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.
great, this is a big help for the lenders
Agree. This should kickstart and help lots of people who depend on this. Congrats!
- Darren at AdExcel dot Com
thank!! great post
Never heard of Prosper.com until now. Looks very promising
See LendingStats.com for great data, stats, and analytics (no, that is *not* a site I have anything to do with, just find it useful).
These are my stats: http://www.lend...LoanManager-com – 29 loans, no defaults, estimated average ROI = 11.69%, average interest rate = 12.36%, average loan age = 583 days.
I think the prosper startup will succeed!
Great news for the P2P lending concept and for individual lenders! However, people need to understand it’s freaking hard to price a loan and determine how much to bid. This is why I prefer lending at Lending Club.
Whatever platform you choose, I do encourage you to try it. I’ve been making 8.89% on Lendingclub after almost 2 years. My prosper loans are also doing well, but I have a few defaults there.
Robin, LendingClub seemed be the 1st SEC approved company back in Oct of 2008, rather than Prosper as you indicated in your post.
http://blog.len...c-registration/
I am not sure how well LendingClub did in the 9 months Prosper was out of the game though. It will be interesting to see how this space does in the future on both the lending and investing side of things.
My guess is Prosper just wants to point out it’s the first AUCTION-BASED P2P loans platform (ie. the secondary marketplace) to get SEC approval.
Yeah, Prosper is going big on the auction nature of their platform (since at this point it’s one of the only differentiators with Lending Club). According to Prosper, “the SEC has never permitted Wall Street investment banks or any other institution to run a true auction where investors could make an irrevocable bid that committed funds prior to the establishment of a final rate.” Which is a big deal if you’re an SEC nerd, but not sure if it will matter to individual lenders/investors.
Lending Club has been doing quite well without Prosper in the game, racking up 7% month-over-month growth in 2009. Now that Prosper is back, it should be a good fight.
p2p lending start-up vying for “first this” or ‘first that’ are silly. Duck9 is the first FICO score prep company started by a Ford model *tosses hat into ring*
True. Yet we have a member of Prosper’s board of directors blogging, “It is with great pride that I congratulate Prosper Marketplace on successfully completing their SEC registration process pioneering the *FIRST* true auction marketplace for person-to-person lending.”
(emphasis mine)
This is fantastic news. Prosper is one of the best uses of the Internet I’ve seen so far. P2P lending has the potential to stabilize other credit markets if it can reach a critical mass.
Amazing company.
Just found Prosper.com CEO’s profile potentially on Facebook
This is fantastic news on many fronts. Our organization is very excited to see this market opening up. Peer-to-peer empowerment of anything is good within a system that tries too hard to centralize the command and control structure of our socio-economic system.
Kudos to the patience and foresight of the Prosper management team.
@ Robin…Prosper will be SEC approved momentarily. We are faithful of that
To anyone thinking of lending on Prosper, I highly recommend you check out the forums and blogs at http://wwwprospers.org. Prosper has a long history of abusive behavior towards lenders, including grossly misrepresenting default rates, misaccounting for collection fees, retroactively changing their terms of service in order to ban critics, and so forth.
It is incredibly difficult to turn a profit on Prosper loans, given that on average 10-20% of them default PER YEAR (see http://fred93bl...g.blogspot.com/). Prosper’s collections are non-existent, and they stopped selling the bad debt to junk buyers a few years ago, meaning that lenders need to be able to collect interest in the 20-30% range to make a profit – illegal in many states, and certainly not a good option for the borrower.
(I think it’s also noteworthy there’s some obvious astroturfing going on in the previous comments. If Prosper was so great, why would they need to do so?)
Err, correction the URL is http://www.prospers.org. Sorry for the typo.
@Robin: would you be willing to update the article with a link to prospers.org or one of the blogs from lenders who have legitimate complaints about Prosper? This article reads like a puff piece for them, and I’d like to see Tech Crunch take a little more neutral position.
Great link re freds blog. That guy is on a mission or something. What little interest I had in proper.com completely went away.
Is astro-turfing some type of credit term?
http://en.wikip...ki/Astroturfing
Anyway, yes, fred93’s blog is a must-read for folks considering lending via Prosper.
Lender beware. Prosper is not in the middle of a class action lawsuit for nothing.
Although I understand the need for such a system I question the viability of it. There are many things to consider???
P2P lending has become way too complicated and restrictive on these sites, so much so that you might as well go to a bank.
40billion.com and Virgin Money keep it simple and between friends and family, instead of strangers. Easier to use and more viable and sustainable in the long run.
I’ve been a lender at Prosper for 15 months. I’m disapointed. Lots of defaulted loans, lots of late loans even though I lent to mostly above average credit grades (some of my defaults were AA). I’m losing money. I wouldn’t do it again.
I really don’t see t becoming an interesting proposition unless they are able to get some type of fractionalization working so that lenders could lever up.
Do that… and suddenly this becomes very interesting.
Otherwise this just looks like a place that’s attracting people who would normally go for PayDay loans and pawnshops.
Congrats Chris Larsen + team
Why can’t people borrow in those four states? I happen to live in Iowa and be pretty young so banks are a little hesitant with me. When I tried to take a loan out on Prosper.com I got a huge disappointment. Does anyone know the meaning of this?