The big two p2p lending platforms for retail investors, Lending Club and Prosper, each have a piece of news this week that we should know about. Both pieces were well covered in Crowdfund Insider with links to follow.....
Earlier this year, Prosper announced a $5 billion securitization deal with numerous hedge funds and investment managers including the Soros Fund and Credit Suisse bank. While retail investors don't participate in securitizations, it is important as a sign of confidence in a lending platform. Aside from these firms showing they are confident in Prosper's ability to perform, large investors like this give Prosper the opportunity to try to scale up like Lending Club has done.
The first securitization under this new agreement is expected to close before the end of the month for $450 million. The securitization got 3 preliminary ratings from rating agency Kroll and those ratings are A, BBB, and B+. Crowdfund Insider's coverage describes it as a mix of loans with 43% A grade, 31% B grade and 10% C grade.
Large investors are a good thing for Prosper and good for us. It gives us more opportunity to invest in more loans over time and helps maintain the viability of the platform for investment.
Lending Club Increases Investor Minimums
Lending Club (this is an affiliate link if you sign up to invest at no cost to you) just announced this week that they are increasing their minimum to open an account for retail investors. All new Lending Club accounts now have a minimum of $1000 required to open. LC states the purpose of this is to help small investors avoid concentration (meaning investing in too few loans) and that 98% of accounts with at least 100 notes in them show a positive return. Let's be real, it's also to lower their administrative costs for retail accounts but at least it is still a relatively small (for an investment account) minimum requirement. And 100 notes at a minimum of $25 per loan still requires a $2500 commitment to the platform.
The Prosper news is good news and the Lending Club news is as well, as long as it doesn't price out too many new smaller investors with the new minimums.