Those earning little-to-nothing on their cash can more easily be connected to people who are willing to give them an above-market rate of return for capital, with no intermediary bank needed. “It’s absolutely the perfect arbitrage between countless frustrated low-yield investors and countless desperate small business owners hungry for financial survival and growth.
Brief History of P2P Lending Online
It was not until well after the new millennium started that for-profit p2p lending started to arise on the web. In 2005,Zopa started up in the UK as the world’s first online p2p lending service, and they are still going strong nowadays as the #1 p2p lending firm in the U.K. marketplace. In the United States of America, Prosper Marketplace started operations in Feb 2006 and within 9 weeks they’d received 100,000 members and serviced $20 million in loans.
peer-to-peer lending sites
They had the P2P loans marketplace to themselves until Lending Club started up in 2007. Within a year’s time of Prosper launching, Lending Club sprang up to contend straight against Prosper head-to-head.
But these successful, venture capital-backed startups also offer portfolios of loans that have quietly registered four to six years of solid returns with low defaults
P2P Lending Site Funding Circle Raises $150M Led By DST At A $1B+ Valuation
There are a number of other online lending platforms in the market today — Lending Club, Prosper, Zopa and Smava (which raised money today too) being a just a handful of the others out there working specifically in the area of P2P loans.
Samir Desai, the co-founder and CEO of Funding Circle, tells me that the company was not actively looking to raise the money and doesn’t even actually need it at the moment (sound familiar?). Of the $65 million it raised last summer, the “vast majority is still on the balance sheet,” he said in an interview.
Because of this low awareness that Desai thinks the big competition for Funding Circle remains to be more traditional banks, which still account for most of the loans that small businesses get today.
Launched in 2010, Desai says that Funding Circle currently has around 40,000 investors putting money up for loans on its platform, with lenders ranging from individuals through to large institutions like the UK government.
The key characteristics of peer-to-peer lending are:
- it is conducted for profit;
- no necessary common bond or prior relationship between lenders and borrowers;
- intermediation by a peer-to-peer lending company;
- transactions take place on-line;
- lenders may choose which borrowers to invest in;
- the loans are unsecured and are not protected by government insurance;
- loans are securities that can be sold to other lenders.