Your guide to peer to peer lending

New P2P Lender to Take on Lending Club and Prosper

by Peter Renton on March 25, 2011

A new peer to peer lender, Peerform, launched in limited beta last week. Formerly known as Lendfolio, Peerform is the first company to launch in the U.S. in several years looking to go head to head with Prosper and Lending Club.

They are taking a slightly different approach in getting started. With a management team that has a background in the New York banking and hedge fund industry they have access to some institutional investors right off the bat. So, while they opened last week for borrowers, they are currently closed for investors. They are using mainly institutional money initially to fund borrower loans. If you are what the IRS calls an accredited investor then you can request an invitation to invest from Peerform by emailing them.

Launched for Borrowers in Five States

As far as borrowers go, they are open in five states: California, Florida, Illinois, Louisiana and Ohio. The process for borrowers is very similar to that of Lending Club and Prosper. Borrowers will need a good credit score (660 or more) and decent credit history before they will be considered for a loan on the platform. Loans will be accepted for amounts of $1,000 to $25,000 with rates starting at 5.84%. All loans will be for a three year term.

The investment process will be similar to Lending Club and Prosper with a choice between an automated investment plan and hand picking loans. Either way investors will be able to spread their money among many loans. There is no word, though, on when they will open to individual investors. But they told me their intention is to become a true peer to peer lender in the future.

Peerform has raised just over $1million in angel financing and they are not currently seeking venture capital money. They are looking to grow the business slowly but steadily. They are fully aware of the hurdles of SEC registration and are prepared to take on that process when the time is right.

As Many as 20 P2P Lenders

I welcome Peerform to the peer to peer lending industry. We need more than just the two players we have currently. The founders of Peerform believe that as peer to peer lending matures it should be able to sustain many competitors. In the US market alone there should be space for at least 20 companies to thrive within a few years.

Stay tuned for further developments from Peerform. You will read about it here as soon as they open for average investors. They are certainly a company to watch.

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Dan B March 26, 2011 at 12:48 am

What I don’t understand is why don’t or can’t these companies jump through all the SEC hoops right as soon as they open for business…………… opposed to doing it months down the road just as it seems like the momentum is about to kick in.

Also……..what happened to Loanio? Haven’t they been in “quiet period” since middle of 2009?

Peter Renton March 26, 2011 at 9:07 am

@Dan, My guess is that these companies want to get somewhat established first before going through the SEC hoops simply because that is a huge undertaking costing millions of dollars. The way that Peerform is approaching this should mean they will be able to do SEC registration while still operating as normal because they are only open to accredited investors right now.

I have no idea what happened to Loanio, but it has been well over two years since they entered their quiet period. So one must assume that the quiet period is likely permanent.

Dan B March 26, 2011 at 1:26 pm

Literally millions of dollars? That is both shocking & disturbing.

Dan B March 26, 2011 at 1:33 pm

@Peter……..If Loanio has disappeared, it’d be interesting to find out if the payments from the notes continued to be forwarded to the investors as usual or if they just became part of the assets of Loanio & the investors got left out in the cold.

Peter Renton March 26, 2011 at 3:09 pm

@Dan, Yes the hoops the SEC make these companies go through make it challenging. This is the main reason why we have seen no new sustained competitor in peer to peer lending since Lending Club launched in 2007.
Good pont about Loanio, I will try and do some digging to see what I can find.

C. Jensen March 27, 2011 at 10:18 am

I’d like to to know about what happened to Loanio notes as well. Similarly, I recently discovered this about Prosper and I find it a bit disturbing (

‘…in the event Prosper becomes insolvent or declares bankruptcy, investors in Prosper notes may lose all or part of their investment even if the underlying borrower continues to pay.’

Is anyone aware if LendingClub has a similar policy?

C. Jensen March 27, 2011 at 10:35 am

Update! I took a look at LendingClub’s prospectus ( and noticed this on page 21:

“If we were to become insolvent or bankrupt, an event of default would occur under the terms of the Notes, and you may lose your investment. ”

In retrospect, this isn’t too surprising. As long as these companies keep growing, it will be OK. It does seem like LendingClub has most of the momentum now though which makes me a little concerned about Prosper.

Any thoughts?

Wiseclerk March 27, 2011 at 10:37 am

Loanio is no longer pursueing p2p lending
CEO told me that the business will be discontinued

Don’t know what happens to the very few existing loans (I assume those will be serviced till end)

Dan B March 27, 2011 at 1:50 pm

Wiseclerk……….. Of course they will be serviced, by someone. THE QUESTION is whether the investors who invested in those notes will still get those payments. The answer to that question may sound obvious but it is not. As I’ve pointed out in the past & the above posters today, there is no precedent whatsoever as to whether these “payments” & these “notes” will be treated as being independent & separate from the assets of the company in question or not. This is crucial because one can only assume that the companies that go under will do so heavily in debt. I don’t know about Loanio, but the notes that are being offered by Prosper & Lending Club are in fact notes of the respective companies themselves…………..which could potentially make us, the investors, at the back of a long queue in any dissolution………………….and that is the real danger.

However, none of this information is new, & both LC & Prosper have been operating under these conditions for several years. The $64 question is whether the p2p idea can be profitable & be profitable under varying interest rate environments. If it is then I think we as investors have little to fear as the amount of money being burned to support these operations until an eventual profitability is not enormous. If on the other hand profitability proves elusive then I for one don’t intend to be around when the crap hits the fan.

Peter Renton March 28, 2011 at 10:42 am

@C., This is a risk that we all take. @Dan is right there is no precedent about what would happen if LC or Prosper went under. I expect it wouldn’t be as simple as just transferring all the notes to a third party.

@Wiseclerk, Thanks for sharing about Loanio, I want to try and find out more about what happened to the loans there.

@Dan, While none of this is new to people who have read the prospectus or followed along closely to the comments of this blog, I suspect most people are completely in the dark about it. I am still trying to dig further on this one and will report back if I find out anything concrete.

mikeandcat March 28, 2011 at 1:26 pm

I invested in three loans with Loanio and a few months ago they just quit servicing them. I have posted inquiries on the site but get no response.

Peter Renton March 28, 2011 at 3:40 pm

@mikeandcat, Thanks for the response. That is interesting. I wonder what happened a few months back. According to @wiseclerk it sounds like some time last year they abandoned the SEC registration and essentially gave up on making a go of their business. But their web site or blog mention nothing about this. But maybe that is when they stopped servicing the loans.

Dan B March 28, 2011 at 5:29 pm

@Mikeandcat…………Do you mean that they stopped paying you or do you know for a fact that they stopped servicing the loans?

@Peter……I think the Loanio info is beyond just “interesting”, don’t you ? After all this is an example of the doomsday scenario that myself & others have brought up today & in the past, is it not??

Peter Renton March 28, 2011 at 5:56 pm

@Dan, I think it is interesting but before we jump to conclusions we need to make sure we are comparing apples to apples. I started a thread on about this and Ken from Lendstats responded. He also invested in three loans and had the same experience as @mikeandcat. He stopped receiving payments on his loan. Ken indicated that he thought that Loanio only ever issued a handful of loans (around 10 he thought) and they never registered with the SEC. So did they have the same backups in place that Prosper and Lending Club have. It is probably doubtful. I am trying to get a hold of the CEO of Loanio because I think he would provide some insight.

Dan B March 28, 2011 at 6:17 pm

@Peter…………..Once again, because someone stopped receiving payments does not necessarily mean that someone else stopped servicing the loan………..i.e. collecting the money. Yes, these are apples & oranges, but I don’t think you’re seeing the big picture here because you’re stuck in the “mechanics” of the question. Specifically you’re suggesting that maybe the investors aren’t getting paid because what?? Loanio decided since they were going out of business they’d give the borrowers a break & stop collecting payment? Is that what you’re suggesting? I mean please!

A more likely explanation is Loanio went out of business & the loans became assets of the company & were liquidated & the investors got screwed. And THAT is the doomsday scenario that we all fear, is it not?

Peter Renton March 29, 2011 at 10:07 am

@Dan, What I am suggesting is that we don’t know what happened. We do know that investors stopped receiving their money but we have no idea what happened to the loans or the borrowers.

While the scenario you paint is certainly a possibility, maybe even a likely one, but does that mean the same thing would happen if LC or Prosper went out of business? Look, I am concerned about it as well, but I am not going to jump to any conclusions based on the limited information we have about Loanio.

Dan B March 29, 2011 at 10:54 am

@Peter…….No it doesn’t automatically mean that the same thing would happen if Prosper or LC went out of business, BUT it might set a bad precedent that would increase the likelihood of such an outcome.

Incidentally I’m not remotely worried that loans will stop being serviced. Also, I’m not suggesting that something like this would happen if LC or Prosper were to go under. If I were, I’d have run for the doors some time ago.

In fact I can think of a number of small “safeguards” that would make the doomsday scenario unlikely. But arguing here in that fashion would be arguing both sides of the same argument & I fear that it would sound a bit wishy washy. I think that the one thing we can all take from this is that it is unwise to be a lender in new p2p companies before they get clear their regulatory hurdles regardless of whether the companies say they’re exempt from it or not. The company that comes to mind is the one from Louisiana but it would unsportsmanlike of me to say any further given my previous verbal evisceration on their business plan.

Peter Renton March 29, 2011 at 3:28 pm

@Dan, I think the space is a bit more mature now than it was when Loanio started – at least most companies know what they are getting in for when it comes to compliance. But you make a valid point. It is far riskier to invest in any new company than it is to invest in established p2p lenders such as Lending Club or Prosper.

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