Peer to peer lending has had a bit of a slow start in Canada. We wrote about Lending Loop last year, a Company pushing forward Canada’s first peer-to-business lending platform enabling you to lend directly to companies who need financing (debt only, $25 minimum). One of us jumped on the platform a put a few dollars in (no missed payments on my 5 loans to date!). We have also had a couple of chats with a few of the folks over there.
In the spring of 2016 the Company ran into a bit of a regulatory hiccup (see our write-up). Canada’s existing regulations didn’t quite accommodate this sort of thing. However, they’re now back after working through a framework and are an “Exempt Market Dealer in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Nunavut, Northwest Territories and Yukon.”
Well, they’re back. They sent this note out to lenders in late October:
It's been a very exciting week for the entire Lending Loop community. Last Monday we announced our re-launch to Canadian small businesses and investors. Since then, we've had thousands of lenders sign up and many businesses apply to be listed on the Marketplace.
To keep you updated on new loan requests and Lending Loop updates, we send out our weekly "In the Loop" newsletter.
This week on the marketplace, we have a property restoration company, a safety equipment seller and a trade contractor based in Saskatchewan. We're off to a great start and we'll continue to add many more loan requests later this week and throughout the remainder of the year. Remember to check back often so you don't miss out!”
They now have a questionnaire about whether Lending Loop is appropriate for you and it is very similar to what you would have to fill out at a self-directed broker. As before, you are technically purchasing a note that is directly tied to the repayments of a borrower. The risk of course is that they go out of business and any realization on their assets does not cover the loan. Rates are quite juicy compared to a savings account (as they should be given their much higher risk) with 10-12% not uncommon. Lending Loop takes a cut of the interest (1.5%) and covers all of the underwriting and payment processing. They also handle the process of dealing with loans if they go sour.
I put a few dollars back in and plan to start lending again. The issue? I haven’t been fast enough to get in on any of the loans that have been posted yet. Go figure. I will post a follow up in the next few months on my progress and how loans are performing.
Worthwhile BNN interview with the CEO here: http://www.bnn.ca/video/lending-loop-gets-back-on-track-as-osc-clarifies-fintech-rules~979834?utm_content=buffer48779&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer