Second p2p lender receives licence
New company LendMe has received a peer-to-peer licence from the Financial Markets Authority and says it will be the first such company to specialise in secured lending.
Peer-to-peer lending, popular overseas and an alternative to traditional financial institutions, matches individual borrowers anonymously with lenders looking to invest, determining the loan’s interest rate by the credit risk of the borrower.
LendMe was founded last year by Mark Kirkland and Edwin Morrison, directors at Auckland law firm Kirkland Morrison O’Callahan.
Borrowers may apply for loans between $25,000 and $2 million, and lenders can fund loans in full or in increments of $1000.
LendMe, which is working toward a mid-year launch, says it will offer secured loans for top-up deposits, home purchases, residential investments, commercial property, business growth, new equipment and the rural sector.
Loans will be secured against borrowers’ assets, most commonly by first mortgage over property.
“Borrowers who can show a good credit history and ability to service debt but don’t have a deposit and can’t borrow through the traditional banks due to the current LVR restrictions, will be able to borrow 100% through LendMe to buy a home,” says chief executive Kerry Kirkland, who is founder Mark Kirkland's sister and formerly headed the marketing services at University of Otago.
LendMe also intends to cater for older New Zealanders who are excluded by banks from borrowing money because of their age.
“Access to money for older people can be very difficult even though they may have an impeccable credit history and good security to offer lenders. LendMe will allow older Kwis to borrow the money they need while ensuring lenders receive great returns on well-secured loans,” Dr Kirkland says.
LendMe is talking to organisations including banks, here and overseas, to become potential institutional investors.
This is the second peer-to-peer lender to receive a licence, after Harmoney broke new ground under new Financial Markets Authority legislation last September.
Harmoney fractionalises its loans to spread investor risk, and has four institutional investors – including Heartland Bank and US-based Blue Elephant – providing about $400 million of lending capital.
Heartland also has a 10% stake in Harmoney, which offers loans up to $35,000 – a far cry from LendMe’s maximum.
Harmoney, which has plans to expand into the mortgage market, charges borrowers an originating loan fee, calculated at between 2-6% of their loan, depending on the borrower's credit rating, starting at a minimum of $300. Borrowers also face late payment fees.
Investors can get a 12% risk adjusted return on loans, which are broken up into $25 fractionalised notes which attract interest. Investors are charged a 1.25% service fee on the principal payment and interest collected on each $25 note.
UK-founded Ratesetter, brokerage Squirrel Mortgages and Lending Crowd, owned by Finance Direct’s Wayne Croad, are also in the process of applying for licences.