Professional Documents
Culture Documents
"As major financial institutions stumble or fail completely, online lending sites…are on the rise.“ CBS News
"...the increased efficiency of cutting out the banks“ The New York Times
Source: CBS News, New York Times, Lending Club Raise a hand to
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THE GREAT RECESSION
Peer-to-Peer Lending
• Access to a Large Pool of Lenders
• Convenient Application Process
• Competitive Rates (8-12%)
• Sophisticated Risk Assessment
• Quick Funding Decisions
• Low Default Rates
• Transparency
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THE GREAT RECESSION
A Short History & Some Supporting Research
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Source: Interview, 5/27/10 Jesse Jacobs, owner 6
THE GREAT RECESSION
Finance Options
Prior to seeking financing Jacobs reduced labor
expense, eliminated the least profitable menu
items and bartered for staff morale-boosters in
lieu of bonuses. He created customer coupon
incentives, introduced a value tea and brunch
and marketed aggressively online. He also
shortened the inventory cycle to just-in-time
reducing cash on the shelf by $40,000.
Starting in 2008 he asked key vendors to
extend payment terms and consider converting
receivables to debt. Several converted about half
their receivables at 7% for six months.
He next sought $10,000 from private investors
and paid 8% on $50,000 in short-term loans.
Jacobs, who qualifies for AMEX Plum, also took
advantage of their offer to extend payments for
90 days to a maximum of $30,000.
It was only after all these options had been
visited that Jacobs turned to Prosper with a
request to borrow $20,000.
Debt Consolidation
Currently the majority of Prosper
(60%) and Lending Club (61%)
borrowers are seeking financial relief
through debt consolidation. Small
businesses comprise the next highest
loan category at 12 percent.
Established Business
On Deck Capital offers borrowers
larger sums. However they must
have operated at least one year at a
non-residential business office, which
discourages debt consolidators.
Source: www.ondeckcapital.com
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THE GREAT RECESSION
On Deck Capital
competes with both
Merchant Cash
Advance programs and
traditional lenders.
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THE GREAT RECESSION
Source: New York Times, May 5, 2010. Providing Loans based on Cash Flow, Not Credit Score.
Contour Venture Partners, First Round Capital, Khosla Ventures, RRE Ventures and Village Ventures Raise a hand to
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THE GREAT RECESSION
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