Your guide to peer to peer lending

Peerform Now Open to Accredited Investors

by Peter Renton on August 5, 2011

I first reviewed Peerform back in March right after they had launched. If you have never heard of them, Peerform are a new p2p lender based in New York intending to compete directly with Lending Club and Prosper. They have been operating now for over four months so I thought it was time to check back in with them. I spoke with their founder and CEO Mikael Rapaport recently to get an update.

Verifying Every Borrower

Already Peerform has received over $12 million in loan requests but is very picky when it comes to approving borrowers, so they have rejected 90-95% of those requests. They are taking an innovative approach to underwriting by verifying incomes for every borrower on the platform.

Peerform will request a signed IRS form 4506T (a form that authorizes Peerform to obtain your tax information) and then they will request your W2 forms. This is quite an onerous burden on borrowers and Rapaport admitted that they do lose a good chunk of people when they demand this information. But they want investors to feel confident in the information being presented by borrowers. This will certainly be a differentiator for Peerform and should help then attract investors to the platform.

Open for Borrowers in 13 States

Peerform is currently open for borrowers in the following 13 states: Arizona, California, Connecticut, Florida, Georgia, Illinois, Louisiana, Maryland, Michigan, Missouri, Ohio, Virginia, Washington. The plan is to keep opening new states as they expand. Their interest rates range from 4.56% (the lowest of any p2p lender) up to 27.08%. All loans are for 36-month terms and are originated out of an outfit called Cross River Bank based in New Jersey.

Innovations Coming for P2P Investors

They are now open to accredited investors in all 50 states, but there is a catch. The minimum investment is $50,000. However, they expect to lower that minimum some time in the next couple of months.

One thing that Rapaport mentioned that many investors will find curious is their plan to introduce tranches to p2p lending. Rapaport has a lot of experience working with structured securities in investment banking and so wants to bring some of these concepts to p2p lending.

These tranches will be divided up into different risk profiles (like CDO tranches). People who are risk averse will be able to invest in a low risk tranche (called senior tranches) and will hardly ever see a loan default but will also get the lowest interest rate of around 6%. Then there will be the more risky tranche where lenders may get around 20% but be much more susceptible to defaults and there will be also tranches in between these extremes. This is certainly an innovation for p2p lending and I will explain it in more detail when they introduce this concept to investors.

Peerform are moving along steadily and growing according to plan said Rapaport. They are still not trying to obtain any outside funding, preferring to grow their platform slowly. Eventually if they are really going to compete with Lending Club and Prosper then they will need to scale dramatically and that, as we have seen, takes a great deal of cash.

{ 9 comments… read them below or add one }

Charlie H August 5, 2011 at 12:55 pm

With a 50K min investment you’re talking about two groups of people; high net worth investors whose game is actually capital preservation, not growth and institutional investors who need to fine yield.

As they get up and running they will compete with LC and Pros for instructional investor interest, IMHO.

Dan B August 5, 2011 at 4:26 pm

So have they gone through SEC approval yet or is there going to be another prolonged & confidence sapping cessation of operations down the road?

Charlie h August 5, 2011 at 10:36 pm

Currently, all Peerform investors are accredited investors as defined by the U.S. Securities and Exchange Commission (S.E.C.) (cf Anyone interested in becoming a Peerform investor should contact us directly at [email protected]

Peter Renton August 6, 2011 at 7:22 am

@Charlie, Their focus right now is more on the institutional investor side, so this is a place where I expect they will compete strongly with Lending Club and Prosper when they get going.

@Dan, Everyone, including the people at Peerform are fully aware of the process that Lending Club and Prosper had to go through a couple of years ago. By offering their investments to accredited investors only they are circumventing the SEC (quite legally) for now. If they want to open up to all retail investors then they will need to go through the SEC registration process, but they could certainly do that while still operating as they do now.

Dan B August 6, 2011 at 6:16 pm

Peter…………I’m not sure I understand your explanation. As far as I know, when LC & Prosper went through their SEC process they stopped taking investors & borrowers. Are you saying that both companies could have continued operations during this time period had they any “accredited” investors? They had zero accredited investors between them? Zero institutional investors?

Peter Renton August 7, 2011 at 8:04 am

@Dan, I am not sure if Lending Club could have taken accredited investors during their quiet period. Back then the SEC was still trying to figure out what to make of p2p lending, so I am guessing Lending Club decided to err on the side of caution. As for Prosper they received the cease and desist letter from the SEC, which I believe meant no operations were allowed at all.

Now, I am not a lawyer but my understanding is that now any company can offer p2p lending investments to accredited investors without going through the registration process with the SEC.

RussG August 11, 2011 at 4:08 pm


It seems you’re saying that Peerform’s tranches are novel, allowing investors to select return rates and risk levels. Aren’t there mechanisms available to investors at other p2p sites that serve the same function? How is Peerform’s offering really any different in this regard?

Chris S December 18, 2011 at 11:36 am

Peter, per this August article above you wrote:

“This [tranches] is certainly an innovation for p2p lending and I will explain it in more detail when they introduce this concept to investors.”

Now that we are approaching the end of 2011, do you have any new information on this topic?

Just curious,

Peter Renton December 19, 2011 at 4:12 pm

@RussG, Sorry I never responded to your question. The big difference between Peerform’s tranche concept is that the 6% tranche will almost certainly receive no defaults at all – they are not just investing in 6% notes but the tranche concept means they will be missing out on defaults completely.

@Chris, I haven’t heard any more details about this concept but I will be happy to put you in contact with the management at Peerform. Just drop me a line if you want to investigate this further.

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