors looking to participate.

This is what has changed. Today, VCs are looking for a truly unique idea with a solid management team before they will even consider an investment. For the first time, I have heard some smaller platforms complain that they are struggling to find investors for their loans. And while the major platforms seem to be unaffected, for now, sentiment has clearly changed.

So, the peak has come and gone as far as easy money is concerned. And that is a good thing. The industry itself is thriving and is nowhere near the peak. In fact, I would say we have barely left basecamp on the rise to the summit.

Funding Circle’s CEO addressed ‘the most pertinent question anyone can ask about our industry’, (Business Insider), Rated: A

Zopa, founded in 2005, has been through a recession. It fared well — average loan losses were 2.3% but average yield was 5.9%. Cormac Leech, an analyst who covers fintech and online lending at boutique investment bank Liberum, has said in the past that even under “fairly aggressive” stress testing Funding Circle’s yields are likely to stay at or above zero.

Peer-to-peer maturity transformation, (FT Alphaville), Rated: AAA

Off/On Balance sheet : While Funding Circle does not hold loans on its balance sheet — not something every lender would consider a badge of pride — it also has a listed fund that exclusively buys loans it originates. They don’t have balance sheet participation, instead, they have off-balance sheet participation.

Lack of deposits: One could argue that online lenders have to treat their investors capital with a little more care than banks, given that their investors cannot rely on deposit protection. But then again, banks themselves are a source of capital for online lenders.

Maturity transformation:  Borrowing short and lending long — isn’t supposed to exist in the world of online lending, where investors own a specific loan or fraction of a specific loan and are locked in for the duration of that loan unless they can find someone to buy it from them. But, to the ire of its rivals, Ratesetter has done maturity transformation for much of its existence. Recently, Ratesetter has tweaked its system to reduce the risk from this mismatch.

Real Estate Tech Startup HomeUnion Raises $16 Million in Series B Funding, (PR Newswire), Rated: AAA

Comment: This deal is particularly interesting because HomeUnion seems to offer much more than an online marketplace for investors and operators. 

HomeUnion, an online real estate investment management firm enabling value investing in single-family rental (SFR) properties, has raised $16 million in Series B funding. The financing included new investors Colchis Capital, Northgate Capital, and Tamarisc with participation by Artiman. To date, HomeUnion has received a total of $23 million in funding from venture capital firms and closed more than $50 million in real estate transactions.

The company handles all aspects of the real estate investment transaction. The HomeUnion.com platform:

  • Selects personalized portfolios of high-quality, pre-vetted rental properties based on investor needs and risk profile.
  • Identifies the best funding source for an investor whether that’s cash, an IRA or financing, and then facilitates the entire process.
  • Acquires property on behalf of the investor and completes all documentation online.
  • Directs property management duties through its in-house Asset Management division.
  • Monitors detailed property information and return analysis.
  • Helps the investor decide on the right time to sell through the use of data science.

Marketplace lending booms even as P2P lenders face ‘uncharted’ regulatory waters, (Business Vancouver), Rated: A

Vancouver-based Grow launched little more than a year ago, but, by Kevin Sandhu’s estimate, the dollar figure attached to applications processed by his online marketplace lending service is “nearing a $1 billion.” In June 2015, the Ontario Securities Commission (OSC) cautioned P2P lenders that they were required to follow the province’s Securities Act.

On March 1, months after the OSC’s warning, Toronto-based P2P service Lending Loop voluntarily suspended new loan requests.

Cormick, the founder of Venture Law Corp., said most of the online platforms in Canada are registered as exempt market dealers. This allows them to underwrite securities that are exempt from prospectuses.

 

Interesting LC Put And Call Options For May 20th, ( Nasdaq), Rated: A

Investors in LendingClub Corp (Symbol: LC) saw new options begin trading this week, for the May 20th expiration. At Stock Options Channel , our YieldBoost formula has looked up and down the LC options chain for the new May 20th contracts and identified one put and one call contract of particular interest.

The put contract at the $8.00 strike price has a current bid of 65 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $8.00, but will also collect the premium, putting the cost basis of the shares at $7.35 (before broker commissions). To an investor already interested in purchasing shares of LC, that could represent an attractive alternative to paying $8.64/share today.

ATB Financial launches new crowdlending platform, (Sys Con Media), Rated: A

Edmonton, Canada: ATB LendR gives Albertans the opportunity to, as a crowd, loan money to budding entrepreneurs. Once an entrepreneur reaches half of its funding goal, ATB will provide the remaining half, completing the loan. ATB collects and distributes payments and interest back to the LendRs. James Belcher, a Calgary entrepreneur about to launch a new downtown restaurant, Paper ST, was the first to sign up as a Founding LendR.

 

Ex-CICC chief Levin Zhu: technology will not kill finance, (Finance Asia), Rated: A

“If you want to manage people’s wealth, you have to talk to them about their needs…You can [of course] send an email to everyone in the world in one second but many things cannot be easily solved through an email. It requires a lot of communication and dialogue,” Levin Zhu, the son of former Chinese premier Zhu Rongji said on Tuesday at the Boao Forum in Hainan.

“We don’t need to meet our clients at all for judging their creditworthiness and [calculating] default probability. Alibaba and Tencent are also using big-data to do this,” Zhang Jun said, while admitting the process cannot be “100% automatic” without the need for humans. Zhang Jun is a former engineer at Microsoft and CEO of PPDai, one of China’s largest P2P lending platforms.

P2Binvestor Receives $50 Million Loan for Growth, ( Crowdfund Insider), Rated : A

P2Binvestor is Denver-based originator offering line-of-credits to SMEs.  P2Binvestor has received $5 million as part of a larger $50 funding round. This is according to a report in the Denver focused publication BusinessDen. The funding was also revealed in a recent filing with the SEC. The publication said the loan was from a “fourth institutional investor”. The company is now focused on finding borrowers.

Broadridge invests in LiquidX, (Finextra), Rated: A

Broadridge Financial Solutions, Inc. (BR) today announced that it has made a strategic investment and entered into a referral, sales, and marketing alliance with LiquidX, Inc. (LiquidX), the provider of an electronic exchange platform for global trade finance.

LiquidX has a unique exchange platform that brings significant liquidity and transparency to the historically difficult trading of corporate receivables by connecting sell-side and buy-side participants. LiquidX unlocks balance sheet capital from large corporations through its innovative technology-driven auction market.

 

Four Alternative Lending Solutions That Meet Four Different Small Business Needs,( Market Exclusive), Rated: B

Kabbage – Apt for Lines of Credit
RapidAdvance – Quick in Merchant Cash Advance
Accion – Loans to Start-ups
OnDeck – Loans to those with Bad score

 

Funding Circle SME CEO Buys Shares, (Morning Star), Rated: B

Funding Circle SME Income Fund Ltd said Chief Executive Officer Samir Desai bought 148,138 shares at 94.50 pence per share on Tuesday. The purchase makes up his entire holding.

 

Tech CEO Will Not Stand for Unfairness in Funding, (Ebony) Rated: B

Cheryl Contee,a Black female founders who successfully raised over $1 million in funding  posted on Facebook “I just had one of the most humiliating experiences of my career. Trying to apply for a Kabbage credit line for a stable, successful, growing small biz – apparently that’s a no-go if you’re Black.”

As her outrage made the rounds, other Black female small business owners, including L Joy Williams, President of the Brooklyn NAACP, piped up on her Facebook post to say they had felt the same. Williams wrote: “Interesting, I applied previously as well and thought it was just I had too many lines open or something.”

Kabbage:  “As outlined in our blog post, we are committed to expanding access to capital to all small businesses. We underwrite solely based on business performance information and do not inquire about an applicant’s demographic information including race, ethnicity, or gender in our underwriting process. Kabbage’s process to determine loan eligibility is focused on evaluating business performance metrics such as revenue growth, cash flow, and other financial indicators. Applicants are approved in real-time using an automated technology platform that processes tens of thousands of applications every month. This process typically does not require manual submission of information, unless there is an exception as was the case here. Ms. Contee provided account information in her Kabbage application that conflicted with the financial accounts linked to her application. As part of our Customer Identification and Anti-Money Laundering Program, we are required to collect and verify customer information and in the case of exceptions, conduct further due diligence which is why the additional information was requested of Ms. Contee. Transparency is and always has been one of our core values, and for this reason, we actively reached out to Ms. Contee to explain why our platform requires financial accounts linked to an application to be under the applicant’s name.”

 

Author: George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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