Prime Meridian Capital Management, specializing in online peer-to-peer (P2P) lending, launched its new fund, Prime Meridian Small Business Lending Fund on 7/1/14, giving investors the opportunity to invest in the growing sector of P2P small business lending. PMCP states, “Prime Meridian’s Income Fund was one of the first P2P lending funds in the United States, with over 29 consecutive months of profitable returns without a single drawdown, and has a well-established track record. Building on this success, Prime Meridian, an affiliate of Novus Investments, has expanded its offerings by moving into the small business P2P lending space.”
Prime Meridian defines P2P lending: “[T]he practice of lending money to unrelated individuals (i.e., peers) without going through traditional financial institutions such as banks or funding mechanisms such as venture capital or investors. There are four major categories of P2P lending: consumer credit, small business, student loans, and real estate. The Prime Meridian Small Business Lending fund was established specifically for targeted investments in small business P2P lending. Its flagship fund, Prime Meridian Income Fund, covers consumer credit P2P lending.”
“Banks aren’t really interested in making smaller loans of less than $500K to small businesses. As a result, most small businesses are looking for alternative methods of borrowing capital to fund future growth,” said Don Davis, managing partner of Prime Meridian. “As witnessed by the fast growth of P2P lending overall, I believe the small business lending category is the next big area for growth in P2P lending. We developed the Prime Meridian Small Business Lending Fund specifically to invest in collateralized small business loans backed by prime and super prime personal guarantees, which we believe carries much lower risk than other segments of the market.”
In 2013, two of the largest P2P lending platforms in the United States (Lending Club and Prosper) issued $2.4 billion in loans—nearly triple the $871 million issued in 2012 and is anticipated to more than double in 2014. Lending Club is planning an IPO which many believe will happen before Thanksgiving.
“The Prime Meridian Income Fund was an early mover in this burgeoning space by allocating to P2P loans using proprietary automated technology. Prime Meridian developed computerized algorithms designed to identify opportunities, assess risk, and capture attractive opportunities for its investors to participate in the innovative, fast growing P2P lending space,” contends Prime Meridian. “Now, Prime Meridian brings that same knowledge, experience, and technology to P2P small business lending with the Prime Meridian Small Business Lending Fund. In its first three months, performance is averaging an 11% annualized return to investors, net of accrued defaults and fees. The Prime Meridian Small Business Lending Fund is currently open to accredited institutional and individual investors.”