Lending Crowd opens for business

Lending Crowd opens for business and targets SME and vehicle finance market

Lending Crowd’s P2P platform is open for business from today, the first in New Zealand to offer SMEs easier access to finance up to NZ$200,000.

The new P2P platform will give around 400,000 New Zealand businesses of less than 20 people quick and easy access to finance to purchase assets, obtain working capital or fund business expansion.

Along with business loans it will offer specialised vehicle finance and an attractive alternative to banks for personal loans. Its launch comes just ten weeks after receiving its licence from the FMA.

Wayne Croad, Managing Director of Lending Crowd, says the genuine aim is to lower the cost of borrowing, provide investors with great returns, mitigate risk and be 100 per cent transparent, with SME and vehicle finance both ripe for a shake-up:

“There is a huge need for alternative financing for SMEs,” he says.

“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,” he says.

“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.

“This will challenge the status quo and free up access to finance, which will be good for business, jobs and the economy,” he says.

Like other P2P companies Lending Crowd is an online platform where people who want to borrow are matched with those who want to lend or invest. It bypasses banks and provides better interest rates for both borrowers and lenders.

But unlike others it will manage loans of between $2,000 and $200,000, all secured by either a registered vehicle or vehicles, a second security of residential or commercial property, or a combination of both. It believes this will help drive down the cost of borrowing.

Another area in Lending Crowd’s sights is commercial and personal vehicle finance, one of the most common areas where people seek finance.

“We’ve built a specialised process for people wanting to buy vehicles, unlike anything else out there,” he says.

“New Zealanders usually get finance for cars, motorbikes and commercial vehicles directly through either a motor trader, broker, finance company or their bank,” he says.

“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,” he says.

Along with SME and vehicle finance the new P2P platform will also offer attractive personal loans for $2,000 or over.

Lending Crowd will target prime bank grade borrowers and is confident this approach will help it 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%.

Features of the platform for investors include being able to diversify over multiple loans from just $50 right up to the entire loan amount, if desired.

Lending Crowd earns a fee from investors only from the interest earned, by the investors. This compares with many other P2P companies that charge investors a percentage of both interest and principal. With Lending Crowd any refinance of borrower loans will not erode investor returns.

In alignment with its policy of 100 per cent transparency 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 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 innovative product addition is to further mitigate risk and provide reassurance for investors.

Lending Crowd has evolved out of Finance Direct, a well-known independent national Non-Bank Deposit Taker (NBDT) with a 16 year history. Its P2P approach is based on years of experience in the offline management of borrowing and private lending.

“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.

“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,” he says.

“Using P2P, Lending Crowd pledges to offer crowd sourced money from like-minded people and institutions to make interest rates more attractive and with 100% transparency around fee structures. This approach will result in substantially more money in the pockets of New Zealanders versus mainly overseas owned institutions,” he says.

Croad says there is plenty of room for another player in New Zealand’s growing P2P market, especially one with years of knowledge and IP, as well as a focus on specific sectors.

“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,” Croad continues.

Pending a successful launch in New Zealand Lending Crowd already has plans for expansion into Australia and has secured trademarks. It is also in discussions with funding partners.

“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,” he says.

ENDS

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