Tag Archives: Lending Club

funding4business – technology shocks coming for Aussie banks

funding4business – technology shocks coming for Ausssie banking

The Murray Financial Inquiry of 2014 into Australia’s financial systems has predicted that technology changes and market disruptors using new technologies will have the largest influence on changing the banking system in Australia, as we know it.

At the forefront of this change is the emergence of peer-to-peer crowdfunding in Australia.

Charles Moldow, General Partner, Foundation Capital in the USA, in a recent report titled  “A Trillion Dollar Market by the People, for the People”, claims that “peer-to-peer marketplace lending will over the next few years, remake banking as we know it”.

Today technology and innovation are making possible a new generation of financial services that are more affordable and more available. That’s why Moldow, believes that “marketplace lending” will evolve to be a trillion dollar “market by the people, for the people”.

Foundation Capital predicts that by 2025 $1 trillion in loans will be originated in this manner globally.

The peer-to-peer crowdfunding industry rose to prominence in the USA & UK during the onset of the Global Financial Crisis in 2008, plugging a hole left by the reluctance of cash-strapped banks to lend to small businesses.

Consequently it has created an opportunity for non-traditional lenders through peer-to-peer platforms to cater to the growing demand for alternative business financing options and directly connecting borrowers and investors

For the first time in banking, the online marketplace makes it possible for a third party to match financial supply and demand. As a result, lenders and borrowers can now find one another and agree to loan terms, all without the involvement of retail banks or credit card companies.

The San Francisco based LendingClub Corp, one of the USA’s largest operators in the online peer-to-peer marketplace, has facilitated more than US$5 billion in loans since its launch during the GFC in 2007. This shift to a peer-to-peer crowdfunding is not unique to the USA.

The major UK networks providing these investment options include, Funding Circle, CrowdCube, Zopa and RebuildingSociety. Funding Circle alone has facilitated over GBP400 million in business loans in the UK over the four years since establishment.

See Charles Moldow’s complete Foundation Capital report here:- www.foundationcapital.com/downloads /foundationcap_marketplacelendingwhitepaper.pdf

funding4business – rise of peer-to-peer lending

The rise of peer-to-peer lending

Traditional banks make money by issuing loans to borrowers. Now ordinary people have the opportunity to do the same. Currently, one of the fastest-growing industries is peer-to-peer lending, which involves offering personal and business loans to strangers over the Internet at agreed interest rates and repayment terms.

The peer-to-peer lending space is currently exploding globally at an exponential growth rate with over $1 billion in venture capital poured into various peer-to-peer start-ups.

Lending Club in the USA is the largest of them all. Founded in 2007, and has issued more than $4 billion in personal loans since 2007. In August, the company filed for an IPO with a fundraising target of $692 million, valuing the company at around $4 billion.

Last week (1st December 2014), AvantCredit, an online personal loan lender based in Chicago, secured a $225 million Series D from a consortium of investors, while OnDeck Capital (USA), also filed for an IPO in November.

This shift to a peer-to-peer (P2P) lending strategy is not unique to the USA. In Britain for example, some peer-to-peer (P2P) networks are offering “mini-bonds” by lumping together lots of small, unsecured loans from retail investors such as superannuation funds, and lending them to established businesses in the form of debt funding.

The major UK P2P networks providing these investment options and small business loans include, Funding Circle, Zopa and RebuildingSociety. Funding Circle alone has facilitated over GBP400+ million in business loans in the UK over the four years since establishment

Here in Australia businesses are beginning to embrace non-bank peer-to-peer lending services and this will present a new and real threat to traditional banks’ business models.

Peer-to-peer (P2P) lending acts as an affordable and flexible alternative to expensive bank loans, where businesses can borrow funds and negotiate business loans directly with willing lenders at mutually acceptable rates and terms. Consequently, peer-to-peer loan matching is emerging as a viable and reliable source for business loans in Australia.

funding4business has recognised this shift and is the first and only peer-to-peer (P2P) marketplace in Australia, specifically established for providing business loans, and connecting Aussie business borrowers to Aussie lenders for mutual benefit.

The funding4business marketplace is open and transparent, offers potentially lower interest rates, faster settlement, online registration and algorithmic loan matching as the norm. P2P lending is a win/win situation for Aussie borrowers and Aussie lenders.

funding4business was launched in Australia on 1st August 2014

funding4business – equity-based crowdfunding regulation

Labor MP Husic urges government to act on equity-based crowdfunding regulation

Federal Labor MP Ed Husic has called on the federal government to introduce equity-based crowdfunding regulation as quickly as possible. Mr Husic, expressed concern that businesses were leaving Australia for more favourable regulatory environments such as New Zealand, while the government considered reform.

“The government has failed to meaningfully respond to calls for reform of the regulatory environment around crowd-sourced equity funding – a platform that is providing access to valuable, much-needed capital for start-ups,” Husic told Parliament.

“For now, I’m very mindful that the sector is demanding of this government a formal statement on where it is at in developing this framework. They’re seeing colleagues leave Australia and head to New Zealand because there’s a more accommodating regulatory environment there.

The government indicated in its Industry Innovation and Competiveness Agenda that the assistant Treasurer will consult widely on a regulatory framework to facilitate crowd-sourced equity funding, to build on the Corporations and Markets Advisory Committee’s (CAMAC) report.

That report was released in June and recommended the government make it easier for Australian businesses to raise capital through online crowdfunding platforms. It said that the government should change the legislation to allow all Australian to invest in companies through equity-based crowdfunding, albeit with a limit on retail investors of $10,000 per year and $2500 per start-up.

“The concern that start-ups have expressed if those types of limits are imposed is that it wouldn’t really raise the type of money that, in some cases, start-ups need to access for the whole exercise to be viable,” he says.

“While numerous ministers have told us how they’re big fans of crowd-sourced equity funding, we haven’t seen a response to the Corporations and Markets Advisory Committee report proposing a way ahead for this funding platform,” Husic says.

Mr Husic’s concerns are the delay on legislation, plus the CAMAC report’s recommendations, including limits on retail investors, are too conservative.

By Kye White | Wednesday, 29 October 2014

funding4business – crowdfunding in Australia a step closer

Crowdfunding in Australia a step closer

This is an extract of an article written by Nassim Khadem, Deputy Editor BusinessDay | Dec 8, 2014, Fairfax Media

 

Entrepreneurs will soon be able to take advantage of crowdfunding.
Crowd-sourced equity funding to help start-ups in Australia looks a step closer.

The Abbott government released on Monday a discussion paper on how Australia could create a regulatory system that protected investors who decided to take a punt on start-ups.

Crowdfunding, which allows a large number of investors to make small equity investments in a company, has taken off globally, growing to more than $5.1 billion last year. But Australia has been slow to join and current regulations impede crowdfunding.

A Treasury discussion paper comes after the final report of the financial system inquiry called on the government to enable crowdfunding.

Many submissions to the inquiry suggested Australia was already lagging other countries in crowdfunding and called for a new regulatory regime to enable it.

“A well-developed crowdfunding system can aid broader innovation and competition in the financial system,” the inquiry report, led by former Commonwealth Bank boss David Murray, said.

New Zealand revived its commercial laws earlier this year to allow retail investors to provide crowdfunding. The Treasury discussion paper suggests Australia could look to this model, although the government said it was not locked into any model.

“We are keen to ensure that any crowd-sourced equity funding model appropriately balances supporting investment, reducing compliance costs – including for small business – and maintaining an appropriate level of investor protection,” a joint statement by

Finance Minister Mathias Cormann and Small Business Minister Bruce Billson said.
The Murray report noted the risks associated with crowdfunding investments would require changes to consumer protection laws, including pointing out the risks of failure and fraud.

Allowing debt and equity to be raised from the “crowd” would provide small businesses with an alternative source of capital that could create jobs and lift productivity, it said.
“One of the obstacles that start-ups face is access to capital,” Mr Billson said.

“Crowdfunding would allow them to get that first-start business off the ground with the resources that it needs.”

Scale Investors chief executive Laura McKenzie, a supporter of product-focused crowdfunding platforms such as Pozible, Kickstarter and Indiegogo, welcomed the discussion paper but said her key concern was about investor education.

“It is critical that any endorsement of equity crowd funding is enhanced with an education program both around the risks involved and portfolio approach required,” she said.

“It is also important in terms of the fees and services provided by the intermediary platforms themselves, who take a passive role compared to the traditional, more hands-on venture capital model. My preference is that in addition to investment caps there are also limitations on the fee structures for intermediaries.”

Tim Heasley, chief operating officer of Artesian Venture Partners, which started VentureCrowd, Australia’s first equity-based crowdfunding platform, said the move would incentivise innovation and competition in the financial system.

Chris Gilbert, the co-founder of Equitise, another crowdfunding start-up targeting small business that will launch in Australia next year, said crowd-sourced equity funding would be an easy win for the government. “It is potentially a very powerful tool for early-stage, higher-risk ventures to raise capital in Australia,” Mr Gilbert said.

The head of KPMG’s digital consulting arm SR7, James Griffin, said one of the first great successes of crowdfunding was the completion of the base to hold the Statue of Liberty in New York. “A new record was set by one crowdfunding platform recently, seeing 62,000 people raise more than $13 million to commercialise a project,” he said. “It is particularly important to us as a country, as the remoteness of Australia does not apply when people consider investing via crowdfunding platforms.”

Airtasker chief Tim Fung said while equity crowdfunding was a complex concept, he was confident it would be a huge driver of economic growth in Australia if implemented correctly. “We just need to get the balance right between free markets and regulation.”

Career One chief Karen Lawson said the growth of equity-based crowdfunding would not only enable businesses to launch and grow quickly but would arguably become a barometer for success.

Milan Direct founder Dean Ramler said the model worked well overseas, especially in the United States. “As it stands it is not easy to provide equity to staff,” he said. “If this can change, it would really help start-ups.

funding4business – government supports CrowdFunding for Start-ups

Federal Government supports CrowdFunding for Start-ups

The Abbott government has recently approved the National Industry Investment & Competitiveness Agenda, which in part supports the use of CrowdFunding and CrowdSourcing to enable start-ups and small businesses to access alternative finance and funding methodologies to source equity funding for their enterprises.

This decision is a follow-on from the earlier recommendations of the now disbanded Corporations and Markets Advisory Committee that had previously recommended that the government should implement enabling legislation to facilitate the use of CrowdFunding, as it would enable start-ups to raise capital and access new forms of funding, which would in turn, boost job creation and the broader economy.

It would also bring Australian legislation in line with CrowdFunding and equity raising legislation that has been successfully introduced in the USA, New Zealand, Canada and the UK, to support start-up enterprises which are driving the economies in these countries.

So what is meant by the term CrowdFundng

CrowdFunding is a method of peer-to-peer financing which can help start-up enterprises and established smaller businesses access fast and simple finance for business loans or start-up equity, by raising funds from the online community and by connecting with a number of independent investors via the Internet in a peer-to-peer relationship.

Start-ups and small businesses are introduced to potential investors directly through an open marketplace based on certain investment matching criteria and algorithms and thereby bypass the complexity and costs of middlemen and the banking world.

How does CrowdFunding differ from Start-up Funding

Start-up funding uses the same method of CrowdFunding but is specifically focussed on the raising or sourcing of seed or establishment capital for early stage equity investment in innovative start-up enterprises, especially in the technology sector. The start-up funds are raised in a similar fashion from the online community of independent investors in a peer-to-peer relationship.

Investors are introduced to potential start-ups through a marketplace based on certain investment matching criteria and algorithms. This type of equity investment is called risk capital because both the risk of loss and the potential for profit may be considerable.

Some background on the emergence of CrowdFunding.

Since the Global Financial Crisis in 2008, the traditional banking system had been hurt by the high underwriting and servicing costs associated with lending to small businesses. Consequently it has created an opportunity for non-traditional lenders through a process called peer-to-peer marketplaces to cater to the growing demand for alternative business financing options by directly connecting borrowers and investors.

Peer-to-peer (P2P) lending lets investors lend directly to individuals or businesses and uses low-cost online platforms to cut out the banks and other financial institutions.

The San Francisco based LendingClub, is one of the USA’s largest players in the online peer-to-peer Crowd funding marketplace, has facilitated more than US$5 billion in loans since its launch in 2007.

This shift to peer-to-peer (P2P) lending is not unique to the USA. In Britain for example, some peer-to-peer (P2P) networks are offering “mini-bonds” by lumping together lots of small, unsecured loans from retail investors such as superannuation funds, and lending them to established businesses in the form of debt funding. The major UK P2P networks providing these investment options include, Funding Circle, Zopa and RebuildingSociety.

Peer-to-peer (P2P) lending acts as a flexible investment alternative where start-ups or established businesses can borrow funds and negotiate directly with willing investors such as self managed super funds, at mutually acceptable investment terms and conditions.

funding4business has recognised this technological and cultural shift and is the first and only peer-to-peer (P2P) marketplace in Australia, specifically established to facilitate Start-up funding and business loans, by connecting Aussie business borrowers together with Aussie investors such as SMSFs, and HNWIs for their mutual benefit.

The funding4business marketplace is open and transparent, offers a broad range of investment options, provides flexibility, offers potentially better investment returns, faster and simple settlement, online registration and algorithmic loan matching to your investment criteria.

funding4business is not a bank, finance company or lender, and we are not owned or backed by a bank or finance company.

We are an Aussie company, with an Aussie team, applying Aussie know-how, to an emerging P2P alternative investment marketplace for Aussie business borrowers and Aussie investors.

funding4business was launched in Australia on 1st August 2014.

 

 

funding4business – digital disruption a major threat to the established banks

Digital disruption a major threat to the established banks

In a recent discussion between Richard Gluyas of The Australian and Paul Bassat one of the founders of Seek, the subject of changing technology and the threat this poses to the major banks in Australia was explored.

Basset claimed that the scale of the potential rewards in successfully carving out a niche in the Australian banking sector through the introduction of disruptive technology, were huge. Bassat suggested that the early technology movers seem to be focused on the mobile payments sector with PayPal, Amazon, Western Union, Visa and a raft of smaller players carving out handy niches in this space globally. But mobile payments is the first of many inroads being made into the cloistered realms of banking and finance. For example:-

The San Francisco based LendingClub Corp, one of the USA’s largest players in the online peer-to-peer marketplace, recently filed for an initial public offering (IPO). LendingClub has facilitated more than US$5 billion in peer-to-peer loans since its launch in 2007 and revenue has more than doubled to US$87.3 million in the six months ended June 30 2014 from a year earlier.

“LendingClub has an interesting business model and has carved out a market niche in the peer-to-peer marketplace as bigger banks are scaling back riskier lending” claims Joseph Schuster founder of IPO research firm IPOX Schuster LLC.

Since the Global Financial Crisis in 2008, the traditional banking system has been hurt by the high underwriting and servicing costs associated with lending to small businesses. Consequently it has created an opportunity for non-traditional lenders through P2P platforms to cater to the growing demand for alternative business financing options and directly connecting borrowers and investors

Peer-to-peer (P2P) lending lets investors lend directly to individuals or businesses and uses low-cost online platforms to cut out the banks and other financial institutions. The P2P lending industry rose to prominence during the global financial crisis, plugging a hole left by the reluctance of cash-strapped banks to lend to small businesses.

This shift to peer-to-peer (P2P) lending is not unique to the USA. In Britain for example, some peer-to-peer (P2P) networks are offering “mini-bonds” by lumping together lots of small, unsecured loans from retail investors such as superannuation funds, and lending them to established businesses in the form of debt funding. The major UK P2P networks providing these investment options include, Funding Circle, Zopa and RebuildingSociety.

Peer-to-peer (P2P) lending acts as a flexible investment alternative where established businesses can borrow funds and negotiate business loans directly with willing investors such as super funds, at mutually acceptable investment rates, terms and conditions.

funding4business has recognised this technological and cultural shift and is the first and only peer-to-peer (P2P) marketplace in Australia, specifically established to facilitate business loans, by connecting Aussie business borrowers together with Aussie investors such as SMSFs, and HNWIs for their mutual benefit.

The funding4business marketplace is open and transparent, offers a broad range of investment options, provides flexibility, offers potentially better investment returns, faster and simple settlement, online registration and algorithmic loan matching to your investment criteria. P2P investing is a win/win situation for Aussie borrowers and Aussie investors.

We are an Aussie company, with an Aussie team, applying Aussie know-how, to an emerging P2P alternative investment marketplace for Aussie business borrowers and Aussie investors.

funding4business was launched in Australia on 1st August 2014.