Author Topic: Business loans  (Read 11501 times)

hoggy1

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Business loans
« on: December 20, 2014, 01:16:51 PM »
How do I get to see LCs small business loans?
Steve

Fred93

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Re: Business loans
« Reply #1 on: December 20, 2014, 06:59:51 PM »
How do I get to see LCs small business loans?

I suspect you have to call LC and sound "institutional" as you ask.

Meanwhile, I'm investing in small business loans via http://www.dealstruck.com .

hoggy1

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Re: Business loans
« Reply #2 on: December 21, 2014, 07:26:12 AM »
I have looked at them before but I can't find anywhere on their site for investors to log in, sign up, or do anything?
Steve

Fred93

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Re: Business loans
« Reply #3 on: December 21, 2014, 09:18:10 AM »
I have looked at them before but I can't find anywhere on their site for investors to log in, sign up, or do anything?

Investor inquiries link at the bottom of the main page.  You have to contact them one way or another.  They are limited to accredited investors, so there's some paperwork to fill out. 

AnilG

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Re: Business loans
« Reply #4 on: December 21, 2014, 08:04:47 PM »
Fred,

What other business loan platforms have you tried? Any pros-and-cons? I am looking to diversify into business loan so researching business loan platforms.

Thanks.


Investor inquiries link at the bottom of the main page.  You have to contact them one way or another.  They are limited to accredited investors, so there's some paperwork to fill out.
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Fred93

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Re: Business loans
« Reply #5 on: December 21, 2014, 11:21:03 PM »
What other business loan platforms have you tried? Any pros-and-cons? I am looking to diversify into business loan so researching business loan platforms.

I have some money with DealStruck and some with FundingCircle.  (More at DS than FC.)  Both have a web-based marketplace running.  Both marketplaces are limited to accredited investors.   Signing up is not so automated as LC & P.  You have to talk to a person to get started.  Both have taken most of their money so far from institutional or big individual investors (ie not thru the marketplace).  The web marketplaces are in their infancy, and at this point frankly experimental.

FC has a "feeding time" at 1PM on MWF.  Its usually one or two loans.  They seem to be trying to make the marketplace work like LC & P, ie letting the investors actually fund the loans.  They're throttling loans into the marketplace, so that with the small # of marketplace investors the loans will get bought up within a day or two.  DS on the other hand, puts up batches of loans every week or two and then lets them sit there for a week or two.  These loans have already been funded internally, so DS isn't in so much of a hurry, and doesn't worry whether loans will 100% fund on the marketplace, as borrowers aren't waiting.

This may sound unworkable, but if you have more money than can be satisfied from the marketplace, both have structures to take your money into a fund and handle the details for you.

FC is bigger and farther along in their development, if you count their UK operation.  In the US they are still tiny.  FC certainly gets much more press.  I think that's partly due to their larger UK operation, and partly due to VC involvement.  (VCs drive publicity machines.)  I get the impression that the UK and US operates are completely separate, with the US operation not benefiting at all from the maturity of the UK operation.  (The US operation was an acquisition.)

I have found better rapport with the management at DealStuck.  I walked into their offices and met the execs.  I found them happy to talk with a visitor, easy to work with, and happy to explain things.

Everything DS does makes sense to me.  FC on the other hand, surprises me often, sometimes making loans with very low coverage ratios, etc.  Sometimes they've given me reasonable explanations based on some of the business numbers, but I'm not completely comfortable yet.  I don't claim to be an expert on business loan underwriting.

For now I'm working with both, as I learn.  Neither has a big enough loan book yet to allow one to compute good statistics on their performance.  (Not counting FCs UK loans, because I really feel different countries have different numbers, different underwriting issues, etc.)

You will go thru learning new vocabulary, just as we did when LC and Prosper started.  Business loans have their own lingo.  And of course, also as with LC and P, they aren't always consistent in their use of the lingo.  When I point out inconsistent wording which has confused me horribly, they often respond with something like "oh, we knew what we meant".  They're too close to this stuff so don't realize when they write things that will confuse normal people.

AnilG

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Re: Business loans
« Reply #6 on: December 21, 2014, 11:52:15 PM »
Thanks for the detailed explanation on Dealstruck and Funding Circle. I have a few clients who are lending on Funding Circle. Personally, I am approved on StreetShares but I haven't lent for business loans yet. Without the data, I am not that comfortable lending out money just on words of the platforms. Platforms have been reluctant to provide data and details on their underwriting process. They all give the reason that they don't have enough volume and history which is true but they don't event want to share data on the applicants that they declined. I will reach out to Dealstruck to see how much they are willing to share data and underwriting process.


I have some money with DealStruck and some with FundingCircle.  (More at DS than FC.)  Both have a web-based marketplace running.  Both marketplaces are limited to accredited investors.   Signing up is not so automated as LC & P.  You have to talk to a person to get started.  Both have taken most of their money so far from institutional or big individual investors (ie not thru the marketplace).  The web marketplaces are in their infancy, and at this point frankly experimental.

FC has a "feeding time" at 1PM on MWF.  Its usually one or two loans.  They seem to be trying to make the marketplace work like LC & P, ie letting the investors actually fund the loans.  They're throttling loans into the marketplace, so that with the small # of marketplace investors the loans will get bought up within a day or two.  DS on the other hand, puts up batches of loans every week or two and then lets them sit there for a week or two.  These loans have already been funded internally, so DS isn't in so much of a hurry, and doesn't worry whether loans will 100% fund on the marketplace, as borrowers aren't waiting.

This may sound unworkable, but if you have more money than can be satisfied from the marketplace, both have structures to take your money into a fund and handle the details for you.

FC is bigger and farther along in their development, if you count their UK operation.  In the US they are still tiny.  FC certainly gets much more press.  I think that's partly due to their larger UK operation, and partly due to VC involvement.  (VCs drive publicity machines.)  I get the impression that the UK and US operates are completely separate, with the US operation not benefiting at all from the maturity of the UK operation.  (The US operation was an acquisition.)

I have found better rapport with the management at DealStuck.  I walked into their offices and met the execs.  I found them happy to talk with a visitor, easy to work with, and happy to explain things.

Everything DS does makes sense to me.  FC on the other hand, surprises me often, sometimes making loans with very low coverage ratios, etc.  Sometimes they've given me reasonable explanations based on some of the business numbers, but I'm not completely comfortable yet.  I don't claim to be an expert on business loan underwriting.

For now I'm working with both, as I learn.  Neither has a big enough loan book yet to allow one to compute good statistics on their performance.  (Not counting FCs UK loans, because I really feel different countries have different numbers, different underwriting issues, etc.)

You will go thru learning new vocabulary, just as we did when LC and Prosper started.  Business loans have their own lingo.  And of course, also as with LC and P, they aren't always consistent in their use of the lingo.  When I point out inconsistent wording which has confused me horribly, they often respond with something like "oh, we knew what we meant".  They're too close to this stuff so don't realize when they write things that will confuse normal people.
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

RazzleDazzle

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Re: Business loans
« Reply #7 on: December 21, 2014, 11:58:57 PM »
First time poster, but I found Fred's post to be comprehensive and wanted to chime in.

I have had the pleasure personally knowing folks in the industry that work with them (for example, I know point person of their software integration with Yodlee etc). Really like the staff working at DS. I personally haven't had the chance to invest via DS though - reason is below.

Issue with business loans is the domain knowledge required depending on the type of business. LC and Prosper have refined their models on consumer debt refi. Business lending underwriting requires specialized knowledge of business risk, their cashflow and their history. It's more difficult to nail a good lending model and it is different for disparate businesses (imagine a few businesses that boom in christmas time but have off months in January etc - their cashflows and thus ability to pay is different).

I do not want this to sound like advertisement, but I have been part of lending group that is now venturing into marketplace model. We are very close to launch out of beta. I will not post website here but folks can PM me and I can go into details. Been busy private lending as it is in the comfort zone and haven't had real need to venture out, though I think I will invest in DS soon. I do not consider them our competitors.

Great to see people diversifying. Can't go wrong with DS. Another good one would be Brendan Ross at Direct Lending, though I believe its a fund with minimal requirement of 100K to get in (and I think there is a waiting line).

Any of you guys planning on attending Lendit 2015?

P.S. Anil, you can call me and I can go into our underwriting process. Though the other platforms aren't incorrect - simply not enough volume to make statistical models. Still, we have 7+ year history so I can give you a certain sense. I have a feeling though that I will see PeerCube @ Lendit so see you there!
« Last Edit: December 22, 2014, 12:02:38 AM by RazzleDazzle »

core

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Re: Business loans
« Reply #8 on: December 22, 2014, 04:42:22 AM »
Any of you guys planning on attending Lendit 2015?

With advertisers like this, who need real users?

Didn't we just get over 2014?  There should be an understanding here.  No adverts for Lendit xxxx until the summer solstice or something.

RazzleDazzle- You would have come out ahead just dropping your coin in the donation box at the door, chap.

rawraw

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Re: Business loans
« Reply #9 on: December 22, 2014, 06:50:56 AM »
I would be hard pressed to invest in any business loan based on statistical models for some issues mentioned in Razzle's post.  Underwriting isn't rocket science, but it isn't easy to standardize either.  Like I've said before, business loans are completely different and I personally don't trust any of the business lenders I've researched so far (haven't done many, since I'm not accredited).  Often there is a reason why banks don't do the loans they claim the banks are just callously rejecting.  Like OnDeck lending 90% on inventory?  Give me a break.
« Last Edit: December 22, 2014, 06:53:31 AM by rawraw »

RazzleDazzle

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Re: Business loans
« Reply #10 on: December 22, 2014, 09:49:35 AM »
Any of you guys planning on attending Lendit 2015?

With advertisers like this, who need real users?

Didn't we just get over 2014?  There should be an understanding here.  No adverts for Lendit xxxx until the summer solstice or something.

RazzleDazzle- You would have come out ahead just dropping your coin in the donation box at the door, chap.

:) Core you along with rawraw and a few others have been the most prolific posters and probably the sharpest. Always appreciate your posts. You are correct, I should have abstained. I was curious to know if investors posting here have ever attended Lendit. And it is better to be suspicious ("if its online it must be true!") - for the record I did follow the hilarious thread on some Eastern European/Russian(?) pushing real estate platform?

Also, ditto rawraw. Plenty of loan pushers online/offline for that matter. You are correct, but banks have increased their "rejection sensitivity". Who cares though, they came right back (see Titan bank) and are investing in those same loans via OnDeck, Kabbage etc. Trick for them is leveraging quick underwriting. Still, they underperform for reasons you mentioned.

Anyways, will try contributing to threads with questions on business loans to the best of my ability.

rawraw

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Re: Business loans
« Reply #11 on: December 22, 2014, 10:46:42 AM »


Also, ditto rawraw. Plenty of loan pushers online/offline for that matter. You are correct, but banks have increased their "rejection sensitivity". Who cares though, they came right back (see Titan bank) and are investing in those same loans via OnDeck, Kabbage etc. Trick for them is leveraging quick underwriting. Still, they underperform for reasons you mentioned.

Anyways, will try contributing to threads with questions on business loans to the best of my ability.
Yea, I think banks are better suited to fund business loans via these platforms because they have the "education."  If I was CEO of a bank right now, I'd be evaluating the ability to engage in some of these platforms -- the main problem is the platform's risk, unless you actually have the loan on your books.  If you don't know much about credit, lots of things sound good (hey I have 90% LTV on inventory.  If it goes back, I can liquidate and be OK!).  But people who do it often realize that's not how things work out. 

RazzleDazzle

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Re: Business loans
« Reply #12 on: December 22, 2014, 03:06:43 PM »
Ha! LTV of 90% - that's an automatic rejection at our platform.

Think diligent investors can still avail business loans. The "lingo" is a bit different but not so much from real-estate crowdfunding platforms. They have debt based offerings. Its a similar.

Agree though, experienced investors only, preferably one's that have a bit of domain knowledge in the type of business getting funded. Fred has had (good?) success per his post above.


rawraw

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Re: Business loans
« Reply #13 on: December 22, 2014, 03:35:28 PM »
Ha! LTV of 90% - that's an automatic rejection at our platform.

Think diligent investors can still avail business loans. The "lingo" is a bit different but not so much from real-estate crowdfunding platforms. They have debt based offerings. Its a similar.

Agree though, experienced investors only, preferably one's that have a bit of domain knowledge in the type of business getting funded. Fred has had (good?) success per his post above.
No offense to Fred, but he has had success in a time of low levels of problem assets.  The real test to underwriting is how it performs in the down markets.

RazzleDazzle

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Re: Business loans
« Reply #14 on: December 22, 2014, 04:57:18 PM »
True but the same can be said for LC and Prosper consumer debt financing.

Agree with more nuanced and granular effort needed in business loans.