Blackhawk Investments is opening the peer to peer lending space up to real estate investors. Blackhawk Investments allows borrowers looking for real estate loans to enlist on their platform and request a loan; upon qualifying they will be matched to interested investors. Lenders can enroll on their platform, browse the loan request and choose where to invest their money. Blackhawk Investment can complete this process in a matter of days for borrowers and can help investors earn a return of 5-12%.
Peer to peer lending has several financial advantages including higher returns and better interest rates at the same risk as a savings bank. Alongside the financial advantages, peer to peer lending also has enormous social advantages as well.
Peer-to-peer lending differs from conventional lending because the investor lends to an unrelated peer without having to go through an intermediary such as a bank or financial institution. The absence of an intermediary helps provide lower interest rates to the borrower and gives the investor the option to capture higher interest rates than what a financial institution has to offer. Peer-to-peer lending utilizes online transactions as the primary method of lending. Just like a bank, the use of the internet helps inform borrowers about the loan such as its interest rates and risk categories. The difference however is that the borrower can access this information in the privacy in his or her own home or office. Peer-to-peer loans provide a financial lifeline for borrowers locked out from traditional lending institutions.
The traits of peer-to-peer lending are matching the right loan application to the profile of the investor or lender based on their investment history. This helps to narrow the options of the peer investor in choosing the right loan to fund based on the investment options. In other words, peer-to-peer loans are the equivalent to matchmaking sites such as eHarmony.com. Most peer-to-peer loans operate in the same manner as a credit card because they are a form of unsecured debt. If the borrower defaults and misses payments, there is not a chance for the repossession of assets. Instead, there would be a rejection for new loans or increases in credit lines. Commercial loans are generally asset-based, or use property such as real estate, housing, and vehicles. These loans are secure but require a down payment of a specified percentage of the purchase price. If the borrower defaults or misses a certain amount of payments, repossession and/or foreclosure of the assets may occur. Finally, peer-to-peer loans provide solid returns to investors because they earn better direct results and they carry a low financial volatility due to the absence of the traditional financial institution.
The two largest peer-to-peer lending companies are Lending Club and Prosper. These companies function by protecting the financial privacy of both the investor and the borrower. Additionally, they commit themselves to transparency by giving requested information to borrowers. Since the implementation of new lending regulations in reaction to the financial crisis of the late 2000’s, financial institutions may reject borrowers with low FICA scores and unacceptable tax returns. As a response, peer-to-peer loans help locked out borrowers with low FICA scores due to situations regarding divorce, illness, foreclosure, self-employment, lack of work experience, nationality status, and/or a combination of the above.
Blackhawk Investments differs from other peer-to-peer loan companies because these loan requests represent investment opportunities secured by real estate, which consumer loans lack. Traditional banks usually charge low interest rates but they have strict credit guidelines; usually resulting in frequent rejections. Hard money loans carry high interest rates and require significant equity from the borrower. Blackhawk Investments prescreens all loan requests from borrowers through its automated matching algorithms, which in return, procures letters of interest from investors. The goals of the company are to build strategic partnerships with other peer-to-peer companies and promote customer empowerment through their online platforms. In conclusion, the main focus of Blackhawk Investments is to help expand the financing options and market knowledge of the borrower. Furthermore, peer investors will learn how to make self-directed investments in commercial notes yielding 6%-12% annualized secured by real estate.
By Robin Wauters
Union Square Ventures in particular is an interesting investor for auxmoney, as it has also backed a US-based company in the same space, namely Lending Club. Both Index Ventures and Union Square are investors in loan marketplace Funding Circle to boot.
On auxmoney’s online marketplace, private consumers can borrow directly from private investors, effectively cutting out traditional banks – and enabling consumers to avoid the high rates banks charge – for personal loans.
The company was originally founded in 2007 by a trio of German entrepreneurs (Raffael Johnen, Philipp Kriependorf and Philip Kamp).
Since the, auxmoney is said to have facilitated over 11,000 loans worth 45 million euros ($58.5 million) to private borrowers, over 50 percent of which were issued in the last 12 months.
Auxmoney currently boasts over 500,000 members.
The team has grown to 30 employees, and auxmoney intends to use the fresh cash to boost its product and expand its workforce.
Says Johnen, who serves as the company’s CEO:
“We are about to witness a major shift in consumer behaviour towards peer-to-peer lending. auxmoney is at the forefront of this development. With our new partners on board, we are ready to turn crowdlending into a recognised, exciting and integral part of Germany’s consumer finance landscape.”
The website P2P-Banking.com caught wind of the investment earlier, which apparently closed at the end of last year, and notes that Index and Union Square now hold 21.8 percent of the shares.
The three co-founders of the company reportedly still hold 40.4 percent of the business – the remainder is held by a variety of seed investors (mainly from Austria and UK).
If the information is accurate, the investment from the two major venture capital firms valued auxmoney at more than $55 million.
by Peter Renton
Jilliene Helman is on a mission. She wants to make real estate investing simple and accessible to everyone. She wants investors to be able to share in the upside of real estate investing without the “hassle of dealing with tenants, toilets and trash” as she puts it.
Helman saw the success of the p2p lending model at Lending Club and Prosper and thought she could apply similar principles to real estate. Together with her co-founder, Justin Hughes, they recently went through the TechStars/Microsoft accelerator program, which helped them hit the ground running. They launched their site, www.realtymogul.com to the public just last week.
By Roben Farzad
Peer-to-peer lending most immediately brings to mind the largely feel-good act of extending small-time money to small businesses and individuals with quirky projects—a curiosity at best and no threat to the lending hegemony of big banks. What’s less appreciated is how successful peer-to-peer lending platforms such as Prosper and Lending Club have been in connecting wholesale numbers of individual lenders and borrowers. Yes, they still allow you to go out there and pick a proposition to invest in. But these successful, venture capital-backed startups also offer portfolios of loans that have quietly registered four to six years of solid returns with low defaults.
The more that record holds, the more these diversified offerings represent an asset class of sorts within fixed income.
The upshot: Those earning little-to-nothing on their cash can more easily be connected to people who are willing to give them an above-market rate of return for capital, with no intermediary bank needed. “It’s absolutely the perfect arbitrage between countless frustrated low-yield investors and countless desperate small business owners hungry for financial survival and growth,” says Robert Lamb, a professor of finance at New York University.
Renaud Laplanche is the founder and chief executive officer of Lending Club, which has been at least doubling its loan originations every year since it started in June 2007 at the onset of the financial crisis. He says he came up with the idea when he realized he was paying 18 percent on his credit-card debt while the issuing bank was paying out 2 percent to depositors. The upstart venture, which just added former Treasury Secretary Lawrence Summers to its highly name-dropable board, made $718 million in loans last year and is expecting to do $1.5 billion this year. That’s not JPMorgan Chase (JPM) or Bank of America (BAC) money, to be sure, but consider the Internet’s accelerant nature and you realize how disruptive the concept could be to the big banks’ lending monopoly (which they flex through credit cards and branch-made loans).
“We’re benefiting from the current environment as a better alternative,” says Laplanche. “We have a pretty strong cost advantage. Plus, the banks have been under a lot of pressure to improve their reserves, much of which were depleted during the crisis.” Even if the banks feel their oats and begin lending again, he says, Lending Club benefits from its operating and marketing costs, which on average represent 2 percent of the dollar figure of its total loans outstanding, compared with three times as much for the big banks.
Lending Club mitigates risk—its default rate has remained in the low single digits throughout the financial crisis—by serving prime and superprime borrowers and turning down 90 percent of loan applications. A key value proposition to investor-lenders: Not only does the peer-to-peer service’s platform crunch and grade individual creditworthiness, it lets those with cash to lend diversify their investment across hundreds of notes. They receive monthly payments, which can either be banked or reinvested. Amazingly, since Lending Club opened in 2007, no investor with 800 notes or more has lost any principal. Depending on the loan grade picked by investors, Lending Club has delivered average annual returns ranging from 5.8 percent to 12.4 percent.
Prosper, perhaps Lending Club’s main rival, has similarly posted nice risk-adjusted returns across its loan portfolio. Its management and board are studded with venture capitalists and Wall Street names.
The value proposition to borrowers, obviously, is access not just to capital that the banks aren’t willing to lend them, but capital at a lower cost should they make the grade.
The concept of online peer-to-peer lending is more old hat abroad. It got its start about a decade ago in the U.K. before spreading to much of western Europe. In more rigid debt markets, such as that of China, where the government keeps a fat finger on banks’ scales, peer-to-peer banking has outright exploded.
Last spring, China National Radio reported that more than 2,000 such websites had been set up nationwide since 2007, with the value of their loans increasing 300-fold, to 6 billion yuan, by mid-2011. The field there is rife with abuse, opacity, and lack of oversight. In September 2011, the China Banking Regulatory Commission warned that the peer-to-peer sector’s bad-loan ratio was “significantly higher” than that of banks and these startups are a breeding ground for fraud and money laundering. Still, the need is there: According to Citic Securities, only 3 percent of China’s 42 million small and midsize businesses can get bank loans, while 36.7 trillion yuan of household savings sits in bank deposits.
By Joe Udo
The stock market is a great investment if you have a long time horizon. But should you continue to invest in stocks once you retire? When you start withdrawing from your retirement portfolio, you will be a lot more sensitive to stock market fluctuations. Most financial advisers recommend reducing stock market investments as you get older, but you don’t want to just stick the money under the mattress either. Inflation will erode cash savings over the years, and we need to continue to invest.