Lending Crowd received FMA approval last Fall and today the peer to peer lending platform has unlocked the doors and announced it is open for business providing access to capital for New Zealand SMEs and consumers.
According to information provided by the company, Lending Crowd seeks to offer a new vehicle for credit for the over 400,000 businesses of less than 20 people operating in New Zealand today. The P2P lender will offer loans of up to $200,000.
“There is a huge need for alternative financing for SMEs,” states Wayne Croad, Managing Director of Lending Crowd. “This sector is an engine room for the economy generating a third of GDP but despite this SMEs are often frustrated by the complexity of getting finance when they need it quickly and easily. Most find the bureaucracy and high-interest rates from existing funding sources, including banks, limit their financial elbow room and ability to grow. Lending Crowd will make business finance easier and cheaper so it doesn’t become a ball and chain. And in doing so we will give people an opportunity to invest in the productive economy with balanced risk and returns, which for many will be an alternative asset class.”
Like other peer to peer lenders, Lending Crowd is a platform where people who want to borrow are matched with those who want to lend or invest. It bypasses traditional banking and strives to provide better interest rates for both borrowers and lenders. But Lending Club will also require that each loan is secured by either a registered vehicle or vehicles, a second security of residential or commercial property, or a combination of both. Lending Club believes this will help drive down the cost of borrowing.
Lending Club will leverage its platform to provide loans for both commercial and consumer borrowers. Croad and his team want to provide finance to the most common areas where people need it – such as personal vehicle loans.
“We’ve built a specialised process for people wanting to buy vehicles, unlike anything else out there,” says Croad. “New Zealanders usually get finance for cars, motorbikes and commercial vehicles directly through either a motor trader, broker, finance company or their bank. But with new technology these traditional ways are now very inefficient and cost New Zealanders millions of dollars every year. Car dealers are not the only sector earning substantial commissions that are also incentivised to clip the ticket by upselling higher interest rates to consumers. Other financial institutions usually have a “one interest rate fits all” approach to borrower risk that is unsuitable for most people. Borrowers and investors are also currently paying for completely unnecessary overhead structures through inflated or deflated interest rates.”
Lending Crowd will target prime bank grade borrowers and believes it will offer the most competitive lead-rate. A1 grade borrowers will be able to obtain a “market leading” loan rate of around 7.90% for personal/vehicle loans and 8.95% for a business loan. There are four “buckets” of borrower loan risk ranging from 7.90% to 19.75%.
Lending Crowd will also be the first P2P lender in New Zealand to offer all borrowers the option of a fully underwritten insurance product to cover them for death and terminal illness. In early 2016, this will be expanded to include illness, bankruptcy, hospitalization and redundancy. The aim of this product addition is to further mitigate risk and provide reassurance for investors.
Lending Crowd will generate revenue only from interest earned by investors. This is different from most P2P lenders that typically take their fee from a percentage of the loan. Investors will be able to diversify across many different loans, from $50 to 100% of a single loan. Lending Crowd will calculate an actual annual rate of return for investors after 90 days and provide all investors with net annual return (NAR) percentages on their investment dashboards at the end of six months of trading history.
Lending Crowd has evolved out of Finance Direct, an independent national Non-Bank Deposit Taker (NBDT) with a 16-year history.
“This will challenge the status quo and free up access to finance, which will be good for business, jobs and the economy,” states Croad.
“We’ve looked extremely hard at what really matters to borrowers and investors in New Zealand and have built Lending Crowd with the prime focus of driving down the cost of borrowing money,” explains Croad. “The flip side is investors know that all borrowers have skin in the game, or security of an asset, that’s baked into all loans at inception.”
“We’re delighted about our speed to market and we’re now looking forward to giving the finance and P2P market something new and different that people will feel good about using.”
“We see our heritage as a huge competitive advantage and a perfect platform from which to stir some change – we have long term relationships equivalent to those people have with their bank – so we expect to be a challenger,” declares Croad.