UK

RateSetter Finishes Successful First Year

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In England p2p lending service RateSetter celebrated it’s first year in business anniversary a few days ago. The loan volume matched is close to 9 million GBP, spread out over 2.400 loans.RateSetter has currently about 65.000 members.
RateSetter has a rather unique business model in the p2p lending landscape which builds on anonymously matching demand and supply for two loan “products”: 36-month loans and rolling loans (the total loan volume is spread nearly 50:50 on these products).

RateSetter says that due to the provisions fund mechanism “every single RateSetter lender has received every single penny of capital and interest that they expected.“. The fund is an instrument set up by RateSetter to “reduce the risk for lenders“. Borrowers pay an amount upfront into the Provision Fund based on their creditworthiness.  Yesterday RateSetter announced that on Sep. 3oth the team managing the Fund decided not to distribute any money from the Fund back to the lenders, which is possible if the team considers the Fund to be excessivly capitalised.

Borrower representative APRs ranged from 7.6% to 11.6%. 79% of borrowers are homeowners. The two purposes car loans and home improvement loans were given for more than 50% of the loans. In the last six month, interest rates for 36 months loans on RateSetter have been falling, whereas the rates for the rolling loans remained mostly at the same level.

RateSetter is a founding member of the Peer-to-Peer Finance Association (see: ‘Peer-to-Peer Finance Association Founded by British P2P Lending Services‘).


(Source: RateSetter)

Funding Circle Allows Multiple Loans and Higher Risk Loans

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Funding Circle will allow multiple loans by the same borrower and also open up to “C” rated borrowers which were so far excluded from loan funding. These changes will be enacted on Sept. 19th. In the blog Funding Circle explains the reasoning for allowing multiple loans:

Businesses typically have multiple finance needs throughout the year, for example they may need finance to purchase new assets or to fund new projects. Previously at Funding Circle, businesses were restricted to one outstanding loan. Many of our borrowers have come back to us with new finance needs and until now we have not been able to help them. In addition, a number of very creditworthy businesses have previously borrowed up to 50,000 GBP with Funding Circle when our maximum loan limits were lower, but which would have always passed our underwriting models for larger loan amounts (our current maximum is 100,000 GBP). …

and for introducing “C” band loans: Continue reading →

Growth and other Recent News in P2P Lending

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Zopa has announced that it reached the milestone of 150 million GBP in loans facilitated. Zopa says the new loan volume per month accounts for between 1% and 2% of new personal loan volume made in the UK.

P2P lending service Lending Club announced yesterday that it has been selected as a World Economic Forum 2012 Technology Pioneer. Lending Club was selected from amongst hundreds of applicants from around the world that hold the promise of significantly impacting the way business and society operate.

Both Lending Club and Prosper did continue their growth of monthly loan volume origination in August (Sociallending.net has charts and company comments).

Peer-to-Peer Finance Association Founded by British P2P Lending Services

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Zopa, Fundingcircle and Ratesetter announced the launch of the ‘Peer2Peer Finance Association‘.

The members say that the new UK trade body is set up primarily to ensure the growing sector maintains high minimum standards of protection for consumers and small business customers, as it brings much-needed new competition and innovation to the banking market. In Britain this year, peer-to-peer finance will account for more than £100 million of loans to individuals and small businesses. As new financial regulatory structures are put in place by the Government over the next 18 months or more, the Peer-to-Peer Finance Association will also work hard to ensure that the new rules will include effective regulation for the peer-to-peer finance market.

The association is open to other peer-to-peer providers subject to meeting the required standards.
The Association has established a wide definition of peer-to-peer finance providers as:
‘platforms that facilitate funding via direct, one-to-one contracts between a single recipient and multiple providers of funds, where the majority of providers and borrowers are consumers or small businesses. Generally, funding is in the form of a simple loan, but other instruments may evolve over time.’

The Association’s Rules and Operating Principles set out the key requirements for the transparent, fair, robust and orderly operation of peer-to-peer finance platforms and cover:
1. Senior management systems and controls;
2. Minimum capital requirements;
3. Segregation of participants’ funds;
4. Clear rules governing use of the platform, consistent with these Operating Principles;
5. Marketing and customer communications that are clear, fair and not misleading;
6. Secure and reliable IT systems;
7. Fair complaints handling; and
8. The orderly administration of contracts in the event a platform ceases to operate.

Rhydian Lewis, CEO of RateSetter, said: “The message we want to send to the wider world is that Peer to Peer is working: Lenders across a number of sites are getting market beating returns on their savings, Borrowers are getting lower cost loans, and increasingly P2P finance is becoming more established in the mainstream. As an industry, we would all encourage clearer regulation of P2P finance (not least because it would address the perception that P2P is somehow not regulated). The Association will give us a platform with which to lobby for P2P to be considered on an equal footing with other financial services.”

This is the first formal trade organisation of p2p lending services. In the US several companies including Prosper and Lending Club did combine efforts to lobby for congress to ease regulation on p2p lending. Users on the other side, united in the PIVN in the Netherlands.

First Business Offer Fully Funded at Crowdcube

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On the peer-to-peer equity market Crowdcube (see earlier coverage) the first business succeeded in raising the desired funding in exchange for equity. Yesterday bodycare business Bubble & Balm hit its funding target of 75,000 GBP. The amount was funded by 82 investors which will in return receive 15% of the equity of the company.

I am one of those, albeit with a symbolic amount of 20 GBP invested, which means that in the future I will own a whooping 0,004% (=1/25000) of Bubble & Balm, once the transaction is legally finalized.

Investing so far was very easy – I contributed my 20 GBP (plus fees) via Paypal. There is the option to pay via bank transfer too. After uploading the money to the account I then selected the business to invest to.

For the moment it is fun to participate in this first public p2p equity process in the UK and I see it as an experiment with the ability to gain first hand experience how it proceeds.

I selected Bubble & Balm as an “investment target” for three reasons:

  1. It was clear that this pitch would be the first to fully fund
  2. It is an established business that already operates since 2009, not a startup with a mere idea
  3. The information provided in the pitch is sound (business plan, financials, background of founder)

The bodycare business will use the investment to expand its award-winning product range, increase marketing activity and to meet increasing demand from retailers such as Waitrose, Oxfam, Planet Organic and a growing number of independents.