Looking at my new fascinating woopra statistics, I clicked on a few of the keywords that appear in the dashboard. I noticed that there are several advertisements (adwords) that appear in Google results related to peer-to-peer lending. So I searched on several related key terms to see what appeared in the google paid search results. I thought that I would save the results so that I can later compare how these results change over time since changes in the paid advertisements may indicate changes in the P2P lending market.

Key Word: Prosper
Results: 14 million results
Paid Search results include:

• Lending Club
• peerlendingreview.com – I’ll mention this site more later.
• MicroPlace advertising for “invest to end poverty”
• Prospers.org – the Prospers.org site seems to be down now because it says “Coming soon!” when I click on the link.

Key Word: Prosper Quiet Period
Results: 33 thousand results
Paid Search results include:

• fred93.blogspot.com

I clicked on the link to Fred’s blog and it takes me to Fred’s home page. I think the results would be more effective if it linked directly to a post summarizing Fred’s issues with Prosper. However, I did notice that Fred’s Prosper late stats have been updated which is always a shocker to see. Some early months of Prosper lending are seeing more nearly 40% of the loans showing up as late.

Key Word: Lending Club
Results: 5,050,000 results
Paid Search results include:

• Lending Club
• PeerLendingReview for the ad “Peer Lending Exposed”

Key Word: P2P Lending
Results: 5,050,000 results
Paid Search results include:

• Lending Club
• Business.com
• PeerLendingReview for the ad “Peer Lending Warning”
• An ad for Mortgage quotes
• An ad for “Peer Lending Paydays” advertising faxless payday loans

Interestingly, I went back to search for P2P Lending a while later and noticed that the advertisements displayed completely changed. Here are the later search results.

Back to PeerLendingReview.com — it seems to be a simple page to encourage sign ups to Lending Club through the affiliate links. However, the page is awful. It claims to a review or to provide you some kind of warning but all it does is link you over to Lending Club to sign up for the service. The page announces “lending club reviewed so that you don’t have to.” It actually says “Lending Club was found to better than Lending Club” and then proclaims “lending club Alternative” (exact case) because my search was for the lower case “lending club.” Here is the page if you would like to see it:

Peer Lending Review - Thin Affiliate Page

• Review of Lending Club Update: New Portfolio View, FICO Score, & More
• Lending Club Statistics: Denying Most Loans
• Internet Reduced Insurance Rates: Similar Impact on Loans?
• Prosper.com Edits Wikipedia: Removing Criticism
• P2P Lending to Students with DUCK9: Heard of it?

There are two great ways that you can support peer to peer lending with a simple mouse click.

1) Vote for Kiva.org — the micro lending site for entrepreneurs in the developing world in the Crunchies which are a major web award. Vote at the 2008 crunchies website under the category of most likely to make the world a better place.

2) Vote for Uncrunch America at Change.org which is being sponsored by Lending Club. Uncrunch America is a newly formed NGO that has been submitted to help change America using the voting system on Change.org. It is based upon the idea that there is lots of money available but hoarded and lots of people in need of money. The top three ideas will be moved to a second round of voting for a runoff election. The the overall top 10 ideas for changing America will be presented to the new administration on Inauguration Day.

About Uncrunch America from Change.org:

Solving the credit crisis from the bottom up

The credit crunch currently crippling America’s economy is not due to a lack of available funds. It is caused by dysfunctioning credit markets and by the banks having adopted an overly conservative credit policy in the wake of the subprime meltdown. After very permissive lending practices for many years, the pendulum has now swung the other way.

But the money has not disappeared. The money is still there, with roughly $6 trillion currently sitting in deposits, CDs and savings accounts earning interest at 3% and not being lent out by the banks. This is enough money to get small businesses through the credit crisis, offer student loans to everyone who needs it and refinance half of all mortgages in America.

Our idea is simple: unlock these resources, enable the people who have the money to lend it directly to creditworthy people who need the money through a new (yet tested over the last couple of years) mechanism called social lending: people lending money to each other at fair interest rates. With this aim in mind, we have created Uncrunch America (www.uncrunch.org), to give us a chance to help each other out…

Read the rest of the pitch at Change.Org.

• Vote for Uncrunch America at Change.Org One More Time
• Rex Dixon: Social Media Director of Lending Club Blog
• Lending Club IRA – Reader Polls
• Zopa Open for P2P Lending in the USA
• Discussion with a Mortgage Fraudster: How to steal $600K

For Christmas I posted the free Kiva gift certificate. Tom from Prospser Lending Review redeemed it, but there are no loans open on Kiva right now for him to use the certificate.

From the scrolling banner on Kiva’s site about the impact that Kiva lenders have made this week:

$1,005,000.00 lent.
12,817 lenders made a loan.
17,329 gift certificates purchased.
15,002 new lenders joined.
2,874 entrepreneurs funded.
1 loan was made every 25 seconds.

AMAZING!

I also gave a certificate away on Facebook and my friend redeemed it for this loan:

Mr. Yous Ba Try, 35, is married and lives with his wife and a ten year-old child in a part of Phnom Penh, Cambodia. He is the head of the family and works as a sculptor designing and making Buddha statues and historical statues from cement and will then sell up for a profit. From his business activity he can … Read More moderately make $3 a day of income. Moreover, his wife, Lay Sarorn has a business at home washing motor-bikes and vehicles and makes $3 a day of income.

Yous Ba Try would like to ask for a loan from Kiva to purchase more cement to expand his business. Half of the loan will be used to fix a roof of the building where his wife has her business.

Congratulations Kiva on your great year. To date Kiva has facilitated over $54 million in micro loans to entrepreneurs in the developing world.

For more about Kiva’s outstanding year, see the Kiva year end review blog post.

Another Gift Certificate Give Away:
I’ll be giving away another gift certificate via Twiter. I am certain that Kiva will have more loans to fund shortly.

• Free Kiva Gift Certificate Experiment Results
• Free Kiva.org Gift Certificate – Merry Christmas!
• MySpace Founder Giving Kiva Gift Certificates for Christmas
• Kiva: Micro Foundations for Micro Loans?
• Second Peer to Peer Lending Carnival

Loanio has continued to claim be almost available since I started blogging on P2P lending. Loanio in fact has been promising its imminent release since before I started blogging P2P lending — back in November of 2008.

For about the past year (maybe more), Loanio has been requesting you to sign up for their email announcements to stay informed of their launch. It is likely that Lending Clubs SEC troubles have impacted Loanio and caused a delay, but why do they keep announcing they will be launching soon? Launch and then announce if you don’t know when you are launching.

Loanio has announced their own launch via email and announced the pending launch via proxy using Rate Ladder. The email that Loanio sent out on September 3rd (three and one half weeks ago) said:

As Labor Day weekend comes to an end, we are proud to finally announce Loanio’s launch. In just a couple of weeks (yes, we mean it this time!), we will be done with the final touches and ready to roll out!

CEO and Founder Michael Solomon and everyone involved with Loanio would like to take this opportunity to thank all of our supporters who have been patiently awaiting our arrival.

Just In Case You Forgot:

Loanio.com is a new peer lending website that facilitates the borrowing and lending of money between individuals through an auction-style platform.

“A couple” of weeks I count as two — not four. And I loved the “Just in case you forgot…” section since Loanio has been sidelined for long enough for the financial markets to completely meltdown, Lending Club to be nearly closed by the SEC, and more…

Loanio has announced via (Rate Ladder), that the launch was going to be “today or tomorrow” already three days ago. So they don’t even seem to be able to meet very short-term obligations — assuming Rate Ladder’s information was correct.

Today though tops all past failures — you can’t even see Loanio’s home page. Just arriving to the homepage requires a user ID and password. See the graphic below. Is Loanio over before it ever even open its doors?

loanio unavailable and requiring a password

Currently every page on the site requires a user ID and password. Without it, you see:

This page requires authentication.

I hope Loanio does open, but it already does not have much credibility in my eyes. I wish them well, but I am not backing them by sending them my money — if they ever actually do open to the public.

In case you skipped or slept through literature in high school, the title of the post is based on a quote from Shakespeare.

• P2P Lending to Students with DUCK9: Heard of it?
• Eric Launches LendingClubStats.com
• Prosper.com Lending Tools Webinar Cancelled
• Review of Lending Club Update: New Portfolio View, FICO Score, & More
• Lending Club Quiet Period Announcement: A Blog RoundUp

The next p2p lending carnival will be hosted here at Personal Loan Portfolio. There are not a large number of submissions that have been received to date, so you have a great chance of being prominently featured in the carnival. If you have recently written about Lending Club, Prosper Marketplace, Fynanz, or other P2P lending services, consider submitting your article.

To submit an article, go to the carnival submission site. Please submit by the end of the day on Monday (June 30th) to be featured in the next carnival. If you miss the deadline, you will be in the next carnival posting.

The last carnival — #9 — was hosted at Rate Ladder. Number eight was hosted at Rocket Finance. Number seven was hosted at Moolanomy.

Again, you can submit articles here. The P2P lending carnival is sponsored by Lazy Man and Money.

I noticed that there is a p2p lending carnival website, but it has not been updated since the 8th carnival.

• P2P Lending Carnival #4
• Carnival of Peer-to-Peer Lending #10
• Second Peer to Peer Lending Carnival
• Contest for Prosper Loan Reviews Still Open
• First Peer-to-Peer Lending Carnival

P2P Lending has been in the mainstream media news a great deal lately. I decided to post a roundup of many of the recent news articles on Prosper.com, Lending Club, Zopa, GlobeFunder, and Virgin Money. It is unfortunate that Lending Club entered a quiet period just as they were gaining tremendous growth in loan volume.

CNBC February 5th, 2008: From Zero to Millions: Financing Your New Business:

Online Family Lending Use a lending network designed for inter-family loans, such as CircleLending.com. Tools at that site will help you and your relative come to terms on the length of the loan and the interest rate, and calculate the monthly payment amount. For $99, CircleLending issues a legally binding promissory note and a repayment schedule. For $9 per payment, the company will set up automatic repayments using electronic funds transfer.

Peer-to-peer Lending: Several websites now make it much easier to find an investor who will back your business. Check out prosper.com, lendingclub.com and zopa.com.

Lending Club’s founder financed his first company with personal loans and high-interest credit cards. He eventually sold the business to Oracle. That experience inspired his new company. Lending Club, which launched on Facebook in May 2007 and on its own site last September, uses technology to match borrowers to lenders willing to offer unsecured loans of $500 to $25,000 with three-year, fully amortizing terms.

The author, Laura Rowley, must have used some old notes because CircleLending.com was long ago purchased by Richard Branson and converted into Virgin Money.

Forbes February 11, 2008: Banking 2.0: New Capital Connections For Entrepreneurs:

Credit-market carnage makes it all the more important for small businesses to understand the full range of potential sources for capital. A growing alternative to traditional sources: person-to-person lending Web sites.

These sites, with names like Prosper.com, Zopa, Lending Club and GlobeFunder, use social networking tools and other software to simplify the borrowing and lending of capital between strangers and even family and friends. For entrepreneurs, these sites offer an alternative and needed source of capital. For lenders, the fast-growing sites offer competitive rates of return and the opportunity to easily participate in the cornerstone activity of capitalism.

I wonder if Maureen Farrell noticed that Globefunder’s lenders are the hedge fund set which I hardly call peer-to-peer lending.

Prosper.com employs an eBay or auction-style model and lets potential lenders both determine the interest rate and who gets funded in a several-week bidding process. Zopa.com used the auction model in the United Kingdom, but in the United States where it launched in December, it works directly with credit unions and lets these unions set the interest rate and decide whether to fund. Borrowers can lower their interest rate by asking lenders to purchase certificates of deposit against their loan for rates of 4.25% or below, and credit unions guarantee the CDs. Lending Club also sets the borrowers’ interest rate based on FICO scores and determines who gets funded. Once a rate is set, Lending Club matches lenders and borrowers by personal interests through their Web site or via Facebook. Borrowers share their stories, and then have a time window to see if enough lenders are willing to fund the loan.

GlobeFunder and Virgin Money USA don’t use social networking mechanisms. GlobeFunder allows borrowers to appeal for funding, determines an interest rate range, and then working with its partners–institutional investors and hedge funds–finds out whether there’s enough interest in the loan to fund it. Richard Branson’s new venture, Virgin Money USA, which was formerly Circle Lending, facilitates the transfer of money between friends and family. Friends and family members negotiate rates, but Virgin Money sets up payment schedules and legal documents and charges fees accordingly.

So Maureen Farrell did notice that GlobeFunder is for hedge-fund lenders. She probably wrote up one of the most concise descriptions of P2P lending sites I have seen in the above two paragraphs.

Right now, default rates at Prosper and Lending Club are relatively low, but that could change with the downturn in the economy. Prosper’s CEO Chris Larsen says the rate of default is now around 4.7%. At Lending Club, borrowers with poor credit are excluded and therefore interest rates are lower. The site has only been in operation since mid 2007, but as of now, Lending Club claims to have a 0% default rate and says that only a small fraction of borrowers–0.012% –have made late payments (30 days or more).

Maureen, you forgot to ask Chris how many loans are late. It can take months of zero payments for a late loan to be considered in default on Prosper.com. And with Lending Club you should have asked the average age of the loans. I mentioned this problem with Lending Club’s statistics in this post on loan rejections. LendingClub’s loans have not aged enough yet for people to actually rely on that late payment statistic for a basket of three-year loans.

What is the potential market for these loans? Analysts predict a huge surge in demand. Javelin Strategy & Research, a Pleasanton, Calif.-based financial services consulting firm, estimates that demand in the person-to-person lending market could hit $159 billion by 2012.

Forbes also put together a concise guide to the peer to peer lending sites.

FOX Business February 11, 2008: Bypassing the Bank:

Peter Barnes talks to Renaud Laplanche, Lending Club Founder & CEO, about LendingClub.com, a social networking website for peer-to-peer lending.

Time February 28, 2008: Hey, Buddy, Can You Spare $10,000?:

WHO DOES IT [p2p Lending]: Bernadette Lui of San Jose, Calif., has $3,125 spread among 13 three-year loans. She earns 14.6% and is considering reinvesting her returns with new borrowers. “They’re pretty small dollar amounts on each loan,” Lui says. “I figured it would be acceptable if someone defaulted.”

Bernadette Lui should have spread her money across more loans. In fact, should could have picked 62 loans rather than just 13. Considering that she on average loaned out $240 to each of 13 people, just one default will significantly impact her ROI.

Washington Times March 2nd 2008: Wanna Talk Money?. The article actually spends more time on sites such as Wesabe and Geezeo, but does include peer to peer lending:

Others have opted for niche sites. Some, such as Covestor.com, allow investors to see how their portfolios compare with others. Social lending sites, such as Lending Club and Prosper, bypass banks to match lenders with borrowers. Buxfer.com and BillMonk.com help roommates, friends and relatives keep logs of shared expenses. NetworthIQ helps people figure out in a public forum what they are worth in dollars…

Some people, such as Phyllis Wright, 48, are just looking for a way out of debt. The customer-services representative who lives in Clinton borrowed $9,000 from the Lending Club to pay off some of her credit cards. “I knew that I had so much debt that I didn’t even bother to try to get a loan from the bank because I knew I would have been turned down,” she said.

She got a 12 percent interest rate, much lower than the rate she had on her credit cards. She had been paying her credit cards about $450 a month. Now she pays Lending Club $301. She still has credit card debt, but “that was a big help,” she said.

Since September, when the Lending Club expanded from a Facebook group to a public Web site, it has issued about $9.5 million in loans, said Renaud Laplanche, founder and chief executive. Last month alone, it doled out about $3 million. Laplanche attributed the rapid growth to the credit crunch that has squeezed the mortgage market and seeped into other forms of lending.

Laplanche said borrowers must have a minimum 640 credit score, no more than a 30 percent debt-to-income ratio and no delinquencies. To minimize risk, lenders make small loans to each person. That way, if one recipient defaults, lenders are still likely to get a return from their investments in other people’s loans. So far, Laplanche said, fewer than 1 percent of all loans have been in default.

“People tend to not default on other people in a community if they feel connected,” he said.

I think Prosper may have already proven that last statement incorrect. I hardly ever lend on Lending Club or Prosper based upon some social or geographic connection, but when I do, I always let the borrower know — just in case Laplanche is correct.

ABC News April 5, 2008: Social Lending Networks, New Alternative to Banks:

There is a video of Murphy who received a 25,000 loan from Lending Club at 12% to fund his popcorn business. The lender Bernadette Lui (mentioned in the time article) is in the video and she mentions that two of her loans are already late. So her return is not going to be so attractive. The video mentions a different estimated ROI for Bernadette — over 15% — than the return mentioned in the Time article. So I was right… Bernadette should have spread her risk across more loans.

No single lender carries a full loan, so the risk is spread out among several people. The borrowers get a fixed rate, based on their credit score, which is usually a better rate than the bank would give and much better than they would get using a credit card.

Bernadette Liu has loaned out a total of $3,125, spread over 13 different borrowers. She’s earning almost 15 percent on her investment. She says that’s a lot better than the stock market or even bank CDs. But she said she is worried about two of her loans on which the borrowers are late making payments.

“It’s a newer venture, so you never know,” she said. “But I think my funds are diversified enough.”

When she says her funds are diversified enough, I wonder if she means just her Lending Club loans or her entire investment portfolio. If she is talking about her Lending Club loans alone, I think she is wrong. She could have invested her three grand across 62 loans at $25 each or 31 loans at $50. If you want to try P2P lending, please invest across more loans. See the articles at Prosper Lending Review and Rate Ladder on the subject of P2P loan diversification.

US NEWS April 8th 2008: Surviving the Crunch:

Ryan Feig, 35, founder of Zensah Performance Apparel, a Miami innovator of seamless compression sportswear. Projected 2008 sales: seven figures
“My experiences with banks have been extremely difficult—even though we sell to teams in the NBA, are a 3-year-old company, have great technology and have some of the greatest athletes. Lending Club [an online social lending network] has been a savior. It’s true capitalism for borrowing. Tomorrow, even if there is no more credit crunch, I think people are going to have better access to capital through people-to-people lending than, let’s say, a bank.”

CBS March 21, 2008: In Credit Crunch, Lending To Each Other:

At a time when credit is hard to come by, more Americans are turning to a new source for money: each other. It’s called person-to-person lending, and it’s expected to rise 800 percent in the next couple of years.

…He was paying 31 percent on his credit card. And now he’s paying …

“Ten percent,” Brown said.

…Those with some money like Clemens, and those who need some like Brown, are now able to get together on Web sites like LendingClub.com and Prosper.com.

Since CBS News first reported on Prosper.com a year ago the credit crisis has made person-to-person lending take off, nearly tripling Prosper’s customers to 630,000.

This article also includes a 2:35 minute video (after the advertisement):

Technorati Tags: P2P lending, credit, Prosper, Lending Club, GlobeFunder, Zopa, Virgin Money, news, roundup, borrowing money

• Glenn Chapman on P2P lending at Prosper, Virgin, Kiva and Zopa
• Rex Dixon: Social Media Director of Lending Club Blog
• Prosper.com Correlations: Late Loans and Interest Rate Caps
• Pennsylvania loans or what were early Prosper lenders thinking?
• One Year Review: My Prosper Lending Experience

I have already commented on Lending Club’s quiet period and referral program suspension. I decided to check other blogs to see what they have to say on the email notice that went out today. Since I was reading everything anyway, I decided to post links and a few quotes to everything that I could find using Google’s Blog Search for Lending Club.

Peer-Lend commented on the uncertainty of the meaning of the communication:

There has been a large amount of speculation recently in many corners that the P2P Lending models might be subject to some legal uncertainty regarding whether the loans should be classified as securities… The speculation has primarily been concerned with who, in fact, owns the loans (notes), and how exactly that ownership [is transferred]….

It is unclear whether LendingClub has ceased operations as a result of an SEC action or whether LendingClub has chosen to bite the bullet and submit to regulation voluntarily. This event could have major repercussions…

The g-spot posted:

My guess is their legal team is burning the midnight oil. Anyone thinking of starting their own P2P lending marketplace may want to review this telling video from 2006 where Chris Larsen of Prosper talks about the effort they spent working with regulators…

What’s new in? blogged about Lending Club sorting out some legal issues:

While the company will not talk to media “until the registration process is completed,” we suspect that Lending Club is looking to obtain a broker-dealer license from the SEC that would legitimize its operations.

Rate Ladder mentions that he does not have much choice but to withdraw funds as they become available. He also lamented the closing of the referral program which I can understand if you see his screen shot showing how much was earning from referrals.

NetBanker posted some screen shots and a few links. Additionally, it seems he got a statement from Prosper.com about the Lending Club quiet period:

Person-to-person lending is an increasingly popular way for individuals to borrow and lend money at attractive interest rates. Understandably it must be done in a secure and trusted way. While we’re not in position to comment on another company’s regulatory stance, Prosper believes that…

– See the rest of the quote at NetBanker’s post on the topic.

I think this blog is jumping the gun in his assessment of the situation:

…it is no longer peer-to-peer lending… The whole idea behind P2P Lending is to keep the banks out of it… Now at Lending Club “lenders” will ensure the funding is provided, then the loans will be sold off to some institution… while the lender most certainly will not receive the full amount…

It destroys the whole “community” aspect of P2P lending…

CenterNetworks posted on the email:

Could the company be working towards an IPO? My guess is not and that this is a standard process to protect Lending Club as they grow. The term “quiet period” is being used and we hear this period could last as long as three months. I have an email into Lending Club to try to get more details.

Good luck on getting more information — it is called a quiet period for a reason. Update: I ran across a second post from CenterNetworks confirming that they received a “no comment” response from Lending Club.

The Bootstrap Economist commented at CenterNetworks that possibly banking regulators were not pleased with the Lending Club business model.

TechCrunch’s post mentions: “…we suspect that Lending Club is looking to obtain a broker-dealer license from the SEC that would legitimize its operations.”

Dividend Growth Investor wondered about the credibility of P2P lending companies overall in the comments at Brip Blap.

Jason at the Amatureist Financial Journey wishes that he would have received more notice and may not want to return to Lending Club when they come back.

I think of all the posts on the topic, Jason commented best — it seems like very poor communication to announce this so abruptly. Maybe due to regulation they had no choice about how quickly this was announced, but I wish they would have mentioned that in the email. It might have stopped some of this speculation. And now of course, Lending Club will not be able to correct this communication for three, four, or more months due to the quiet period.

Anyway, I am still hoping for the secondary loan market which would bring liquidity to the P2P lending market. We’ll find out sooner or possibly later, but in the mean time, I’ll be making my next transfer of funds to Prosper.com.

The Lending Club quiet period email was also blogged by Prosper Lending Review, by the Lending Club CEO (unfortunately comments were closed), and Saving for Home.

UPDATE: I added more blog links related to the Lending Club quiet period in a second blog post.

Technorati Tags: roundup, lending club, quiet period, p2p lending, banking, speculation, rumors

• More Lending Club Quiet Period Announcement Links
• Change in Lending Club Cash Burn Rate Due to Quiet Period
• Prosper Marketplace Update Targeted at “Lazy Man and Money”?
• Top Ten Referrers and Posts for the First Half of 2008
• More Website Updates Including Following Comments

Due to the Lending Club quiet period, the Lending Club referral program has ended. The program was a good one — I earned over $300 in referral fees through this website by blogging about my experience creating a portfolio, creating a video, gathering advice for new lenders, the inception of the referral program and the Lending Club bonus program.

I hope that they bring back the referral program after the quiet period is over.

From the quiet period email sent out today:

Q2. What about referrals?
A2.1 The current referral program is terminated. If you have referred someone who has already signed up as a lender or a borrower, or if you have been referred by someone and have already signed up as a lender or a borrower, you will be receiving your referral payment within the next few days.

Technorati Tags: lending club, peer lending, p2p lending, affiliate programs, referral code

Photo credit: TheTim

• Prosper Referral Program Closes
• Lending Club Referral Program – It’s Official!
• Lending Club Quiet Period Announcement: A Blog RoundUp
• Prosper Marketplace Enters Quiet Period
• Review of Lending Club Update: New Portfolio View, FICO Score, & More

Lending Club sent an email today that first surprised me because a quick reading of a few details sound rather ominous. However, if you read past the “you can withdraw uncommitted funds” sections of the email, or rather stick to the important stuff in the first paragraph, this email exciting news for P2P lending.

I believe that this means that Lending Club is going to succeed at making a secondary market for loans. If this works, you should be able to buy and sell Lending Club loans that are already “in progress” — this will provide liquidity to the market. If the interest rates stay the same, this will make the loans a much more attractive investment.

It is also interesting that Lending Club is going to be eating their own product (funding all borrowers’ loans) during the quiet period. That is certainly going to give Lending Club more skin in the collections side of the business.

The quiet period email:

Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.
The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.

Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.

Q&A:

Q1. What about money I have begun moving, but is still in transit to Lending Club?
A1.1. If you are in the process of verifying your bank account, you will be able to complete that verification but will not be able to add new funds
A1.2 If you have initiated a transfer, the funds will be displayed in your Lending Club account balance as soon as those funds are available.
A1.3 If you have uncommitted funds, you may request that Lending Club return those funds via the same method used to load the funds. For example,
• If you have initiated an ACH to add funds, these funds will be transferred into your Lending Club account but you will not be able to lend these funds out. You can go into your Lending Club account once the ACH transfer has been completed and withdraw funds back into your linked bank account..
• If you’ve wired funds into your Lending Club account and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to wire these funds back to you at no charge.
• If you’ve sent funds by check, and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to send you a check by mail for the same amount at no charge.

… [see separate post on the suspension of the referral program]…

Sincerely,

Patrick Gannon
Senior Vice President
Lending Club
440 N Wolfe Road
Sunnyvale CA 94085
www.lendingclub.com

Good luck Lending Club! I hope this works out.

I was hoping that Rob was going to stop by and comment on my posting about the possibility of a small penalty for early loan payoffs, but that does not look likely for a while now.

Technorati Tags: quiet period, lending club, promissory notes, p2p lending, secondary market

• Prosper Marketplace Enters Quiet Period
• Lending Club Quiet Period Announcement: A Blog RoundUp
• Change in Lending Club Cash Burn Rate Due to Quiet Period
• Lending Club SEC Update During the Quiet Period
• More Time for P2P Lending Advice

It was my turn to give a speech last Thursday in the Toastmaster’s club that I attend. I decided to give the speech on P2P lending. For me, the most difficult part of selecting this topic was cutting down the material into only a 7 minute speech.

The Toastmaster (the person running the meeting) gives a short for the speaker, but the content is often provided by the speaker. I asked the Toastmaster to mention that this a perfect topic for me because it intersects two of my favorite topics — finance and the internet.

During the speech, I explained the basics of Prosper.com and Lending Club. I also mentioned Virgin Money for family loans if someone wants to lend the full amount to a family member. I gave a quick overview of the process for both lending and borrowing. Not a single member of the audience attending the meeting had ever heard of peer-to-peer lending.

I mentioned that for unsecured loans, the rates are good for borrowers. However, many of the people attending the meeting can probably find a better interest rate on a loan with a HELOC from our credit union. Of course, that puts your house at risk. For lending, I explained that there is a risk of default, so a lender needs to spread the risk among several loans. Seven minutes go by very fast in a speech, so I did not have time to talk about as much as I would have liked.

A few of the audience members seemed interested in the topic and wrote down the website URLs, so maybe Prosper and Lending Club will have a few more members due to my speech.

If you are not familiar with Toastmasters, it is a club to practice public speaking skills. It helps with both prepared and impromptu speaking. It provides the chance to learn about interesting topics and to meet people from outside my area at work. I also find it to be a relaxing way to spend one day per week at lunch.

• Lending Club’s SEC S-1 Risks
• Lending Club SEC Update During the Quiet Period
• Rex Dixon: Social Media Director of Lending Club Blog
• Zopa Open for P2P Lending in the USA
• Lending Club Quiet Period Burn Rate Update

I received a promotional email from GlobeFunder today. What amazes me is that they seem to be targeting hedge fund qualified investors, but the email says that they have only originated $100,000 loans since January 1st, 2008. That is a slow start in volume and one that is not likely to entice many major institutions to invest. It is not worth the paperwork to invest such small sums from a large portfolio — it simply will not move the ROI needle. Dwarfing that number Prosper has pushed out $117 million in loan volume. The same article mentions that January 2008 alone was $7.2 million in loans.

Edit 11/28/2008 : See the comments following this article in the comments by the Globfunder CEO.

Here is the text of the GlobeFunder email:

When the media is absorbed in (some would say paralyzed by) the global credit crisis and market downturn, it’s hard to bring attention to a global event closer to home: GlobeFunder is shaking-up the traditional lending world. But we’re being noticed by the likes of Forbes and others – check out the 2-11 article at Forbes.com, and find more links to recent news stories on our website.

We continue to build and strengthen our positioning and unique proposition against “sympathy-lenders” and “feel-good social network” competitors like prosper.com and lendingclub.com. After all, we’re in the business of making it convenient, transparent, and affordable to borrow money first. When we’ve accomplished that, we’ll move on to “feeling good” second.

A sneak peek at our partner strategy: we’ve successfully inked a deal with Cal Spasand C&S Financial. (Cal Spas is a pioneer in the Home Resort(TM) market and redefines “luxury outdoor living”). This is a working template for like-partnerships where GlobeFunder in essence acts as the financing arm for organizations with a broad customer base and aggressive sales pipeline. Our goal: instant access to large numbers of credit-worthy borrowers.

We continue to refine and streamline our registration process with our partner eDominate. At the same time, state licenses continue to trickle in (sometimes maddeningly slow) and we’re currently up to 14 states served, with 10 more states added by next week, and several large states (yes, same states that feature large in the elections) coming on-line soon. Against that backdrop, we have a trajectory from $0 loan requests to more than $700,000, with more than $100,000 successfully funded since January 1. With additional licenses we will reach the critical mass necessary for on- and off-line advertising to dramatically ramp-up the number of borrowers.

As you may remember from our last eCard, GlobeFunder India was launched in January and, together with our partner Intellecap we are nearing the point of funding a variety of Microfinance Institutions (MFIs).

Last but not least, the “official” GlobeFunder blog is up and running! Featuring weekly observations and commentary on lending and related topics by our leadership team, it is ready to receive your learned wisdom or spontaneous reactions, whichever come first. Above all, point other folks our way so we can really get some interesting dialog going!

Pompous, yet exciting.

I decided to check out the Forbes article referenced and I noticed this quote:

“These sites, with names like Prosper.com, Zopa, Lending Club and GlobeFunder, use social networking tools and other software to simplify the borrowing and lending of capital between strangers and even family and friends. For entrepreneurs, these sites offer an alternative and needed source of capital. For lenders, the fast-growing sites offer competitive rates of return and the opportunity to easily participate in the cornerstone activity of capitalism.”

Check out the investment requirements below to become a lender — GlobeFunder is not P2P lending. Although, to be fair, Maureen Farrell does go on to explain how GlobeFunder works:

“GlobeFunder and Virgin Money USA don’t use social networking mechanisms. GlobeFunder allows borrowers to appeal for funding, determines an interest rate range, and then working with its partners–institutional investors and hedge funds–finds out whether there’s enough interest in the loan to fund it. Richard Branson’s new venture, Virgin Money USA, which was formerly Circle Lending, facilitates the transfer of money between friends and family. Friends and family members negotiate rates, but Virgin Money sets up payment schedules and legal documents and charges fees accordingly.”

I have to once again point out that Maureen Farrell, like most journalists, simply quotes Chris Larsen’s default statistics when the late (rather than defaulted) statistics show the referenced number is a distortion. She does mention the short time frame of LendingClub statistics, but still her analysis seems rather rosy on the performance topic.

“Right now, default rates at Prosper and Lending Club are relatively low, but that could change with the downturn in the economy. Prosper’s CEO Chris Larsen says the rate of default is now around 4.7%. At Lending Club, borrowers with poor credit are excluded and therefore interest rates are lower. The site has only been in operation since mid 2007, but as of now, Lending Club claims to have a 0% default rate and says that only a small fraction of borrowers–0.012% –have made late payments (30 days or more).”

I decided to go back to the GlobeFunder website to see if I could register. However, not only is Globe Funder not into “feel-good” they are not even a peer-to-peer lending site. In fact, the rules to register (and it takes up to 30 days to review your application) sound much more like Hedge Fund requirements than a peer-to-peer lending site. You must meet one of the below requirements to become a lender on Globe Funder. I can’t understand why they compare themselves to LendingClub and Prosper with these lending hurdles.

Also, why are they bothering to blog about credit card companies when their target investor market is the hedge fund set. Their two target markets, portfolio managers and those in need of a personal loan, are too far apart to have a blog targeted at the audience. How many people in the hedge fund crowd know anyone who needs a small personal loan for high interest rates?

I am not interested in feel-good lending either. I would like to make a decent return and I think most investors in Prosper and Lending Club loans also want to earn a positive return. However, I do not meet GlobeFunder’s requirements for lending:

• Regulated Entity – I am (i) a U.S. bank or any banking institution… (ii) a U.S. savings and loan association… (iii) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; (iv) a U.S. insurance company; or (v) an investment company registered under the Investment Company Act of 1940.
• Business Development Company – I am a “business development company” as defined in the Investment Company Act of 1940.
• Private Business Development Company – I am a “private business development company” as defined in the Investment Advisers Act of 1940.
• Small Business Investment Company – I am a “small business investment company” licensed by the U.S. Small Business Administration under Section 301(c) or 501(c)(3) of the Small Business Investment Act of 1958.
• Entity Not Formed For The Specific Purpose Of Acquiring The Security Offered – I am an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986… with total assets in excess of $5,000,000.
• Individual (Net Worth) – I am a natural person whose individual net worth, or joint net worth with my spouse, as of the date hereof exceeds $1,000,000.
• Individual (Income) – I am a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with my spouse in excess of $300,000 in each of those years and I have a reasonable expectation of reaching the same income level in the current year.
• Employee Benefit Plan – I am an “employee benefit plan” within the meaning of Title I of the Employee Retirement Income Security Act of 1974… total assets in excess of $5,000,000…
• State Plan – I am a plan established and maintained by a State … total assets in excess of $5,000,000.
• Trust – I am a trust with total assets in excess of $5,000,000
• Revocable Trust – I am a “revocable trust” that may be amended or revoked at any time by the grantors thereof, an all of the grantors are “accredited investors”.

Well, I will not be lending at GlobeFunder any time soon.

• Lending Club, Prosper.com, and more: P2P Lending News Roundup
• What NOT to say in your Personal Loan Application
• Richard Branson: “Go Fund Yourself” with Virgin Money
• Pennsylvania loans or what were early Prosper lenders thinking?
• Risky Business: Using Payday Loans to Pay the Subprime Mortgage

I participated in the second peer to peer lending carnival which is hosted at Brip Blap. There were too many good submissions to decide on a favorite post in this carnival, but I will post links and comments below to a few favorites. I submitted my article on Lending Club rejecting most loan applications.

Peer-Lend posted information on the new bidding guidance and interest rates. Moolanomy posted information about his second loan on Prosper. Prosper Lending Review interviewed the Fynanz CEO. (That one was interesting enough that I already blogged about it.) Rate Ladder updated the vintage curves.

WiseClerk make some P2P lending predictions for 2008. One of his predictions (listed at 75% probability) is that we will see insurance against p2p lending defaults. Dough Roller posts how he overcame his fear of p2p lending although he admits that he has not entirely overcome his concerns about lending on Prosper.

I am glad to see a post from a borrower. This time the post comes from Amanda who asks lenders how they would feel about financing a second prosper loan for her. The official Prosper Blog also posted some interesting and unusual tips for borrowers.

Money Smart Life posted an Introduction to P2P lending. It is a very basic introduction and more from the borrowers point of view. Also, I am not sure why Kiva is included in his list of sites since Kiva does not perform the functions he describes in the post. Kiva is for third world entrepreneurs. Kiva is not for people who want a lower interest rate or were rejected by their bank for a loan.

Here is my post on the first peer to peer lending carnival. Also, if you want to participate in the next peer to peer lending carnival, visit the carnival homepage.

• P2P Lending Carnival #4
• Carnival of Peer-to-Peer Lending #10
• First Peer-to-Peer Lending Carnival
• Submit for the next P2P Lending Carnival
• WSJ writes about P2P Lending