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I have seen evidence of a merchant that just recently got funded by Lending Club. This merchant had taken out merchant cash advances previously. There is no doubt in my mind now that Lending Club will be competition to this industry.
Some background:
- merchant had really good credit
- merchant had negative days on the banks (overdrafts and NSFs)
it begins
How were the repayments structured? Did you see the bank statements? 5 days a week fixed ACH?
they do 1 monthly automated payment. They verified the bank account by depositing in like 50 cents and withdrawing it the next day. Then like a week later the merchant got 35k ACH'd in from them.
Once a month payment? Interesting. I wonder how that will preform for them. Say they did that 35k over 12 months (1.20%...just guessing...no idea what they charge), but that's going to be a $3,500 payment. I could see a lot of those bouncing on them.
it is my expectation that these will be 3-5 year loans, not 1 year.
This is really going to put the pressure on companies like ondeck capital. How do you compete against a 5 year loan?
Stories like this are portable to any vertical... Guys were around making money... Then along came two kuckle heads.
As the market expands, so to will the desire amongst "the crazy ones" to write similar stories. When industries render themselves powerless to change, they become susceptible to disruption.
I'm stocking up on my popcorn supply to enjoy the show!
Interesting-watched Renaud's testimony and he mentioned alliances with Quickbooks (yes we all know how accurate merchants books are), yelp/facebook/fedex/ups - nothing new here. Only going up to 35k . Head to head with on-deck (who currently gets their declines). They are not offering business loans on a p to p basis-using a separate investment fund to test out the strategy. Unsure about rates. They hired a former capital one small business guy and Can Capital hired former Capital One folks as well. Thinking that the high credit quality might make this somewhat of a zero sum game with Capital One business credit-but will do damage to on-deck to a small degree.Quote:
Originally Posted by sean bash
interesting. I guess it wouldn't surprise me if Lending Club was using an investment fund in the interim to do small business loans instead of their peer base. Otherwise, people would've been talking about it a lot more.
On that note though, I had an affiliate relationship with Lending Club and Prosper for a short while and I talked to some people that worked at both. One of them basically told me that they have a select group of major syndicate partners that take all the deals they want within a day or two of the application coming in and that all of the rest are posted on to the site for individuals to invest on their own. They didn't get too specific but what I got from it was that the best deals were cherry picked out and the rest actually went on the site for regular joes and investors to buy into.
Where did you hear about the investment fund thing? From something you read or something you heard? Be interested to learn some more stuff about this.
Quote:
Originally Posted by sean bash
I spoke with them-COO and Pres. I also think that the p to p aspect of the consumer loans will eventually just go away.
I was just reading on them this morning, apparently (according to NY Times) $35K is their maximum loan amount. In one instance I was reading it took 61 investors to come up with $6,000 for 3 years @ 11.6%. The article I was reading was from 8/1/2012.
"Every man must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness." - Martin Luther King, Jr.
After now having invested money into loans on lending club, In my personal opinion I can't see the p2p aspect going away. Syndicating in their deals is super addicting and you can literally put a minimum of $25 into a deal so it's easy to bring the smallest of investors in. Also you can set up an IRA there or move your existing one to them and make an retirement fund out of syndicated loans. They've got a good thing going.Quote:
Originally Posted by staten
Are we going to have east coast vs west coast wars? Keep an eye on these guys they have the deep pockets and technology to make a breakthrough - the CEO already made a statement publicly that the mca space lacked technology and innovation-
http://m.crunchbase.com/company/lendingclub
move over IRA? That is dangerous territory.Quote:
Originally Posted by sean bash
Sounds wonderful...until you have a couple defaults. Then these investors are all of a sudden ignorant, unsophisticated and were tricked. Try telling FINRA in an arbitration that investing retirement funds into a deal where merchant has 500 credit, 10 NSF's and a lien was a sound, responsible & suitable investment.
Lending Club is already regulated by the SEC. Each loan is booked as a security and each security is issued with a prospectus about the deal. Each prospectus tells you about credit score, liens, income, and other stuff. It's the same thing as buying stock.Quote:
Originally Posted by Chambo
There are defaults but their loans are classified on a scale of A to G (G having the highest rate of return, highest risk, and highest default rate). Even class As have defaults, just fewer.
A to G rating worked out SO WELL for Standard & Poors and Lehman Brothers too....Quote:
Originally Posted by sean bash