Alternative Finances

Online Lenders Hunt For Fresh Capital

The online lending marketplace has been hitting some speed bumps as of late. The key problems, according to Reuters, are the skittishness of hedge funds and, of course, market volatility.

That’s a big change from the previous mindset governing the industry, where investor capital was easy to come by, leading to a doubling of loan volumes across each of the past three years. The latest figures could come in at about $37 billion for the current year, said Morgan Stanley.

But without the usual suspects — i.e., hedge funds — pouring money hand over fist into the sector, lenders must find their lending capital elsewhere.

In an interview with the newswire, David Snitkof, who cofounded marketplace loan data and analytics company Orchard, said: “There was plenty of fast money in the industry [last year]. But a lot of those funds have faced redemptions in other asset classes.” In one real glimpse into just how difficult it may get for online lenders, Prosper Marketplace ended its securitization bond issuance program with Citigroup, not long after Citigroup paid a 12.5 percent yield on the firm’s B/BB- rated notes — outpacing by far the 5 percent yields that were seen only this past summer.

In terms of market volatility, equity markets have not been kind to the stocks, cutting several of them in half. And market volatility has boosted the cost of credit facilities that have typically backed the retail loans themselves. On Wall Street, according to the newswire, the rates charged to the online lending firms have been boosted from 3 percent to 5 percent.


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