Your guide to peer to peer lending

Two New Companies Enter P2P Lending Space

by Peter Renton on February 21, 2011


Loanora is a very interesting new entrant in p2p lending. They are doing something completely new, at least in this country, and that is focusing on secured commercial rest estate loans funded by individuals. They are taking a narrow niche within commercial real estate – established franchises looking to secure funding to develop or refinance their property.

The loans are expected to be the $250,000 to $1,000,000 range with a term typically of three to five years. The interest rates on these loans will vary from 7-12% depending on the size and term of the loan as well as the credit profile of the borrower.

Loanora was founded by former Wall Street investment banker, David Elder, who has been involved in small business lending for more than 20 years. When I chatted with Elder last week he explained that there is a huge glut of commercial real estate loans coming due in the next year or so and many small to mid-size companies will struggle to refinance these loans. His company hopes to take a small slice of this pie.

Loanora will take between 50 and 100 basis points of each loan with expected investor returns to be in the 9% – 10% range. But unlike existing p2p lending he expects default rates to be very low. He will only lend to established franchisees that have multiple properties already. There is a minimum investment requirement of $5,000 per investor and when they open for business some time in the second quarter only California investors will be eligible. They expect to roll out nationwide eventually, but right now they have licensing in place just for California.

They are certainly a company to watch. They have a strong management team with a lot of experience in commercial lending. With expected investor returns of 9%, backed by property, they could become a viable alternative for p2p lenders looking for a more secure investment.

There is a new kid on the p2p lending block for student loans, It is the brainchild of college student, James Worboys, who saw the real gap in college financing brought on by the credit crisis on his campus. He thought there was an opportunity to help his fellow students obtain financing for their education through the peer to peer lending model.

James has partnered with web developer, Marc Schäffner-Gurney, a recent graduate of Rochester Institute of Technology with a degree in New Media Interactive Development. Together they have created the site, which is getting ready to accept student loans for the fall semester.

How it Will Work

  • Students must sign up for loans on their site with an adult cosigner and the loan will only be approved for listing if the cosigner has a decent credit history.
  • Students must provide a complete school history so investors can some idea as to the character of the student.
  • There is a 2.5% origination fee paid by the student and a 0.25% loan servicing fee, also paid by the student.
  • Interest rates will be capped at 9% and will be the same for borrower and investor.
  • Money will be paid directly to the school, not the student.
  • Investors have a minimum investment amount of $500 per loan.
  • Investors from any state may invest but they must be accredited investors.
  • There is a maximum four-year moratorium on collecting payments from borrowers to allow the student time to graduate.

The focus of will be on the college alumni community. They will be allowing and encouraging a lender-student relationship if both parties are open to it. They see it as a way to allow wealthier graduates, rather than just donating money, to directly help the students at their alma mater.

It probably won’t have much interest for the wider p2p lending community with interest rates capped at 9%. But many people maintain strong ties to their alma mater and this is one way they can give back in a real and measurable way.

{ 7 comments… read them below or add one }

Wiseclerk February 21, 2011 at 4:02 pm

Noticed the Leonora website a few days ago. But was detered by this message:
“The Loanora web site is solely intended to be used for informational purposes as an introduction to the business model for potential investors and borrowers. Loanora is not offering investments in loans at this time.”

So the website isn’t just an advertisement for an offline business model?

Aaron February 21, 2011 at 4:12 pm

Invest in My Education sounds interesting, but I’m not exactly sure that it will take off in any measurable way. For undergraduates, there are an unbelievable amount of programs, grants, and government subsidized loans available. already has a lot of cards stacked against them. Something like this sounds more viable for graduate students that are having trouble getting funding for Ivy League schools.

I have a quick question to ask. Are these loans categorized under a student loan statute where the note cannot be discharged in bankruptcy? If this is the case, then why do you need an adult co-signer? If this is NOT the case, then how is this any different from getting a student loan via Prosper or Lending club?

I find this fairly troubling also because the investor will more than likely not see any return until after the student graduates and begins paying off the loan. What kind of loan duration are we talking about here? 10 years? 15? 20?

I’m sorry if this is a downer, but I just can’t see how this could possibly be viable when you are competing with government subsidies and bank juggernauts like Sallie Mae that are willing to offer a lower rate due to high volume. Normally I am optimistic about social lending, but this one is a HUGE underdog in my book. I certainly wish them luck.

Peter Renton February 21, 2011 at 6:29 pm

@Wiseclerk, Loanora appears to be a real p2p lending site. They are still developing the site and getting all their licensing in place – that is likely why that message is still in place. The web site should go live for investors some time in the second quarter.

@Aaron, I am not sure how these loans are categorized and what implications a bankruptcy would have. I have sent the management of an email requesting a response to this and your other questions.

Dan B February 22, 2011 at 4:56 pm

I’ve spent the last few minutes pronouncing Loanora in a number of ways & I’m still not getting it.

Jack March 1, 2011 at 10:34 am

I just spent time on Loanora site….seems they are trying to do what is already doing, except provides loans secured by both commercial and residential loans.

Kaushik October 19, 2011 at 1:35 pm

I agree with David Elder that the glut of commercial real estate loans coming due over the next few years will be welcome by opportunistic real estate investors. Good target market for loans.

I further agree that lending to experienced franchisees that already have multiple properties is a sound idea. In principle, good underwriting.

However, their million dollar loan limit and 7 year term suggests they are trying NOT to attract loan applications for distressed hotel assets or class A office buildings. Which is a pity. Because despite being aware of this opportunity and having good underwriting sense, investors will not get a piece of the pie but instead be left to read about how Blackstone and 10 other private equity groups made a killing on hotel assets acquired from 2012 to 2015.

Peter Renton October 24, 2011 at 10:38 am

@Kaushik, You are right that Loanora is not focusing on hotel assets or Class A office buildings. They have a very targeted niche of commercial real estate for franchises.

I would love it if someone launched a p2p lending company that specialized in other areas of commercial real estate but there is no one I know of who is doing that. So individual investors are left to invest in REITs or, as you say, just read about how well others are doing.

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