Startup Lending
Online peer-to-peer lending platforms have surged in popularity by connecting people who want to borrow directly with people who want to lend.
On Wednesday, San Francisco-based startup Prosper announced a new $165 million round of financing led by Credit Suisse NEXT Investors, and which included participation by J.P. Morgan Asset Management, SunTrust Banks and USAA, among others.
The new funding raises Prosper’s valuation to $1.865 billion making it eligible to join the elite club of “Unicorns,” or startups valued at over $1 billion.
The idea is simple: services such as Prosper sidestep traditional bank loans, which can involve complicated applications and lengthy wait times, and connect borrowers and lenders directly online.
Both Prosper and rival Lending Club launched in 2006.
Prosper has issued more than $3 billion in total loans, while Lending Club has facilitated more than twice that amount, to the tune of $7.6 billion.
There’s OnDeck, another company that lends sums of money to small business owners who have a hard time borrowing money from banks, and Fundera, a kind of Kayak for small business loans that shows potential borrowers all of their options on one platform.
In December, both OnDeck and Lending Club saw hugely successful IPOs; OnDeck’s shares rose as much as 40 percent in their market debut, while Lending Club raised over $1 billion in its offering.
Prosper CEO Aaron Vermut says his company is singularly focused on unsecured consumer credit loans-or loans that aren’t protected by any collateral.
In the last quarter, the company facilitated close to $600 million in loans, 200 percent more than the same quarter one year ago, he says.
The economy would have to tank hard before Prosper’s lenders saw real losses, he says.
It’s no coincidence, Vermut says, that many regional banks and asset management groups participated in financing Prosper this time around.
“We’re really good at lending credit to consumers,” he says.
If that’s true, banks are going to want a piece of that action, whether they’re the ones lending the actual money or not.
(Credits to DAVEY ALBA)
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