This So-Hot Robot Is Launching a Marketplace Lending Hedge Fund
January 26, 2017
LendingRobot has come a very long way since I first connected with them two years ago. Back then, CEO Emmanuel Marot was simplifying access to marketplace lending for individual investors by automating the decisions and executions. A year later, they were the first in the industry to introduce that technology via a mobile app. As someone who has used their service for a long time, one thing was always the same, the company helped you invest and monitor performance but they didn’t have custody of the actual money.
That’s all changing with the announcement of their new hedge fund (“LendingRobot Series“), which will actually be separate and only open to accredited investors. The fund is managed by LendingRobot’s robo-advisor technology which scores, invests, and even manages secondary market activity without any need for human advisors. Basically the robots are doing the heavy lifting and they’re only investing in loan marketplaces such as Lending Club, Prosper and Funding Circle. Because of that, the fund only charges 1.00% of assets under management, and caps fund expenses at 0.59%.
The way Marot tells it, they’re taking the mystery out of a hedge fund. There’s no “black box,” he says. Instead, the fund uses Blockchain technology to deliver a public, unalterable ledger, so that LendingRobot Series investors see exactly which loans the fund is invested, where the defaults are, and exactly what the costs are across the fund.
One of the biggest allures of investing in marketplace loans in this fashion is the liquidity offered. Investors don’t need to wait 3-5 years to wait for the loans to fully mature to take their money out. Investor money is converted to Units of ownership in these Series that are issued on a weekly basis. By default, loans payments keep being re-invested and the Units value increases.
Marot said that the company only has 7 employees, yet they’ve managed to rack up more than 6,500 clients (myself among them) for their original service and have helped those clients deploy more than $120 million in assets along the way. They claim that they’ve been able to improve returns in alternative lending by more than 2.5%.
Founded in 2012, the company raised $700K in seed funding and $3M series A from Runa Capital.
As mentioned, LendingRobot Series is available to accredited investors only, and they’ll initially only allow 99 investors to participate in the fund with a minimum investment amount of $100,000.
Marketplace Lending Association Announces 11 New Members
January 12, 2017
WASHINGTON, Jan. 12, 2017 /PRNewswire/ — The Marketplace Lending Association (MLA) today announced the addition of eleven new companies to the Association. The new members join as the MLA works to expand its presence in Washington. The MLA was formed in 2016 by founding members Funding Circle, Lending Club, and Prosper Marketplace with the goal of promoting a transparent, efficient and customer-friendly financial system.
New Members include: Affirm, Upstart, CommonBond, Avant, PeerStreet, Marlette Funding, Sharestates, Able, and StreetShares. New Associate Members of the MLA include dv01 and LendIt.
This expansion represents a new chapter for the MLA, as it extends the group beyond consumer and small business lending to include platforms focused on student loan refinancing and real estate, as well as greater diversity of funding models, including lending platforms that hold loans on balance sheet.
“On behalf of the founding members, I welcome these new members to the Association and I look forward to working with them to advance our mutual public goals both in Washington and in state capitols around the country,” said Nathaniel Hoopes, executive director of the MLA. “As MLA member companies continue to innovate and create new opportunities for borrowers and investors, the MLA will play an important role in sharing data and insights that help educate policy makers on the benefits that these companies bring to consumers, businesses, and our financial system.”
To provide policymakers with a general overview of its 2017 agenda, the Association also today sent letters to the incoming Trump Administration and to the leaders of the 115th Congress.
ABOUT MLA
MLA, a professional trade association, was formed in 2016. The goals of the Association are to promote a transparent, efficient, and customer-friendly financial system by supporting the responsible growth of marketplace lending, fostering innovation in financial technology, and encouraging sound public policy at the state and federal level. To be eligible to join the association MLA companies must abide by the highest standards of business conduct in providing credit and services to consumers and businesses.
For more information about MLA, its members and its membership standards, visit the MLA website at www.marketplacelendingassociation.org.
Media Contacts:
Nathaniel Hoopes – Executive Director
Phone: (202) 660 1825
nat.hoopes@marketplacelendingassociation.org
Bizfi Hits $2B Origination Milestone; Providing Financing to More Than 35,000 U.S. Small Businesses
December 22, 2016
NEW YORK–(BUSINESS WIRE)–Today, Bizfi, the premier fintech company with a platform that combines aggregation, funding and a marketplace on a single platform for small businesses, announced that it has surpassed $2 billion in financing – through both growth and working capital – to more than 35,000 small businesses across America.
The Bizfi.com marketplace was launched in 2015 to provide small business owners with access to multiple financing options from more than 45 lending partners. These financing options include short-term financing, franchise financing, lines of credit, equipment financing, medical financing, invoice financing, medium-term loans and long-term loans guaranteed by the U.S. Small Business Administration.
“Over eleven years ago, when Bizfi became one of the first alternative finance lenders, we understood that if we remained committed to the principle of providing business owners with fast access to smart capital, we could achieve growth while supporting the number one job engine in the economy,” said Stephen Sheinbaum, founder, Bizfi. “During the last decade we have invested in creating the best platform and user experience with the most advanced technology to ensure business owners can access the financing they need. Hitting this milestone reinforces that our business fundamentals are strong and we are providing a much needed service in this growing economy.”
“Every dollar we provide to a small business owner returns multiples of GDP,” said John Donovan, CEO of Bizfi. “Being able to support the small business community is at the heart of our company. We believe there is tremendous opportunity to grow our marketplace offerings. We have funded over 35,000 small businesses and we look forward to greatly expanding that number.”
Donovan continued, “One of the key reasons why I joined Bizfi as its Chief Executive Officer was its growth trajectory. In just two years, the company has gone from supplying $1B to small businesses to $2B. This is a testament to our unique business model of providing both a financial product and a marketplace.”
Built from proprietary technology, Bizfi’s platform uses application program interface (APIs) to leverage a wide variety of sources to quickly offer loans and other financial products to small businesses. The platform is strengthened by strategic relationships with more than 45 funding partners, 15 of which are integrated within the platform, including OnDeck (NASDAQ:ONDK), Funding Circle, Bluevine, and Kabbage. Bizfi is also a direct lender on the platform.
About Bizfi
Bizfi is the premier fintech company combining aggregation, funding and a marketplace on a single platform for small businesses. Founded in 2005, Bizfi and its family of companies have provided $2 billion in financing to more than 35,000 small businesses in a wide variety of industries across the United States.
Bizfi’s connected marketplace instantly provides multiple funding options and real-time pre-approvals to businesses from a wide variety of funding partners. Bizfi’s funding options include short-term financing, franchise financing, lines of credit, equipment financing, medical financing, invoice financing, medium-term loans and long-term loans guaranteed by the U.S. Small Business Administration. The Bizfi API provides a turnkey white label or co-branded solution that easily allows strategic partners to access the Bizfi engine and present their clients with financial offers from Bizfi lenders all while maintaining their customer’s user experience. A process that once took hours, now takes minutes.
Contacts
Media
KCSA Strategic Communications
Kate Tumino, 212-896-1252
ktumino@kcsa.com
or
Bizfi
Sales, 855-462-4934
bizfisales@bizfi.com
or
Bizfi
Marketing, 212-545-3182
marketing@bizfi.com
Merchant Cash Advance’s Impact on Factoring
October 6, 2016
A little more than two years ago, the International Factoring Association voted to ban merchant cash advance companies from membership, citing loose underwriting standards and competitive pressure.
On Wednesday, at the NACLB conference in Las Vegas, Craig McGrain, President of factoring company Durham Funding, hinted on a panel at just how strong that competitive pressure has become. According to him, about 70-80% of their applicants today already have a merchant cash advance. Five years ago, it was only 5% of businesses, he said. He thinks a lot of that has to do with small businesses not knowing what all of their available options are.
The numbers may not be all that shocking considering that Funding Circle VP Michael Rabil also said at the conference that 30-40% of their applicants already have an MCA. Funding Circle provides small business term loans.
That’s a lot of merchants turning to MCA before finding their way to another product.
Marketplace Lending: Where No One Makes Any Money?
September 28, 2016
At the Marketplace Lending and Investing conference in NYC, LendAcademy founder and p2p lending expert Peter Renton asked a group of panelists a stunning question, “Why is no one making any money?”
For the sake of context, Renton explained that if banks were basically the most profitable business type on Earth, then how could it be that those companies infringing on their space or partnering up with them weren’t partaking in that.
The question was posed to Noah Breslow of OnDeck and Sam Hodges of Funding Circle, two of the most high profile players in the alternative small business lending industry. Both companies have been operating at a loss despite being in business for quite some time, in the case of OnDeck, almost ten years now.
Breslow took the question in stride, saying that “first you have to look at the unit economics of a loan. If you’re not profitable there, you’re in trouble. You can’t scale your way out of that.” He added that there are indeed competitors that fail on this test alone who won’t likely be around for much longer.
But as to why they personally were still not profitable? He put a lot of emphasis on their continued strategy to expand.
Funding Circle’s Hodges offered a similar explanation, saying that they have spent a lot of resources on expanding into five countries. He also said that “their plan takes them to profitability next year.”
Of course, neither OnDeck nor Funding Circle are as diversified in their product offerings as banks, explaining perhaps why the analogy between bank profitability and their profitability isn’t apples to apples. LoanDepot CEO Anthony Hsieh touched upon this in his presentation earlier in the day when he said that his company acquires an astounding 600,000 leads per month, a record high, but with very low conversions. So many [lenders] are monoline, he said.
Surely that affects the bottom line.
Nonbanks Make Banksy Moves
September 13, 2016It’s starting to feel a little more bank-like in the industry.
Lending Club’s new CFO Thomas Casey, who officially starts September 19th, was the CFO of Washington Mutual Bank from 2002-2008. He’ll be taking over for Carrie Dolan who resigned immediately prior to the company’s Q2 earnings call.
Similarly, Eric Daniels, the former CEO of Lloyds Banking Group, joined Funding Circle’s board last week. He will find good company with fellow board member Bob Steel, who is the former CEO of Wachovia and former vice-chairman of Goldman Sachs.
Both companies are considered leaders in the nonbank lending industry but wear and tear is making these “marketplaces” more like the banks they originally set out to disrupt.
Marketplace Lenders Win Over Wall Street Lobbyist
August 25, 2016
The line between marketplace lending and Wall Street just got thinner with the head of a major Wall Street bank trade group switching camps.
Nat Hoopes, VP of public policy and government relations at the Financial Services Forum will head the Marketplace Lending Association.
Formed in April this year, the Marketplace Lending Association was formed by Prosper Loans, Funding Circle and Lending Club to “promote a more transparent, efficient, and customer-friendly financial system by supporting the responsible growth of marketplace lending.”
A requirement to join the association is to be matching 75% of loans, by dollar, with commitments for funding from investors before the loans are issued. The group therefore probably seeks permanent acceptance of the ability for investors to buy loans or securities backed by loans in online marketplaces.
Hoopes has held a couple of stints in Washington as legislative director to Republican senator Scott Brown and as VP of government relations for the ‘Fix The Debt’ campaign. His appointment comes at a time when marketplace lenders have been trying to gain some clout in Washington as regulatory scrutiny tightens.
LendIt’s Peter Renton is Still Earning 8.72%
August 25, 2016
LendIt, speaking to LendIt USA 2016 conference in San Francisco, California, USA on April 11, 2016. (photo by Gabe Palacio)
LendIt Conference founder Peter Renton made more from his marketplace lending investments in the last twelve months than some people earn in a year just from their nine-to-five job. $54,936 to be exact, according to his latest blog post detailing his performance. That’s a result of investments on the Lending Club platform, Prosper, P2Binvestor (which requires you to be an accredited investor), the LendAcademy P2P Fund (which includes Funding Circle, Upstart, Lending Club and Prosper), and the Direct Lending Income Fund managed by Brendan Ross (which invests with lenders such as Quarterspot and IOU Financial).
Unsurprisingly, his business loan performance through the Direct Lending Income Fund has earned the highest yield, a TTM return of 12.77%.
While reporters and critics seem to be planning the funeral for several lending platforms, Renton remains steadfast in his optimism. “Eventually, I plan to have a diversified seven-figure portfolio made up of consumer, small business and real estate loans,” he wrote on his Lend Academy website.
Though Renton is reaping the benefits of being a platform investor, it’s the platforms themselves that may be in trouble, according to a recent op-ed by Todd Baker, a senior fellow at the Mossavar-Rahmani Center for Business and Government at Harvard University’s John F. Kennedy School of Government. On American Banker, Baker wrote, “Almost all [Marketplace Lending] revenue is generated from ‘gain on sale’ fees earned from new loan sales. This dependence on origination volume and gain-on-sale margins makes MPL results exquisitely sensitive to macro and micro trends in investor demand and risk appetite.”
And if a platform isn’t sustainable, the theory is that future investment opportunities may not be as available as they have been historically.
“MPLs need to shift to a more sustainable mode — either as banks or as nonbank balance-sheet lenders — before the end of the current credit cycle brings on a real shakeout and the MPL experiment becomes a financial failure,” Baker wrote.
Renton himself acknowledged a downward trend in his yield, conceding that it may never return to previous levels. “While I would love to be earning more than 10% again I don’t expect to get back there any time soon,” Renton wrote.
He also recently rebutted a Bloomberg article that argued Lending Club was being shady with repeat borrowers.
