Ever wondered how p2p lending is regulated in the US in detail? The new GAO report ‘Person-To-Person Lending: New Regulatory Challenges Could Emerge as the Industry Grows‘ has all the details and covers the situation of Prosper, Lending Club and Kiva. It also reviews possible regulatory changes.
Interview with Korstiaan Zandvliet, Managing Director Symbid
Symbid was first covered in the P2P-Banking blog two weeks ago. IÂ interviewed Korstiaan Zandvliet to get a deeper insight into the service.
What is Symbid about?
Symbid is the first online investment platform where the crowd directly invests in the equity of a start-up or existing company! Everybody can be an investor, each part has a nominal value of 20 EUR and you decide how many parts you would like to invest. The minimum is 20 EUR, the maximum is 2,500,000 EUR! The Symbid way of directly investing in equity is unique. It makes investors partial owners of the fully financed (newly founded) company. Entrepreneurs use Symbid as a quick, simple and fun new way to obtain start or growth capital with help from the crowd. Additionally, once fully funded an entrepreneur has the luxury to interact with his community of investors within a closed online collaboration workspace!
How did you get the idea for Symbid?
During my master degree in Entrepreneurship and new business venturing I noticed that many of my classmates did have an entrepreneurial dream but were reluctant to act upon it due to financial constrains. On the other hand I noticed that people became more connected using social networks such as Facebook and Twitter. By combining these ideas I came to the conclusion that social networks could also be used to communicate investment propositions to a large audience.
What’s the process for entrepreneurs?
Symbid provides an online platform where companies and individuals are able to submit a business idea (proposition). When you register your idea at Symbid, you indicate how much capital is required to start or grow your business. Users search for ideas they believe are viable in generating future profits. Investing is possible from €20,- per part and payable through all accepted payment methods.
Symbid uses a secure separate bank account for all investments on the platform. This way investors and entrepreneurs are assured that investments are used for no other purpose than the financing of business ideas. Until the funding goal is met, an investor has the possibility to freely withdraw his investment from Idea A and for example invest it in Idea B. This situation could occur when an entrepreneur has not made the right adjustments to satisfy his investor. When the target amount is met, the total invested amount, investments are fixed and can no longer be withdrawn.
When an idea is fully funded and all the final investors are known, they are gathered in one legal entity. The process occurs online and is completed when the entrepreneur and investors are being granted access to a secured online collaboration community. Subsequently, the entity buys the predetermined amount of shares with the attracted funding. People within the collaboration community can join forces to bring the newborn company to a successful organization. This online community offers various collaboration tools to actively manage and monitor the progress of the company and interact as one with the entrepreneur or management team. Every individual share is tradable, which makes it even more interesting to invest through Symbid and become a shareholder in a newly founded or existing company.
How is Symbid more attractive than other potential sources of capital (VCs, business angels, banks, …) for founders?
With Symbid, entrepreneurs are able to onboard a large group of shareholders combined into one entity. This group of people can be used for market research but also as launching customer group. By giving away equity to his investors, the entrepreneur can make sure all incentives and motivations are aligned from an entrepreneur perspective as well as from an investor perspective. Hereby an entrepreneur’s crowd becomes a think-tank for the respective company.
In comparison to the cost of capital, the 5% success fee is for most businesses lower than the average costs of receiving capital via a bank. If these businesses would get financing from the bank at all.
Who is able to invest? And what are the advantages?
Symbid allows investments from 20 Euro onward. Everyone can invest however for the moment we only serve Dutch companies. All investments done via Symbid are transferred into shares with voting rights, direct transfer- ability and dividends. This leads to the highest chance of a sound financial return, financing success and liquidity.
Continue reading
Trustbuddy – P2P Lending Service Listed at Public Stock Exchange
I have been aware of Trustbuddy for some time. They are (at least internationally) pretty unknown since they do not do much marketing. I have only once written about them before, in order not to give publicity to a company which charges interest loans for rates in a height, that I deem could be called usury (on moral grounds not on legal grounds).
According to their own published figures on the site the current ‘Effective annual interest’ for a one year loan varies between 219% and 852% (733% to 5102% for a one month loan).
While Trustbuddy calls itself a p2p lending service, their rates are somewhat closer to Wonga (see Need a loan at 2334 percent APR).
Why do I now write about Trustbuddy then?
Well ignoring them, won’t make business models like these disappear. And it seems to be profitable for the service as well for lenders as per the numbers that Trustbuddy supplied P2P-Banking.com.
But the main questions I ask lenders is: Do you feel it is ethical to earn the 12% p.a. interest rate given the costs the borrowers are charged? If you answer this with yes for yourself, then Trustbuddy may be a good choice for you.
Furthermore Trustbuddy is one of few companies in this business that have a drive for international expansion. Remember they bought Loanland operations earlier.
The following is information supplied by Trustbuddy:
TrustBuddy AB (2009), a Swedish P2P lending facilitation company. Using in-house developed and proprietary mobile-/web-based financing solutions, it facilitates smaller short-term loans between private consumers. The company does not lend out its own money; pooled loan-portfolio investors provide funding. TrustBuddy has already reached close to 40,000 registered members, of which more than 20,000 are active customers, in Norway and Sweden alone. This is done with virtually no marketing efforts, showing how popular the product is. Continue reading
Lending Club Nearing Break Even
Peter in an article over at SocialLendingNet has collected some interesting statements showing that Lending Club is close to be able reaching break even on cash flow terms.
Renauld Laplanche told him, that Lending Club has topped 1 million US$ monthly revenue and could thereby cover it’s operating expenses, if investments in the future (technology, marketing) are disregarded.
Lending Club is the second major p2p lending service after Zopa to approach break even.
Lending Club is still a long way from making profit as it has a long way to go to redeem the money invested in the platform over the past years. But the growing volume and the ability to cover expenses a very good signs that p2p lending services can scale to profitability.
Symbid Launches P2P Equity in the Netherlands
Symbid is the first service to launch the p2p equity concept in the Netherlands. Most of the site is available in Dutch only, but the info film is in English so I will embed that here. Apparently there will be an English language version of the site soon.
390,000 US$ P2P Loan Funded via Rebirth Financial
Rebirth Financial announced that it facilitated a 390,000 US$ loan via it’s social lending platform to NOLA Brewing Company. You can read more about NOLA Brewing company here.
The press release says: “In the case of NOLA Brewing, Rebirth Financial matched the loan to ASI Federal Credit Union in less than one week. ‘Rebirth’s process was quick, easy, and helped us raise the necessary funding to can our beer,’ said Dylan Lintern, Vice President of NOLA Brewing Company.“.
If I read this right and the loan was funded by just one institutional lender you can hardly file this under Rebirth Financial’s claim “Rebirth Financial Inc. debuted America’s first person-to-business lending platform … in February. It allows people to lend small sums of money to small businesses in their community.“. I wrote to the founder Chonchol Gupta who replied: “This loan started as a p2p loan but was fully funded by the credit union, who would not have seen the loan or perhaps given thought to it, if it was not for the groundswell of community interest. Banks see it as great PR to fund loans important to the community.“