In September 2011 Cabiedes & Partners invited Comunitae (private lending website) to present their project at the AIEI. José and Luis Martin Cabiedes They intended to invest in this business, and as they usually do, they brought it to the AIEI so that the other members of the association could also evaluate it. I was delighted with the talk we had then with Arturo CerveraThe founder and CEO of the company; and the p2p lending sector, which in my opinion has a lot of potential to take this business away from the banks. So I decided to invest in Comunitae, together with Cabiedes and Good Invest (Norberto Varas). This investment isfinalised in November 2011.
With this investment, Comunitae has mainly dedicated itself to improving the product: improving its website, the process of registering loan requests, the process of registering lenders, etc. At the same time, the banking sector has been worsening, restricting credit and generating less and less confidence on the part of individuals. Banks and savings banks demand higher and higher interest rates for loans, and offer lower returns to depositors. As a result, more and more people are turning to p2p lending to finance themselves or to invest their money.
Private-to-private lending success stories: Lending Club, Prosper, Zopa, ...
In the United States, Lending Club and Prosper already more than 1,000 M$ of loans (TechCrunch)in annual growth of 100%.
In the UK, Zopa has already raised more than £200m in formalised loans.
In Spain too, albeit on a smaller scale: Comunitaenow has more than €1m in formalised loans and is growing rapidly (more than €70k lent in May 2012, 7 times more than in May 2011).
How does Comunitae work?
The company receives loan requests from individuals via the web. It analyses the credit profile of each person requesting money, asks for all the necessary documentation, and discards more than 70% of the requests. Comunitae also grades each request with an A (lowest), B or C risk level. 30% of the requests are accepted and published on the website so that users can lend to those they want.
How much does it cost those who ask for money?
The interest rate depends on the risk level of the borrower and the evolution of interest rates on the market: currently between 10% and 15% APR for loans of up to €10,000 with a maturity between 1 and 4 years. Comunitae also charges the borrower an origination fee of 2.5%.
How much do those who lend money earn?
Users who lend money are charged the agreed interest rate according to the loan, pay a management fee of 1% to Comunitae, and are currently in arrears at less than 5%. With this, in fineIn the case of the "Lender's return", lenders have a net return of 7-8% (actual data 2009-2012), much higher than the return on a deposit, and with less risk than with preference shares, convertibles, structured products, ...
What happens if someone does not return the money?
Comunitae takes care of the management of non-payments to obtain the payment of the amounts due and in case of non-payments it shares the information with the largest provider of information on non-payments in Spain (just as with a bank it is not advisable not to repay a loan because one ends up included in the files of defaulters). It negotiates payment schedules with potential defaulters, and ultimately sues and prosecutes them.
How to invest by lending money?
It is simple: you registerYou make a bank transfer from your bank account to Comunitae and you choose the loan applications in which you want to participate. The best thing to do is to lend little money to many people, in order to have a more diversified portfolio and reduce the risk. Then, as the interest is paid and the principal is returned, Comunitae will credit it to your account, and when you want you can re-invest it, or dispose of the money.
In the end, it seems that the time has come for the peer-to-peer for loans between individuals in Spain. It is undoubtedly a very attractive option to take out a loan, or to diversify your investments while obtaining a much better risk-return ratio than the financial products offered by banks. what do you think? do you dare to try it out?
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