[debtman222]

What is the impact of these large commercial players (Prospect/CIT) entering the market?

http://www.fool.com/investing/genera...ident-and.aspx

Eliasek: We're very excited about this business segment, which we refer to as "online lending," because "peer-to-peer" is a bit of a misnomer when an institution like ourselves gets involved.

Our strategy has been an organic one, so far. We've been focused on purchasing consumer loans through Prosper and Lending Club, as well as small business loans through On Deck. These third-party origination platforms often retain loans on their own balance sheets, or sell loans to third parties.


As a result, we're currently looking to build our own origination platform or platforms, which we hope will generate greater origination volumes, higher direct yields, and potential equity upside from valuation growth in the originator itself.

We think this industry will continue to grow rapidly in the years to come, and we are keenly interested in continuing to be a market leader. We're looking at levered prime consumer, unlevered near prime consumer, and unlevered small business loan returns, net of losses of 15-30% in the online industry. So, it's safe to say that we're keen on making a greater allocation to this segment.

Wathen: You mentioned equity returns coming out of the peer-to-peer lending?

Eliasek: Well, if you own an originator, you have an additional storehouse of value for the future. Lending Club's last private round I think was $3.8 billion. Maybe it'll go public later this year, maybe Prosper and On Deck a year later.

If we're going to be supplying loan capital to an originator, let's capture the potential equity upside from the originator itself.

Hanson: So you're interested in actually trying to build out a platform similar to the Prospers and the Lending Clubs of the world? Or are you saying invest in those platforms?

Eliasek: The former. We're interested in owning our own platform or platforms, probably emphasizing small business first. Small business tends to need less leverage, and fits more favorably into our regulatory baskets.


We can do consumer as well, but there's a few more constraints there as a BDC, so probably emphasizing and focusing on small business first.

[Capital Stack]

This is great, validates our industry having a player like Prospect cap who's a really strong mid-market finance company. It also lends a different pool of capital than the other debt/equity pieces in the market. A BDC structure allows them to structure deals very creatively.

Interesting, so it is a correct takeaway that they intend on building their own platform but structuring debt/equity combo on an originator that will be targeted?

[Chambo]

This is great, validates our industry having a player like Prospect cap who's a really strong mid-market finance company. It also lends a different pool of capital than the other debt/equity pieces in the market. A BDC structure allows them to structure deals very creatively.

Interesting, so it is a correct takeaway that they intend on building their own platform but structuring debt/equity combo on an originator that will be targeted?

Remember Scarface.....Don't get High on Your Own Supply
Or Public Enemy....don't Believe the Hype.

All this big money rush is NOT, I repeat, NOT a boom for our industry. All the brokers out there living and dying by their fees and a couple renewals here and there should be very,very afraid right about now.

[Capital Stack]

Hey chambo who said scared money don't make $$$$

[JayBallentine]

Remember Scarface.....Don't get High on Your Own Supply
Or Public Enemy....don't Believe the Hype.

All this big money rush is NOT, I repeat, NOT a boom for our industry. All the brokers out there living and dying by their fees and a couple renewals here and there should be very,very afraid right about now.

Not if companies like Kabbage allow every broker the ability to have their own branded (white labeled) and automated sites.

This turns the broker into more of a lead generator.

The way I see it, there will be lead generators (formerly brokers) and funders in 5 years.

[Jared_Weitz]

Not if companies like Kabbage allow every broker the ability to have their own branded (white labeled) and automated sites.

This turns the broker into more of a lead generator.

The way I see it, there will be lead generators (formerly brokers) and funders in 5 years.

What about the broker/funders who have already built up a good AR. That won't just go away. I think guys in that position will always be a hybrid.