March 2, 2006

The United States' 1st Internet lending and borrowing B2B exchange has been launched yesterday. Prosper is a B2B trading portal and works in a similar fashion to online auction site eBay.

However, instead of listing and bidding on items, people list and bid on loans.

Lenders set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select.

Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender.

Then the auction begins as people who lend bid down the interest rate.

Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan.

Chris Larsen, Prosper: "Prosper gives people the opportunity to take back the marketplace for consumer credit."Backed by Accel Partners, Benchmark Capital, Fidelity Ventures and Omidyar Network, Prosper generates revenue by collecting a 1 per cent fee on funded loans from borrowers and charging a 0.5 per cent annual loan servicing fee to lenders.

People can spread their risk by bidding for many small loans across different credit grades instead of concentrating their money in one big loan to a single individual.

"Until now, financial institutions have controlled who is able to obtain credit and the rates people pay," said Chris Larsen, chief executive and co-founder of Prosper.

"Over time, this one-sided control has bred inefficiencies and excessive margins - leading to higher rates for borrowers, and restricting people who have money to lend from entering and generating income from this vital and lucrative market.

"Prosper gives people the opportunity to take back the marketplace for consumer credit.

"By providing the platform and tools for an efficient marketplace created by and for people, Prosper aims to make consumer lending more financially and socially rewarding for everyone."

Last year, Richard Duvall's Zopa launched a similar service in the UK.

This website puts borrowers in touch with people who are willing to lend them money, charging a fee equivalent to 1 per cent of any loan made.

Lenders set their own rate of interest, and choose which borrowers they want to lend to depending on what risk they want to take.

Source: 999 Today