P2P lending company for sale

As reported by Rateladder, there is an unknown company that has offered their newly developed p2p lending site for sale. They posted the following announcement on p2ptechforsale.com:

We are from a company that is looking to sell all rights to our proprietary P2P lending technology. Our company has been quietly in development for the past year, though have made the very difficult decision to halt launch plans for reasons internal to our team. We hold extremely high hopes for the future of P2P lending globally, and believe very strongly in the value it provides borrowers and lenders.

We have developed a complete P2P lending web application that will provide any aspiring P2P company with technology to support rapid deployment in any geographical market. We built it from the ground up, and went through extensive internal testing and went so far as to conduct closed testing with users.

...The front end is fully branded, and a sale can be made to include branding, or packaged as a white-labeled solution. Available intellectual property includes company name, logos, taglines, and a number of top-level domain names.

Over the past few months there have been several individuals and teams that have tried to build, buy and sell p2p lending sites.

• Freelance projects - I've seen at least five different listings on freelance websites over the past couple months where people are looking for help to build a prosper clone. Here is another one posted a couple weeks ago.
• Loanio - Loanio has been in development for over a year. We first reported on them back in July 2007. Some have speculated the current site for sale is Loanio. I admit that was my first thought too. According to my recent email conversations with CEO Michael Solomon the technology is in final testing. The regulatory challenges of launching a p2p lending company are a very difficult barrier to entry (see Lending Club and IOU Central). According to p2ptechforsale, those selling the site "are not lawyers by trade." The founder and CEO of Loanio is, however, a lawyer. He has a Law Degree from Brooklyn Law School. Loanio is scheduled to present at FinovateStartup tomorrow.
• IOU Central - IOU Central launched in Canada earlier this year after purchasing a P2P lending startup from Denmark called Fairrates. Fairrates was built in 10 months by Arkadiusz Hajduk and opened in April 2007. They have since run into regulatory challenges and have halted lending.
• CommunityLend - Also from Canada, CommunityLend has built a platform, team and is reportedly ready to launch.
• SocialLendingGroup - Social Lending Group has a functioning website and tried to sell it in February but could not find someone willing to pay the $2,000 reserve.

Update: I have been contacted by Loanio, IOU Central and CommunityLend. None of these platforms are for sale.

VaultStreet streamlines financial document management

Matt and I originally planned on attending FinovateStartup in San Francisco on Tuesday. Unfortunately due to work commitments, we had to cancel our plane tickets and reservations at the last minute. Several of the CEO’s and founders who will present at Finovate have agreed to participate in email interviews and we will post these over the next few days. First up is Carter Kirkwood, CEO of VaultStreet.

At the first glance of his bio, it seems like lawyer Carter Kirkwood is the unlikely founder of a technology company. He was an intellectual property transaction attorney, where he specialized in representing e-commerce and software businesses that developed, licensed, or acquired technology. On the VaultStreet blog he confesses, “I am not a technologist.” He is, however, the target consumer. Like most of us, he has several checking accounts and spends way too much time with snail mail, paper statements, printing and filing. Or at least he used to. His solution to the filing problem is VaultStreet, an online document management system. These are Kirkwood's responses to our questions about VaultStreet:

Can you tell us a little about your background, the company and what inspired you to create VaultStreet?

My inspiration for founding VaultStreet is fairly simple – I HATE FILING. Yet I have to keep various records in case I ever get audited by the IRS, need proof of ownership for an insurance claim, or apply for a loan (like a mortgage). My observation was that my online broker, bank, employer, insurance provider and utilities all had my information stored on their computers, yet I always received everything on paper. Now I had been using Quicken for over 10 years (and used the data download feature) but that did not solve my problem (which was that I wanted to stop wasting weekends filing away paper or searching for it when I needed it).

My background is as an intellectual property lawyer and most of my clients were in the IT space. So I probably have a heightened sensitivity to the interaction between legal concepts (like privacy, ownership, and evidence) and technology. Over time it became clear to me that what was needed was a virtual “record keeping” system that could protect the user’s privacy from end-to-end (i.e. from the bank to the consumer to the tax preparer or financial planner) while at the same time providing chain of custody evidence which would show that the e-document had not been altered since it was originally created by the bank (or other institution). Finding a way to solve this problem turned out to be more difficult than I originally imagined and eventually required solving a series of sub problems in a manner that was backwards as compared to existing solutions (this is what we have filed the patents on).

Since those early days, we have learned a lot from our customers and have discovered that what they initially value most about our system is its ability to automatically collect and organize their financial documents for them in a single location while protecting their privacy. Fortunately, we built that functionality in to the system from the very beginning.




What are the major advantages of storing all financial documents in one location?

Consumers have a hard time remembering all of their different user names and passwords. Plus it takes a lot of time to navigate across 4-6 institutions to collect documents from multiple locations. Then you must save each individual document on your computer with a unique name and organize the document set. It takes up valuable time that could be better spent with family and friends. VaultStreet offer consumers the convenience and time savings of having all documents automatically collected and organized into a single location, which also prepares them to respond quickly to financial events such as loan applications. Collecting documents into VaultStreet’s online repository also offers protection in the event of disaster, such as a fire or flood.

For institutions, VaultStreet offers a real way to reduce the operational and administrative costs of mailing documents to account holders while increasing customer service to these same account holders at banks, brokerages and utility companies. Institutions can use VaultStreet to collect, organize and authenticate the source of financial documents for their customers. It’s a great value-added service with the potential to build customer loyalty.

Who are the primary users of VaultStreet?

Consumers/taxpayers are the initial primary users, but we have had strong interest from accountants, financial planners, tax preparers, and mortgage brokers.

You currently provide secure document storage for five brokerages and about ten banks and utilities companies. Will you continue to increase the number of institutions you cover?

Absolutely. This is a top priority.

Many of our readers hold peer to peer lending accounts. Do you plan on adding the ability to store documents from Prosper, Zopa and Lending Club?

We would be very interested in talking with those companies about how to work together to not only store documents from them but also to facilitate the process of asset and income verification that often occurs when consumers apply for loans.

Security is obviously a major concern. How will you ensure that sensitive documents will remain secure?

We have designed the system from the very beginning to be very secure. We not only work at VaultStreet but we are also users of VaultStreet, so we take the issue of security very seriously. To learn more about our security, we have posted information at http://www.vaultstreet.com/content/how-it-works/security_overview.php. Our CTO is available to address specific questions related to security.

What have been your biggest challenges as you launch a new company?

Early on, when the company was more of an idea and less of a product, it was a challenge to get people to understand what we did (but I think that is probably true for most transformational technologies). Now the biggest challenge is keeping up with all of the business development opportunities. We have been pleasantly surprised at how many banks, brokerages, and insurance companies have contacted us saying that they have been waiting for this kind of service.

Is there anything else you would like to add?

I want to extend a personal invitation to you and others to register with the service. Registration is available on the home page. To learn more, go to www.VaultStreet.com.

Fynanz and Simple Tuition featured by Boston Globe

The Boston Globe takes a sharp look at the student loan industry and especially the peer to peer market in today's article Student loan confusion opens market niche.

In addition to Fynanz and Virgin Money, the Boston Globe talks to Kevin Walker, co-founder and chief executive of Simple Tuition, an online service that helps students compare various loan options. Simple Tuition is one of the companies we hope to talk to at FinovateStartup on the 29th.

Here's an excerpt from the Boston Globe article:

So-called peer-to-peer lending companies are also sailing into the student loan fray. Waltham-based Virgin Money (part of Richard Branson's empire) offers to formalize loans between students and their family members for $299. Fynanz Inc., a younger New York start-up, recently began doing the same thing in Massachusetts, though Fynanz allows strangers (perhaps alumni of a school) to make loans to students and earn interest - anywhere from 6 to 10 percent, depending on the borrower's credit score.

But online peer-to-peer lending is still new, and Fynanz has completed one loan since its launch in March. "We don't expect this to be mainstream anytime soon, but I do expect some of the smarter, more involved students to see this as an option," says chief executive Chirag Chaman, an alumnus of Worcester's Clark University.

"It could help a small number of students, but I don't think it's going to solve a national credit crunch," Tony Erwin says of peer-to-peer lending. Erwin is Northeastern University's director of financial aid services. "It's a fine idea, but it's not the fix," he adds.

As long as students and parents are searching for a fix, that creates openings for start-ups.

"It's a really disruptive time in the market," says Stein. "But I really view chaos in a marketplace as a great opportunity."

Related:
Fynanz seeks to fill void in student lending
Fynanz off to a slow start
Fynanz becomes the first P2P student loan marketplace
Interview with founder Chirag Chaman

American Banker: Fynanz Seeks to Fill Void in Student Lending

American Banker has featured the new p2p student loan lender Fynanz in a recent article (login required). Here are the highlights:


...The New York company began facilitating private educational loans in two states last month and now offers them in seven states that it says account for a quarter of U.S. student loan volume.

Chirag Chaman, Fynanz's founder, said it is entering the market at the ideal time, in part because student loans are being tarred with a brush better applied to other categories of credit.

"My feeling on this is there was never a problem with the student loan asset class," Mr. Chaman said in an interview Wednesday. "The problem was somewhere else. I personally still believe that if you have good underwriting criteria, the student loan is one of the safest unsecured assets out there."...

There are some differences between his company and other P-to-P loan facilitators, which typically try to attract lenders with attractive returns. Unlike Prosper and Lending Club, which make it clear to lenders that the loans are not guaranteed, Fynanz shares some of the risk by offering to guarantee some or all the principal for every loan originated through its site.

"We have some skin in the game," he said...

Like standard student loans, Fynanz loans are not typically wiped out if the borrower files for bankruptcy protection, Mr. Chaman said...

Bobbie Britting, a senior analyst with the consumer lending practice at TowerGroup Inc., a Needham, Mass., independent research firm owned by MasterCard Inc., said there is a void in the student loan market.

"In general, the student loan industry has just been hit hard as a repercussion of the mortgage market and the tightening up and elimination of the asset-backed securities market," she said. "There's no liquidity there, and what we've seen in the last several months is a number of lenders laying off, a number of lenders suspending operations, going out of business."

This upheaval presents an opportunity for Fynanz, because even though the regular supply for student loans is drying up, people continue to go to school and there is still plenty of demand, Ms. Britting said.

"It's going to fill a void, because there are lenders closing their doors on a regular basis, and students still want to go to school," she said. "And as Americans, we want them to go to school. We want an educated society."

...

According to Mr. Chaman, in its first month Fynanz generated just over $5,000 of loans and has $25,000 in the pipeline that will be approved. Students have applied for just over $100,000 of loans, but that figure includes repeat applications for those who were not approved the first time around, he said.

There is no shortage on the supply side. Lenders have made about $350,000 available to lend. "There's enough cash to lend," he said. "The borrowers haven't come in yet."
What is striking about that imbalance in supply and demand is that Fynanz has done almost no marketing to lenders. "Once more students start to come in, we see the lender side showing up," Mr. Chaman said.

...

"You can do it now," he said. "We obviously have put aside a very small amount of cash to buy back loans. Six months ago it was a lot larger when we had a tie-up with a financial institution," which he would not name. He expects to develop another relationship eventually.

Fynanz encourages students to apply for smaller loans than they would through traditional channels, Mr. Chaman said, and to come back over the course of the year as their funds run low.

This not only makes their applications more appealing to lenders, but it also helps combat the inherent seasonality of student loans, he said.

Fynanz began offering loans in mid-March in New York and Florida. It has since expanded to include Massachusetts, New Jersey, Ohio, Georgia, and North Carolina. It plans to go nationwide, Mr. Chaman said.


It is good to know that Fynanz has another $25,000 worth of loan requests in the pipeline. Just yesterday I mentioned that there is currently only one loan available to bid on.

Fynanz says that lenders have made about $350,000 available to lend. I wonder how this figure is calculated. With two days left for bidding, Fynanz's first loan is about 50% funded. I'm sure that Fynanz won't let this request go unfunded. If they need to I bet they cover the rest of the loan.

It's good to know that the loans are protected from bankruptcy and that Fynanz is starting to expand to other states.

Related:
Fynanz off to a slow start
Fynanz becomes the first P2P student loan marketplace
Interview with founder Chirag Chaman

Prosper Days 2008 Videos

Hundreds of borrowers, lenders and Prosper employees converged on San Fransisco in February for Prosper Days 2008. Prosper has now released video from the conference. Thanks to Prosperous Land for the tip.

Prosper Days 2008: Prosper 101 - Session for those who are new to Prosper or need a refresher course. Bryan and Tim give a Prosper history lesson, site tour and how-to demonstration.




Prosper Days 2008: Chris Larson's Keynote - Chris Larsen, CEO and Co-Founder, Prosper Marketplace Inc. Introduction by Marilyn Paguirigan.




Prosper Days 2008: Borrower Experiences - This session presents an opportunity for all members to gain a better understanding of the overall experience and process from a Borrower.




Prosper Days 2008: Leveraging Social Capital - In this session, panelists share their thoughts on social capital and what role it can play in improving borrower credit performance and lender returns.




Prosper Days 2008: Managing Large Portfolios - In this session, one of Prosper's larger lenders will discuss some best practices for creating a large portfolio with attractive returns. In addition, the session highlights a third party technology solution for building and managing a large portfolio.




Prosper Days 2008: Earning A Risk Adjusted Return - This session covers how to earn a risk adjusted return by understanding the relationship between risk and pricing.





Prosper Days 2008: Collection Practices - This session reviews the current status of Prosper’s collection process, including the results of several recent initiatives, and discuss the road map for future enhancements.




Prosper Days 2008: Prosper API Workshop - The API session provides a discussion with a number of users of the Prosper API including demos and commentary on how to put the API to work for better bidding, building applications, and even creating a new business built on Prosper data. The session is for advanced users, both programmers and non-programmers alike.




Prosper Days 2008: Advanced API Applications - Advanced applications information that goes beyond the API Workshop topics.




Blogger Panel: P2P Lending 2.0 Trends - A diverse group of banking, microfinance, P2P lending and social networking experts shed light on trends impacting Prosper, financial services and personal finance.




Prosper Days 2008: Town Hall Lunch - Town Hall Lunch with Chris Larsen, John Witchel and Bob Kagle.

Fynanz off to a slow start

Dano34, an international student attending Queens College in New York, may soon become the first person to obtain a peer to peer student loan through Fynanz. Fynanz opened their doors to borrowers and lenders one month ago.

In this initial launch phase, borrowing is restricted to students with a primary residence in New York or Florida but Fynanz will gradually open to more states. Although the borrower's primary residence must be New York or Florida, the school borrowers attend can be in any state.

Fynanz purposely launched during a student loan "off season" to ensure they have the technology right and all their systems are tested. "We expect the momentum to pick up in early May and grow steadily through August and September," founder Chirag Chaman said.

So far there is only one open loan request. Dano34 is requesting $2,750 to help pay tuition and purchase a used laptop. His brother, Maverick, is co-signing the loan and has put $150 of his own money into the loan. So far, 14 lenders have funded 54% of the loan.

Fynanz has the difficult challenge of attracting sufficient critical mass to make their loan platform viable - lenders won't sign up if there are no borrowers and borrowers won't sign up if there are no lenders.

In addition, Fynanz has the challenge of explaining their new platform to skeptical students and administrators. Ana Bak, a student and opinion editor for Texas Christian University's newspaper the TCU Daily Skiff recently called p2p lending sites "less credible." Here's an excerpt from her editorial, Person-to-Person lending practices risky.

"...there are faults within the P2P program. The assistant director of scholarships and financial aid said taking a loan with this system would be risky as it is untested.

.... First, the lenders may be giving out loans with less information about the recipients. Second, these type of programs, because they are new, may not be as trustworthy as more established lending companies.

It makes the lending system seem weak and, ultimately, less credible."

Ana Bak does not mention any specific peer to peer loan company. Prosper , the oldest online p2p marketplace, has been around for over two years and made over $133 million in loans. If that is too new for Texas Christian University then Fynanz has a huge uphill battle.

RME gives $750 to our readers

Six weeks ago I wrote about Revolution Money Exchange (RME), a new PayPal competitor. It is well funded (over $50 million in venture capital) and they don't mind spending the money in order to rapidly grow their user base. Their $25 sign-up bonus promotion, which was set to expire today, has been extended for another 30 days.

Over the last six weeks 30 of our readers have signed up for RME and received $750 in sign up bonuses. When you refer someone else you get an additional $10. One reader commented, "Set my account up-no prob this morning. Set one up for my wife too-$25.00 for me--$25.00 for her and I got a $10 refer fee. Easiest $60.00 I ever made."

We will use the $300 RME bonus we have received to attend the FINOVATE conference in San Francisco and bring you news from more financial start-ups including the new peer to peer lender Loanio.

If you want more information see our previous posts about RME or sign up now.

• PayPal competitor Revolution Money Exchange offers $25 sign up bonus
• Why does Revolution Money require my social security number?
• Revolution Money Exchange improves referral program

Prosper eliminates state rate caps

Following Lending Club's lead, Prosper has opened up to borrowers in almost all states and eliminated state rate caps. All loans now have a maximum rate of 36%. The only exception to the nationwide plan is Texas (limited to 10% interest for personal use loans and 18% for business use loans) and South Dakota (cannot borrow).

Previously borrowing was not permitted in some states (like Nevada) and was restricted to businesses in some states (like North Carolina) and had very low rate caps in some states (like Pennsylvania). Prosper was able to eliminate rate caps by partnering with WebBank, a Utah-chartered Industrial Bank. Lenders do not technically lend directly to borrowers. Instead, they make a loan purchase commitments and purchase a promissory note from Prosper which represents the loan made by WebBank. WebBank assigns the loan to Prosper. WebBank is the same bank Lending Club uses to service their loans. All the legal details are on the state licenses page.

In addition to removing state rate caps, Prosper has made several other changes and upgrades.

• Minimum instant transfer amount lowered to $50 - If you install Prosper’s Facebook application, you can instantly transfer funds from your bank account to your Prosper account as long as you have at least $100 in active loans. Previously transfers would take a couple days to go through unless you transferred more than $500 at a time.
• Second loan criteria updated - The new rules for whether a borrower is eligible for a second loan are dependent on the borrower’s credit grade, and the factors taken into consideration include time since last loan originated, consecutive months of on-time payments, and whether the borrower’s credit grade has dropped or not. The total cumulative value for all of a borrower's loans is $25,000.
• Lender servicing fee for AA increased to 1% per annum - Just three months after raising fees for borrowers, Prosper is also increasing the servicing fee for lenders. Previously the fee for AA loans was 0%. All the details are on Prosper's fees and charges page.
• Listing durations standardized at 7 days - The listing creation process has been simplified and listing durations are all now 7 days.

Charlotte Observer: 'Peer-to-peer sites connect lenders with borrowers'

Christina Rexrode has published a detailed look at peer to peer lending for the Charlotte Observer - Peer-to-peer sites connect lenders with borrowers. Reaction to the article among veteran lenders on prospers.org was very complementary. The national media typically makes glaring errors when writing about peer to peer lending. This article, however, was different. Oak_Hill_Fire said it was "not a purely fluff piece." Lender j9359 called it, "Probably the best written and balanced piece on Prosper I've read" and DakotahFury said, "it was one of the better articles I've seen."

Christina and I exchanged several emails and phone calls regarding the article but kept missing each other due to our busy schedules. I hope this blog was helpful to her as she gathered information for her article. Her article is organized around five parts - the connectors, the risks, the borrowers, the lenders and the future. Read the whole thing here.

Speaking of the peer to peer lending and the media, there are three other articles over the weekend that are worth mentioning.

Los Angeles Times - Know the risks before investing in start-ups
In this Q&A the author recommends considering Prosper as a way to diversify investments to someone who is interested in investing in a friend's new company.

"If you're interested in seed-round investing, consider attending angel investor networking events to get a sense of the range of opportunities available. If you're interested in high-yield debt returns, Jacobs said, consider peer-to-peer lending websites such as Prosper, at www.prosper.com, where you can place many small loans across a portfolio of customers with different risk profiles."

Oddly, the same author did not mention the peer to peer lending sites when responding to a different question about lending money to family and friends.

"If you're making a very small loan, it might not pay to go through the time and expense of drafting legal documents or seeking collateral, unless there's a high possibility of default -- in which case you may want to reconsider."

I'd argue that Prosper and the other peer to peer lending sites are the perfect platform to use when lending money to family and friends.

The Press Enterprise - Riverside residents recommend social lending Web sites

"Returning from a trip to Africa in early 2007, Bruce Hammond, of Riverside, wanted to help out people in some of the poor villages he had just visited. He did some Web research, and heard from friends about a nonprofit social lending site called Kiva.org, which had been mentioned on book tours and TV shows by former President Clinton, Oprah Winfrey and other celebrities....Some like Kiva are being used for purely philanthropic purposes, but experts say other for-profit sites are becoming increasingly popular meeting places for qualified borrowers and lenders."

Sun Sentinel - Lending networks take off on Web

"In a credit crunch, borrowers who need the money may ask friends and family or use their credit cards. But there's another group you might want to try: People you meet over the Internet."

Lending Club at Santa Cruz Tech MeetUp

Despite the recently announced 'quiet period,' Lending Club's Rob Garcia met with dozens at the Santa Cruz Tech MeetUp on Wednesday. Here's a brief report from the Santa Cruz Sentinel:

"Rob Garcia said Lending Club was an alternative for investors looking for higher returns and borrowers seeking lower interest rates. Rates for personal unsecured loans start at 7.88 percent; a total of $15 million in loans have been issued. The firm is registering with securities officials, and no investments are currently being accepted."