The P2P lending industry is certainly starting to heat up. I’ve discovered a lot of companies in the P2P lending industry and gained some insight into these companies by watching some of LendIt 2013 .
Recently, I found out about a new company called GROUNDFLOOR . The idea intrigued me, so I decided to reach out to the founders: Brian Dally & Nick Bhargava. In short, it is a P2P lending company tailored to real estate development projects. After you’ve checked out their website, read the Q&A session below for some of the details we were able to gather from them. Brian and I have both signed up for the private beta and are excited to put our benjamins to work!
Q: We would first like to know how and why you got interested in the p2p
lending industry. Was it an extension of seeing companies like
Prosper/LendingClub remove the banks from the equation in lending?
A: Actually, we were not aware of LendingClub or Prosper when the concept for Groundfloor first took shape. It was really the financial crisis of 2008-09 that motivated us to build a new kind of finance. We are interested in returning to the roots of what finance was before there were 800-pound gorillas who are “too big to fail” yet fail the rest of us regularly.
Q: What is the biggest obstacle that GROUNDFLOOR faces or has faced?
A: The banks have a sophisticated, heavily engineered process for originating, underwriting and managing loans for real estate. Replacing that with a peer-to-peer model is hard. We think we understand the obstacles well enough and have designed ways to handle them. The toughest thing in making any market is to make sure that the deals we put forward have the maximum appeal to investors. That’s why we’re starting off with a beta, to test and make sure we’re dialing that in correctly.
Q: Any information on what rates lenders/borrowers can expect to
earn/pay? Will it be similar to LendingClub in note grades etc?
A: The rates vary based on the project and deal structure, but lenders can expect to earn interest from 5% and up, perhaps as high as 10%. Loans are secured by the property and we have some innovative twists to share that lenders are really going to like.
Q: How will projects be selected and what types of projects do you anticipate financing? Are there any in the pipeline you can share details on?
A: Developers and lenders who are interested in what we’re doing should visit GROUNDFLOOR.us and sign up to get involved now. We’re putting together a range of projects for feedback from potential lenders. We’ve identified a handful of initial prospects, and are continuing to add more. Lender feedback will ultimately shape which projects are part of our beta and which ones will need to wait until our commercial launch.
Q: How big of loans do you anticipate to be servicing?
A: We’d rather not speculate about that right now.
Q: Finally, do you have an anticipated launch date of the first project and when the beta will begin?
A: Not that we can announce yet, no.