Good news for P2P lending and trading platform Prosper as it concludes its 9-month hiatus during which it was not allowed to continue its loan operations in the United States.
The Securities and Exchange Commission is now greenlighting Prosper to facilitate peer-to-peer lending in 14 states with more on the way, borrowing nearly nationwide. Prosper is now the first and thus only Internet auction-based P2P loans platform to have its registration statement declared effective by the SEC, which is evidently good news for other players in the P2P lending industry, such as Lending Club.
SEC’s approval of Prosper’s secondary marketplace, which enables people to loan money directly to other individual and institutional investors, comes a couple of months after the startup had already reignited its lending platform in the State of California (update: and apparently had to suspend it again a few days after).
Chris Larsen, CEO and co-founder of Prosper, is happy the dry period is over:
“With the financial system in crisis, P2P lending – Americans investing in fellow Americans and small businesses – is needed now more than ever. It has been extremely frustrating to be on the sidelines in the teeth of a credit crunch.”
Starting today, Prosper is available to lenders in California, Colorado, Delaware, Georgia, Illinois, Minnesota, Montana, Nevada, New York, South Carolina, South Dakota, Utah, Wisconsin, and Wyoming. Borrowing is permitted in the District of Columbia and all states except Iowa, Kansas, Maine, and North Dakota.
Prosper has raised approx. $40 million in capital to date from Accel Partners, DAG Ventures, Fidelity Ventures and Benchmark Capital, among other investors. The company was the first to introduce the concept of people-to-people lending in the U.S. when it launched in 2006. From the time the startup officially launched up until the time it entered an SEC registration quiet period in October 2008, Prosper claims to have grown to more than 800,000 members, facilitating approximately $180 million in personal loans.
Prosper has now enhanced its auction model to include a so-called hard bid floor for each listing, which helps lenders appropriately price for risk while investing online. The bid floor for each listing is calculated by adding the national average certificate of deposit rate that matches the term of the borrower loan to the minimum estimated loss rate assigned to each listing. In addition, Prosper has lowered its minimum bid requirement to $25 (previously $50), which should make it easier for lenders to diversify, particularly smaller ones.
More details are available on the Prosper blog.