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P2P lending is growing rapidly

When there’s a void, someone is likely to fill it, right? Sir Richard Branson is a case in point. The mastermind of Virgin Atlantic, Virgin Records and just about everything else Virgin is also a leader in a relatively new, fast-growing online business called peer-to-peer lending. You guessed it — Virginmoney.com

With banks now mired in a credit debacle they created, Virginmoney.com is among several alternative online finance companies, with names like Prosper.com or Lendingclub.com, doing a reported thriving business, according to Reuters. Dubbed a P2P service, these ‘Net operations put people wanting to borrow together with those who want to lend. The borrower gets the money he wants and the lender gets a better return than he can find in the stock market or in any bank CD. Sounds like a win-win.

People looking to lend claim P2P is a good port in today’s financial storm. For example, in the past year, two San Francisco partners have invested almost a million dollars and received a return of more than 12 percent on the money they’ve lent so far, according to Trends Magazine. When Loanio.com began doing business only last October, more than 1,000 people signed up the first week.  A larger site, LendingClub.com, has handled a reported $20 million in loans since late 2007.

While P2P lending has been around since 2001, there isn’t much uniformity in the way they operate. For example, Virginmoney.com offers mortgages but it mostly focuses on facilitating lenders and borrowers who already know each other — sort of a friends and family model. Such relationships make the loans more secure, they say.

 Totally different is San Diego-based FirstAgain.com. It makes loans from $10,000 to $100,000 on credit history, not FICO scores. Interestingly, FirstAgain.com doesn’t think much of credit bureaus or FICO scores and for good reason, according to Barron’s.  When California Interest Research Group last sampled credit reports from the big 3 bureaus, they found eight in 10 contained errors. FirstAgain.com, along with most of the others, uses the latest fraud-detection technology, proprietary credit-scoring algorithms and lots of common sense in making loan decisions, says the company which, happily, encourages borrowers to finance their new boat purchase with them. Since 2006, FirstAgain.com has loaned over $100 million.

At least two of the P2P companies (Loanio.com & Prosper.com) are in the process of registering with the SEC in order to create a secondary market for their loans. Moreover, P2P’s aren’t limited to just consumer loans. Business loans are also in the mix for some. According to one projection, P2P companies will be handling $1 billion by 2010 and $9 Billion by 2017. In addition some cash-rich P2P sites could well look at acquiring conventional banks in the near future, significantly changing the current banking model. Now that would be interesting!

Check out P2P lending. While I don’t see floor planning in today’s P2P picture, these new breed of alternative finance companies just might be an answer for some of those solid boat buyers that are being blown off by banks today.

Comments

5 comments on “P2P lending is growing rapidly

  1. Chris Lyons

    Great Blog Norm. This is out of the box thinking that we should all be talking about. I have been watching the P2P business models for years. I have even had talks with a couple of these guys about boat loans and they have expressed to me some interest but they are cautious about big yacht loans due to there inexpereince in boat loans. I have in the past told my clients that have been declined by the traditional banks to give these P2P sites a shot. I warned them to there extremly high interest rates and shorter than normal terms. I have not heard of any success. I beleive that the general public/ investor has a perception that boat/yacht loans are the highest risk type of loan. We all know differently, don’t we.

    A few of the brokers and dealers that I work with will fund their own deals with their own money to close a deal. Most of the time these loans are only bridge loans until the borrow can set up a traditional loan. These guys has not lost a penny and closed the deal when normally the customer would have gone away. THIS IS NOT FOR EVERYONE AND IT DOES HAVE RISK.

    This out of the box thinking is the reason why a few of us in the industry are pushing for our own MARINE INDUSTRY FEDERAL CREDIT UNION. Just think if the marine industry started a credit union 10 yrs. ago and it has reach a billion dollars. What type of floor planing could we set up to help our industry? What type of boat loans can we approve? For those that think we beleive that a credit union would be the answer to all our problems, we beleive it’s a good start.

  2. Captain Jack

    Chris is absolutly correct about thinking outside the box. Why should we wait for our recreational lenders to start lending again. Over 80% of my applications have been declined in the past 60 days. Almost all of them I would fund myself if I had the money.

    How can I learn more about this marine industry credit union? How can I help? I can’t sit on the sidelines any longer and wait for our so called industry leaders to react. My lenders tells me to be patient and that things will get get back to normal soon. GIVE ME A BREAK!!

  3. Arch

    CHRIS,
    What’s the latest on the Marine Industry Credit Union. Isn’t it pretty much a done deal at this point?

  4. LARRY RODRIGUEZ

    AS WE’VE BEEN TOLD, OR HEARD……….THESE ARE CHANGING TIMES, LIKE NO OTHERS IN THE PAST.
    I FIRMLY BELIEVE THAT ONLY THOSE DARING ENOUGH TO JOIN THE CREATIVE PROCESS, AND BE WILLING TO INVEST & DO NEW THINGS, IN A TOTALLY NEW CREATIVE WAY, WILL SURVIVE.
    TIME TO PUT OUR THINKING CAPS ON, OBSERVE, INVESTIGATE, LISTEN AND ACT WITH GREAT LEAPS INTO THE FUTURE.
    AMERICA IS IN THE VERGE OF A NEW ERA, UNLIKE THE PAST WHERE PEOPLE THOUGHT THERE WAS ONLY ONE WAY TO DO THINGS RIGHT…………..THE RIGHT WAY WILL BE THE ONE THAT WORKS, EVEN IF FOR THE SHORT TERM, FOR IN SOME AREAS EVEN WHAT WORKS TODAY, MAY BECOME OBSOLETE AS QUICK AS TOMORROW, WHEN ANOTHER NEW WAY WILL HAVE TO BE TRIED OUT, OR PUT TO THE TEST.
    TECHNOLOGY IS NO LONGER THE ONLY FIELD THAT MAKES LONG TERM QUESTIONABLE, BUT IT SEEMS TO BE DRIVING & MIXING THE REST OF OUR THINKING WITH IT. YES I KNOW THIS MAY SOUND CRAZY TO MANY.
    TO SOME THIS BRAND NEW WAY MAY MAKE THEM FEEL A BIT INSECURE, BUT LET’S FACE IT, LIFE HAS NEVER PROVIDED A GUARANTEE, OUR ANCESTORS ACTUALLY MADE THAT IDEA UP, SO THAT THEY COULD SELL US GOODS, (and many of us still use it to make a living!)
    THERE’S ONE SIDE TO THAT NEW POINT OF VIEW, WHICH WILL ALLOW FOR US TO SURVIVE THE POSSIBLE STRESS, BUT ONLY IF NOT AFRAID TO LOOK AT THE WORLD WITH EYES OF A CHILD, BEHIND EVERY CORNER LIES AN ADVENTURE, AND HOW SWEET LIFE CAN BE THEN.
    AFTER ALL, ADVENTURES ALWAYS MAKE THE BEST STORIES TO TELL THE GRAND KIDS (and the ones they so closely pay attention to, and we vividly relive each time), DON’T THEY?
    I DON’T KNOW ABOUT THE REST OF YOU, BUT I’M SO GLAD TO BE ALIVE AND HAVE THE OPPORTUNITY TO PASS THROUGH LIFE DURING THESE INCREDIBLE TIMES, THAT NO MATTER HOW THOSE IN THE MEDIA TRY TO SCREW IT UP FOR ME, THEY CONTINUE TO FAIL!

  5. Chris Lyons

    Thanks Capt. Jack. You can email me at yachtmoneyman@yahoo.com and we can use your help.

    Thanks Artch for your concern. The organizing committee is staying on course. As you know from personel experience anything worth while doing takes time. We all on the organizing committee are spending as much time as possible to acheive our goal and at the same time we are all working on our day to to real jobs. Here’s the update. Our first draft business plan is completed. We have the support from a number of trade association like the MRAA. We are still in the process of conducting our Feild of Membership survey. With the help of a executive recruiter we found a great interm CEO that has the experience to take our CU to the billion dollar level within ten years. We are working on a website to keep eveyone updated on a weekly basis.

    Arch as soon as the MIFCU is a done deal I’m make sure you will be one the first MIFCU members and I’m sure they will take your deposits.

    Thanks

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