|By Jim Bruene on October 22, 2009 9:20 PM | Comments (1)|
Caught up in the regulatory crackdown in all things financial, new models that would transparently originate consumer and small business loans between individuals, the so-called P2P marketplaces, have struggled mightily to satisfy SEC requirements (my feelings about that). In fact, all three peer-to-peer U.S. lenders had to shut down for extended periods in 2008/2009 to reengineer their marketplaces. See our previous coverage here (note 1).
Earlier this year, Lending Club spearheaded a largely marketing-oriented campaign called UnCrunch America, which brought together several companies including Credit Karma, Virgin Money, Geezeo and On Deck Capital to publicize alternative lending. You can see our previous coverage, but that program appears shuttered with the URL redirecting to Lending Club.
This week, a new multi-company effort called, Coalition for New Credit Models, officially launched (press release). This group is spearheaded by rival loan marketplace Prosper, whose founder Chris Larsen has spent considerable time lobbying federal and state legislators during the past year.
The coalition's stated goals are largely political, hoping to influence legislators to reverse the SEC ruling that classified P2P loans as security offerings as well as adopt new programs to help support new methods for consumers and businesses to access capital.
Chris Larsen's quote in the press release compares the need for financial innovation to that needed to solve energy problems:
This country has been in an energy crisis for years, and we are now in a financial crisis. America's economic future depends on new and alternative credit models being embraced in the same way green technologies are being nurtured by policy leaders to help solve the energy crisis.
It's a worthy effort, and we hope their voices will be heard on Capital Hill. With traditional bank financing still a pipe dream for many small businesses, this is an ideal time to test new methods of getting capital to entrepreneurs who can productively put it to use.
About the coalition members
We are proud that five of the seven (Credit Karma, Loanio, Prosper, The Receivables Exchange, and SecondMarket) have appeared on stage at FinovateStartup and three of those (Prosper, Credit Karma, and Loanio) have also presented at Finovate in NYC (note 2).
Here they are in alphabetic order:
- Credit Karma: The San Francisco-based Finovate alum (video) launched in 2008, displays free credit scores and credit report info in an ad-supported business model.
- Loanio: This Nanuet, NY-based peer-to-peer lender launched at Finovate 2008 in October 2008 (video). However, it suspended business activities a few weeks later to register its securities with the SEC. It has yet to reopen.
- ProFounder: The Palo Alto, CA-based startup provides a platform where entrepreneurs raise seed funding from their social network and affiliates.
- Progreso Financiero: The Mountain View, CA-based firm provides loans to underbanked Hispanic families using a proprietary credit score enabling it to make loans to families without FICO scores.
- Prosper: The San Francisco-based startup, which presented at the inaugural Finovate in 2007 (video), has facilitated $180 million in p2p loans since launching Feb. 2006.
- The Receivables Exchange: The New Orleans-based startup showed its account receivable marketplace at FinovateStartup this past April (video).
- SecondMarket: The NYC startup and FinovateStartup alum (video) is the largest centralized marketplace for illiquid assets such as auction-rate securities, bankruptcy claims, CDOs, private-company stock, whole loans, and more.
1. For more on peer-to-peer lending, see our Online Banking Report: Peer-to-Peer Lending (Dec. 2007)
2. Uncrunch America members Lending Club and On Deck Capital are also Finovate alums.
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