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July 26th 2016, Daily News Digest

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  • Today the interesting part of Lending Times is mostly coming from the UK.
  • And we apologize to our readers as our website technical issues seem to continue for unclear reasons. It was down a while, it’s back up now.

United States

United Kingdom



United States

It’s a sunny outlook for small biz owners with economy on an upswing, (NY Daily News), Rated: AAA

Comment: could it be that the small but dynamic marketplace lending space is having a real effect on the economy ?

Two industries that are doing quite well — in Manhattan and indeed across the country — are restaurants and hospitality. According to the New York City Economic Development Corporation’s June 2016 report, 10.7 million passengers flew into and out of the region’s airports in March 2016, a 7.9% increase from March 2015.

“People are spending the same amounts, but I’ve definitely noticed an increase in the volume of people engaging in the bar scene. They stop for a drink and maybe a quick meal, and there are definitely more tourists visiting this year. I’m noticing more turnover at each table.”

Lending approval rates at institutional investors remain high (62.7%). Strong yields and low default rates in this category of lenders drives the high approval rates. New York’s financial markets are a safe haven for investors seeking a bigger bang for their buck.

Banks and other lenders have identified small business lending as a profitable sector of their portfolios. They continue to make more investments in technology and partner with marketplace lending platforms to streamline the loan application process.

Look for small business lending to remain strong this summer and into the fall. Anyone looking to start or grow a business should keep this in mind.

National funding reaches $ 1.5 billion milestone in capital deployed to small businesses, (Press Release), Rated: AAA

National Funding, one of the largest private lenders of small business loans, today announced it has reached $1.5 billion in total capital deployed. Further validating its business performance, the company also announced it funded $151.8 million in loans for small businesses for the first half of 2016, up 45% from the first half of 2015. The company was recently listed as one of the top 10  mall business alternative lenders by deBanked.com, ranked by loan volume.

National Funding’s company data also provided key insights about the state of the small business sector:

  • The top five small business industries that National Funding served were: special trades; general contractors; medical; business services and trucking
  • The average National Funding customer generates less than $1 million in sales
  • Average business customer has between 25 and 50 employees
  • Working capital loans make up approximately 80% of the company’s sales, but many businesses also seek leasing in order to obtain equipment
  • Key capital expenditures for customers include: expansion, marketing, inventory, equipment financing and taxes
  • Helped over 25,000 businesses to date.
  • Founded in 1999

On Funding Circle’s valuation, (FT Alphaville), Rated: AAA

Private technology startups are pretty tough to value, particularly if you’re on the outside looking in.

First, you have the inherent subjectivity in valuing any company. Investors can differ on which metrics are most appropriate and what to include or exclude in their calculations. Even a price set by a reasonably liquid market doesn’t settle the argument; after all, one of the reasons an investor buys or shorts a stock is that they disagree with the market.

Second, you have opaque and complicated capital structures. The classic, clean idea of selling equity involves a certain number of shares at a certain price giving a straightforward percentage ownership of a company. In the tech world, however, liquidation preferences are common and the blurred line between debt and equity make it difficult to deduce anything sensible from fundraising announcements.

Funding Circle is a lender to small businesses and is the only one of its UK peers with operations in the US; it was the first, and still only, UK online lender to have its loans securitised; and it is the only lending startup on either side of the Atlantic to have floated its own closed-end investment fund in London. To-date, the six-year-old company has lent over $2.5bn globally.

It is said to be one of only two fintech “unicorns” in London and has a valuation of $1bn. The figure was reported in the FT, the Wall Street Journal, TechCrunch and others when the company announced a $150m funding round in April 2015.

However, the company’s group accounts for 2014, which were signed off in July 2015, a few months after the deal was revealed, do give us a figure we can use to start with a little more certainty.

In a section on employee share awards, the accounts say that a “performance target” must be met before certain shares are eligible for dividends and capital return. That performance target is “an enterprise value of £450 million”. Today, £450m is around $590m. Depending on what dollar value of sterling you use during 2014 and 2015, you get a range of $650m to $765m. That’s a ceiling on the value, rather than the value itself, if you assume that companies generally set “performance targets” that have not yet been met. (Also, “enterprise value” is being used interchangeably with “equity value” in the accounts, according to a Funding Circle spokesperson.)

In July 2014, Funding Circle raised $65m in a Series D round, so the note in its accounts suggests (although as discussed above, does not confirm) an upper limit for the valuation in that round of around $765m (sterling was bouncing around $1.70 that month). The 2014 accounts show revenue growth of 144 per cent to £13m and a 210 per cent increase in losses to £17.3m.

Further to that, we can draw the conclusion that the $150m Series E raised in April 2015 at a reported $1bn valuation gave the company, at minimum, somewhere between a 30 per cent or 50 per cent uplift, depending, again, if you decide to try and adjust for currency moves.

Since July 2015, Funding Circle’s $1bn round, OnDeck’s shares are down 63 per cent. OnDeck funds some loans with its balance sheet, so perhaps one could argue Funding Circle should be compared with an online lender which doesn’t, in the main. Lending Club, then, is down 71 per cent and even before the scandal involving former CEO Renaud Laplanche was revealed, shares had fallen 53 per cent since mid-2015.

That sort of comparison does not just apply to Funding Circle, of course.

So how much is Funding Circle worth? Well, how much are you willing to pay?

Benefits of Investing in Marketplace Lending, (Prosper), Rated: A

Prosper updated their website with the benefits of investing in maketplace lending.

Note 1: why not call it p2p lending anymore ? I really think that p2p lending is 90% of the innovation and bought a tremendous amount of goodwill.

Note 2: Here are the reasons, just in case you need a quick reminder:

Proven Solid Returns

Individuals who invest in marketplace lending loans can earn an estimated 5-9% net return (after adjusting for fees and defaults). These loans tend to perform better than more traditional types of fixed-income products such as corporate government and emerging market bonds.

Reduced Risk

Marketplace lenders make it easy to diversify across many loans to reduce risk and drive solid returns. In increments of $25 of more, people can invest in a number of loans (or portions of loans).

Short Duration

Typical marketplace lending loans are offered in terms of 3 to 5 years. With no pre-payment penalties for the borrower, the effective duration of the loans could be less.


Investing in marketplace loans is easy. Investors can choose to use an automated tool, which runs a search for specific types of loans, or manually find loans that match a desired risk tolerance.

Low Volatility

Well diversified portfolios of marketplace loans have consistently performed during times of stock market volatility and rising interest rate environments. These loans have also performed well during times of both high and low unemployment rates.”

Disruptive technology innovators revealed, (Infotechlead), Rated: A

Cybereason, Klarna and what3words are the top three technology companies in the list called Top 25 Technology Innovators & Disruptors: 2016 prepared by Juniper Research.

United Kingdom

UK P2PFA Releases Peer to Peer Lending Data for Q2 as Growth Slows, (Crowdfund Insider), Rated: AAA


The UK Peer to Peer Finance Association (P2PFA) has released its second quarter numbers for 2016. The P2PFA was founded in 2011 as a self-regulatory body for the sector to promote high standards of conduct and consumer protection and represents the largest P2P lenders in the country. According to their data, cumulative lending now stands at £5.8 billing with £658 million in lending occurring during Q2. In year ago same quarter, total new lending registered £507,936,000 a solid increase. But Q2 numbers are a dip from Q1 2016 when total new lending came in at £715,421,000. Both the number of borrowers and lenders increased from Q1 to Q2.  Zopa remains the largest lender by cumulative total followed by Funding Circle.

“the main story behind these latest figures on peer-to-peer lending is the continued expansion in the number of investors and borrowers – with more than 150,376 lenders and 332,107 borrowers currently using P2PFA platforms. More borrowers – both individual and businesses – underscores that peer-to-peer lending is now a mainstream alternative finance product, engaging an increasing number of participants.” [Comment: I wonder if they remove duplicates if the same lender/borrower is active on multiple platforms]

Both lending for consumers and businesses slowed with business lending taking a larger dip. This is probably indicative of the challenging global economic environment. It will be interesting to see if the Brexit decision will have any impact on this sector of finance.

q2 p2p volumes per originator UK

LendInvest’s Christian Faes Reflects on Brexit Decision Four Weeks Later & Announces Revised Lending Criteria, (Crowdfund Insider), Rated: A

Following the shocking vote to leave the European Union (EU), the largest peer-to-peer mortgage lender in the UK published a letter, signed by Faes and co-founder Ian Thomas, stating the website is moving into this period of transition as a “very well capitalized, profitable and with one of the most diverse funding bases” of any UK marketplace lender.

Christian noted that shortly after the vote, he and his team revised LendInvest’s lending criteria by tightening the platform’s terms for high-value purchases and temporarily pausing lending on new second charge cases. He noted:

Christian Faes & Ian Thomas – LendInvest – March2016“Steering clear of higher-risk loans is in fact a strategy we have undertaken for several months. Since last Autumn we have markedly reduced our lending in the high-valued, central London residential market which we felt was showing signs of overheating. Today, our focus is on residential properties which generate reasonable yields where our professional borrowers make investment decisions based on income, not on speculative assumptions of unrealistic capital appreciation.” [Comment: We think the best way to show no effect is with numbers. ]

P2P funds ‘unaffected by Brexit’, (Bridging and Commercial), Rated: A

Peer-to-peer (P2P) lenders could stand to gain a greater market share as some banks have reduced appetites to lending in the wake of Brexit, according to Chirag Shah, CEO of Nucleus Commercial Finance.

Chirag’s comments followed claims that some lenders have begun to lose their funding lines as a result of financial turmoil caused by the EU referendum.

“Bank appetite will reduce, we are already seeing them pull out of a few transactions,” Chirag insisted.

“Some of the larger lenders in the bridging space will come under pressure as their bank lines are scaled back.

“This will enable [the] likes of Nucleus [and other] P2P lenders to gain market share.”

Chirag explained that P2P lenders were at an advantage as investors were less likely to withdraw their funding.

Louis Alexander, managing director of The BridgeCrowd, echoed this sentiment, noting that returns on P2P investments were a driving force behind the sector’s popularity.

“We have seen more and more investors join the platform as investors seek to get reliable returns secured over a strong asset class,” Louis explained.

John Goodall, CEO and co-founder of Landbay, added: “…Since Brexit we have seen no change at all to average investment levels of both current and new investors on our platform.

“…We have diverse funding sources [for borrowers], without relying on any one party to fund our mortgages.”

And with over 330,000 borrowers now utilising P2P loans, Kevin Caley, founder and chairman of ThinCats, said lenders would remain committed to growth. [Comment: perhaps the numbers don’t tell the same story as you can read just 2 article above. It is true that ThinCats continues to grow, but they are the real exception.]

Gillian Roche-Saunders Shares Insight into UK FCA Crowdfunding Regulatory Review, (Crowdfund Insider), Rated: AAA

Gillian Roche-Saunders, is a partner at the law firm of Bates, Wells & Braithwaite in London. She represents some of the largest P2P and investment crowdfunding platforms in the UK today assisting with compliance, business models, marketing and regulatory approval. She also works closely with the UKCFA and is a Director at the EIS Association, and thus has a unique perspective into the inner workings of both platform and regulators.

The FCA is in the process of reviewing its initial set of rules for both debt and equity internet finance.

Roche-Saunders explained;

“Yes. The FCA is under pressure in both directions right now…These pressures are both internal and external.  They are being pushed from all sides. My opinion is there are some internal individuals that believe more stringent regulations are demanded. Other teams have been asking to go above and beyond what is written rules. They are definitely being pulled in different directions. Two of the core priorities are consumer protection and competition. You will find a spectrum of FCA staff on different places in that continuum.”

Roche-Saunders believes the external pressure is also coming from traditional finance players. Having recently attended an FT event, she said it was clear that traditional finance sees “P2P encroaching on their space.” Of course lobbying on behalf of one’s industry has always been a way for an industry to compete. Roche-Saunders stated there is no doubt that some MPs are being lobbied based on these concerns. Even while some understand the need to keep regulation proportionate there is a “lot of political pressure at play.”

The document published in concert with the review indicated the FCA will demand more diligence from platforms and additional transparency. Asked as to how are the platforms reacting to this? Roche-Saunders assured this was certainly fine;

The FCA is unique in its competition mandate as part of its overriding mission. Investor protection is balanced by the need to foster competition as this is deemed the best method to benefit all consumers. Will this competition requirement play a part in the crowdfunding review?

In closing, Crowdfund Insider asked for Roche-Saunders to predict the final outcome.

“I think the financial promotion rules will be extended to P2P platforms. They will be subjected to similar rules as crowdfunding platforms. I would expect minimum standards will be forthcoming for investors too. For the moment there are only a few rules that P2P must follow. That is not necessarily a bad thing. It all comes down to where that line is drawn.

“Regarding equity crowdfunding and the areas the FCA commented on; it is difficult to see how they will improve there. Having seen some of the supervision they have done on the crowdfunding platforms it is hard for me to see anything additional unless the review reveals any other problems.”

Lower interest rate offered, (Business Cornwall),Rated: A

Folk2Folk, winner of the Best Lending Platform for Small Businesses by AltFi, has launched the lower interest rate loan in response to the aftermath of Brexit. Dependent on meeting certain criteria, Borrowers will now be able to draw upon a 5.5% interest loan, a reduction of 1% on the 6.5% rate Folk2Folk will continue to offer.  The lower rate will help make capital more accessible and reduce the cost of a Folk2Folk interest-only loan by 15% per month. [ Comment: Lending is like a delayed time bomb. You don’t know which wire you cut until the loans start aging and they are seasoned. It takes usually 7 to 12 months for loans to start seasoning. Sometimes an effort that looks like capturing market share can be instead. ]


P2P exodus from Shanghai city centre leaving huge glut in office space, (South China Morning Post), Rated: B

Savills forecasts vacancy rate of the city’s grade-A office buildings to hit 13.3 per cent in 2017.

China Economic Weekly recently reported that more than 10 per cent of the finance industry’s new demand for office space in Shanghai came from the P2P sector last year.

According to fresh figures from property management firm Colliers, the average rent in Shanghai’s CBD grade-A office market dropped by 0.5 per cent in the second quarter to 10.3 yuan per square meter per day, in direct response to an exodus from many prime buildings. “New supply could reach its highest level since 2009 next year, far beyond demand, and this is actually a bigger concern than P2P,” added Zheng, adding that the Shanghai Tower, completed earlier this year to become China’s tallest building, still has 30 per cent of its space available.


George Popescu
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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