New Zealand’s newest marketplace lending platform comes with a few twists it hopes will differentiate it from the competition.
Lending Crowd becomes the first P2P platform to offer up to $200,000 to the 400,000 New Zealand companies employing less than 20 people, the company said in a release.
It also offers specialized vehicle financing and personal loans.
Lending Crowd Managing Director Wayne Croad said SME financing options are lacking even though the sector is a vital economic contributor.
“There is a huge need for alternative financing for SMEs. 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.”
Before marketplace lenders arrived, the few actual options had their drawbacks, he added.
“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.
Lending Crowd functions like a traditional peer-to-peer lender in that it matches borrowers and investors. It also lets investors buy small fractions or entire loans.
There are several more unique features to Lending Crowd. Its loan range is wider, and they are either secured by registered vehicles, residential or commercial property, or a combination of property and vehicles. Investors are only charged fees on interest earned, not principal.
Lending Crowd will calculate an actual annual return rate for investors after 90 days, while also providing all investors with net annual return percentages on their dashboards after six months of trading history.
Borrowers also have the option to purchase insurance against death and terminal illness. In a few weeks coverage will be expanded to include illness, bankruptcy, hospitalization and redundancy.
Mr. Croad said auto loans are a popular segment, and one ripe for disruption.
“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.”
Both car dealers and finance companies have an important stake in keeping rates high, a bias that works against the customer, Mr. Croad added.
“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.”
Individuals in need of at least $2,000 can also visit Lending Crowd, which plans on focusing on prime bank grade borrowers A1 grade borrowers can obtain a market leading loan rate on personal and vehicle loans of 7.90 percent. There are four levels of risk with rates ranging up to 19.75 percent.
Lending Crowd began as Finance Direct, an independent national non-bank deposit taker that also provided lending services. That helped facilitate the sift to an online, peer-to-peer environment, Mr. Croad said.
“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.”
Should things turn out as expected in New Zealand, an Australian expansion is being planned.