Communitylend Closes – Company Focuses on FinanceIt instead

Today Canadian p2p lending site Communitylend announced that it will close the p2p lending marketplace to focus on its consumer lending business. Communitylend will continue to service existing loans; there will just be no new ones.

Quote from the announcement:

If you have been following the CommunityLend Peer to Peer (P2P) Lending story over the years you might have been wondering why we have been so quiet here here recently.   The short answer is that we have been trying to decide how much more time to spend on our P2P Lending site in light of a larger and faster growing consumer lending business we also operate called Financeit™.

We have now made the decision that we will be suspending the operations of our P2P lending site so that our team can focus solely on Financeit™.

This has not been an easy decision for us but one which has come about over time because of our observation that P2P Lending, as it needs to operate within the Canadian regulatory system today, has enough headwinds blowing against it that getting to a significant scale was going to be both expensive and difficult.   As we searched for solutions to these challenges as a P2P Lending operator, we kept our focus on our desired goal, to create a lending product for Canadians that gave them a less expensive and more convenient way to get an instalment loan.

We realized that we needed to get closer to where the borrowing “transaction”’ occurred instead of recruiting the borrower after the fact.  People buy things in a store location (offline and online) and too often just use their credit cards and then carry balances with high interest rates.  We realized that helping people at this transaction moment was the key to driving interest in our lending product.  This conclusion led us quickly to focus on sales finance and starting in late 2010 we launched a market leading sales finance platform called Financeit™. Continue reading

CommunityLend Raises 1.5 Million CAN$

CommunityLend has closed a 1.5 million CAN$ private placement from several individual angel investors and an institutional investment fund. The proceeds of this private placement will go to scaling up loan origination, loan adjudication, and loan servicing operations, the company says, continuing:

This investment comes on the heels of a successful year since our launch as Canada’s 1st (and only) online consumer loan marketplace by CommunityLend Inc. Monthly loan volume has more than doubled each of the last 3 months and we are projecting this pace of growth to continue throughout 2011.

(Source: Communitylend blog)

Review of My P2P Lending Predictions For 2010

In January 2010 I wrote down my predictions for p2p lending trends in 2010. Now let’s see how good my crystal ball was. The black text is my original prediction, with the review added in green and yellow.

More competition and entering more national markets (probability 100%)
This is a fairly easy bet. There are many, especially European markets, where no p2p lending service is operating yet. Even accounting for the fact that laws and regulation in some national markets make it hard or impossible to establish a service, there is still plenty of room. Looking at an individual country, it is much harder to tell. I still wonder that there are no competitors to Zopa in the British market (yet).
As expected this was an easy bet to win. Plenty of new p2p lending companies launched. Zopa got 4 new competitors in the UK (Ratesetter, Fundingcircle, Quakle and Yes-Secure). 3 companies launched in Finland. FairPlace started in Brazil.

More products (probability 100%)
Currently nearly all p2p lending platforms only offer one product: unsecured, fixed term loans. The differences are more in the details of loan funding (bidding, no bidding, markets, listings) but not in the offered product. In 2010 we will see additional products (e.g. secured loans).
Ratesetter introduced rolling monthly loans with variable interest rates. (Note: variable interest rates were one of my predictions for 2008 – I was a bit early on that one). Money360 tries p2p mortgages. CommunityLend might be up to something really interesting with FinanceIt. Some smaller enhancements to the existing product were developed too (e.g. cars as collateral).

A bank will acquire an existing p2p lending service (probability <25%)
While last year’s prediction was that there is the first bank experimenting with p2p lending (and there was), 2010 might see a bank (or other financial institution) buying a running p2p lending service.Buying will be much faster, cheaper and risk-less than if the bank tries to build a new service.
Did not happen. An interesting development was the decision of a Korean Savings Bank to act as a lender on MoneyAuction. Continue reading

P2P Lending Year-End Review 2010

As the end of 2010 approaches here is a selection of main peer-to-peer-lending news and developments covered by P2P-Banking.com:

(Photo by paul (dex))

CommunityLend Starts FinanceIt – Offers Sales Financing Solutions for Businesses

Canadian P2P Lending company CommunityLend has launched new site: FinanceIt. FinanceIt allows Canadian businesses to provide their own in-house financing directly to their customers. Initially FinanceIt targets home improvement vendors, a line of business in which FinanceIt says Canadians finance 51 cents on every dollar spent.

Features of FinanceIt include:

  • A complete lending platform, including ID verification, credit review, EFT, and collections
  • Instant approvals that are valid for 90 days
  • Automated legal documentation
  • Works on iPad and other mobile devices
  • Funds are deposited into our partner’s bank account
  • No fees of any kind

This is a highly relevant development for p2p lending. If successful, CommunityLend will achieve four goals:

  1. Increase loan demand while at the same time cutting marketing expenses/efforts to reach potential borrowers
    The promotion of the loan offers will be in fact done for free by the business that offers the financing for its goods
  2. Build strong business relationships to vendors, which can be broadened should CommunityLend develop more p2p banking products aimed at businesses in the future
  3. Identify borrowers in person (at the store)
    While I cannot judge how crucial this is in the Canadian market, it would be very useful in some other markets for p2p lending services to have
  4. Validate the purpose the loan is taken out for
    Usually in p2p lending unsecured loans can be used for any purpose the borrower wants. While some sites ask the borrower to describe the loan purpose in the listing this is never tracked or validated for it would be time-consuming and costly – just not worth the effort.
    In a financing solution it is obvious what the loan will be used for. How is this information valuable? Communitylend will have very good data on how default rates differ depending on the loan purpose allowing them in mid-term to improve the pricing of the credit risk into the offered interest rate.

I believe this is a major step for p2p lending coming out of a single product niche (unsecured loans) into a broader p2p banking approach. And banks should watch out. Offering financing solutions to businesses is a core product for some banks.

P2P lending marketplaces in other countries should explore if offering loan financing to businesses is a viable route for them to grow too. In fact I know one p2p lending company that already has similar plans in the working and will start financing in 2011. Continue reading

P2P Lending Site CommunityLend Adds Car Loan Cooperation

Communitylend has partnered with Canada’s largest used car site AutoTrader.ca, now offering a car financing option through Communitylend for every listed car.

The option is limited to private listings in Ontario for cars with a sales price of up to 25,000 CAN$.

This is a good partnership for Communitylend as it will profit from increased exposure to potential borrowers.

(Source)

Related Article: P2P Lending With Cars as Collateral

CommunityLend Taps Broker Market

Canadian p2p lending service CommunityLend announces:

MorWEB partners with CommunityLend Inc. to provide direct access to
unsecured lending options for the Canadian Mortgage Broker market

Marlborough Stirling Canada (MSC) is pleased to announce that direct access to CommunityLend, Canada’s only online Peer-to-Peer lending service, will now be available to the broker market using MorWEB.

MorWEB brokers will now be able to seamlessly refer clients directly to CommunityLend to arrange unsecured loans from private investors.  This will provide another value added service to customers of mortgage brokers using MorWEB.  Phase one of this novel integration is now available on the MorWEB platform with a more comprehensive integration scheduled for later this year.

CommunityLend, , launched earlier this year and is exploring a number of different marketing options to spread the word about its services and to recruit good quality borrowers looking for more competitive rates for small unsecured loans.

”We are excited by the opportunity to work with one of Canada’s leading software providers to the Mortgage industry,” noted Michael Garrity, CEO of CommunityLend.  “We understand the important role of Mortgage Brokers in helping their clients to find the best rates on loans to meet their needs. …”

Since CommunityLend is restricted to accredited investors* by regulation, this marketing move uses an existing multiplier to reach potential lenders. It continues the earlier reported trend of existing financial institutions partnering with new p2p lending players.

(Source: CommunityLend blog)

*corrected an earlier version of the article wrongly stated “institutional lenders” – see comment below

CommunityLend Launch – P2P Lending in Ontario

Today CommunityLend launched it’s peer-to-peer lending service in Canada. The service currently is available to residents of Ontario. Borrowers can use CommunityLend as an alternative loan source to bank loans or credit cards with the ability to set the desired interest rate themselves (CommunityLend sets minimum rates). Loan amounts range from 1,000 to 25,000 CAN$ for a loan duration of 36 months. CommunityLend is open for borrowers with a good credit rating (AA to C), which encompasses about 70% of the population.

The borrower has the option to define whether there will be an auction (competitive bidding) once the loan amount is funded, possibly getting him the advantage that the interest rate will be lowered during the auction time with lenders underbidding each other.

Due to regulation restrictions only lenders qualifying as “accredited investors” are allowed to participate as lenders. The minimum investment is 100 CAN$. Bids can be in multiples of 100 CAN$.

CommunityLend provides lenders information about borrowers to help them make decisions about lending, including; the credit categorization of the borrowers on the site (credit rating) , their assessed debt burden ( affordability rating), their assessed stability (stability rating).

CommunityLend actively steers lenders towards diversification with the rule that a lender can only bid a maximum of 10% of the amount of an individual loan and the bid maybe not more than 10% of his total overall investment.

Registration to the service is free. Borrowers pay closing fees of 1 to 2.5% percent of the loan amount depending on credit grade (minimum 75 CAN$) upon payout of the loan. Lenders pay 1% p.a. fee on the outstanding loan principal.

CommunityLend uses credit bureau data and bank account data to verify borrower identity.

The following video gives an introduction to CommunityLend:

I like the cheerful style of the website. All information is presented in an easy to navigate and easy to understand way.

Which P2P Lending Developments Happened in 2009 as Forecasted?

In January I published my predictions for p2p lending trends in 2009. Now let’s see how good my crystal ball was. The black text is my original prediction, with the review added in green and yellow.

More competition and entering more national markets (probability 100%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers. In other markets, where there is no national p2p lending service active yet (e.g. Canada, New Zealand), p2p lending will be introduced by the launch of a service. Possible candidates include Communitylend and Nexx.
It is hard to predict when the dormant US players (e.g. Prosper, Loanio) will overcome the regulatory hurdles and if that step is lasting.
The British market which has (compared to other markets) rather low regulatory barriers so far is dominated by a single player –  Zopa. I wonder if we’ll see the launch of a competitor there.

Multiple new services launched in 2009, e.g. Aqush in Japan, Sobralaen in Estonia, Uppspretta in Iceland as well as ill-fated Pertuity Direct in the US. Prosper reopened. The mentioned Communitylend and Nexx did not make it so far, though it looks like  Communitylend missed a launch in 2009 only by weeks. No competition in Britain for Zopa yet.

Boom of social lending services/p2p microfinance (probability 100%)
2008 saw the launch of Babyloan, Veecus and Wokai. Kiva funded more the 1 million US$ new loans in a single week in the end of December. The steep growth of Kiva, MyC4 and other services will continue and new p2p microfinance platforms will launch.

Kiva continued it’s enormous growth and popularity. Vittana and United Prosperity launched. For MYC4 it was a hard year with decreasing loan volumes. Continue reading