CommunityLend blog

A new article about us from the perspective of lenders.

New service turns investors into lenders | Investment Executive

Toronto-based CommunityLend Inc. has launched an online lending service that allows accredited investors to make loans to consumers for profit. And although it offers no brokerage fee to advisors, CommunityLend pitches its services to investors as an alternative investment, comparing the return on consumer credit favourably vs returns on traditional fixed-income.

“This is a new investment class to the average — but reasonably sophisticated — investor,” says Colin Henderson, CommunityLend’s chief technology officer and co-founder.

This press release was added to our site today.

CommunityLend Introduces Peer-to-Peer Lending to Canada

Online lending company aims to help borrowers get better rates by cutting out the “middleman” in Canada’s multi billion dollar personal lending market

Toronto, ON - February 17th, 2010: Toronto-based Internet company CommunityLend Inc., recently announced the launch of Canada’s only online peer-to-peer lending system after over two years of regulatory consultation and platform development.

Peer-to-peer (p2p) lending is an international financial services innovation which cuts out the traditional “middlemen” in lending transactions, such as  banks and credit card companies, by facilitating the direct matching of borrowers to investors through online loan auctions. Peer-to-peer lending has been called “game-changing” by financial industry analyst Javelin Research[1] and has also been recognized by the Harvard Business Review in their 2009 List of “Breakout Ideas”.[2].

“Consumer lending has been a major driver of the Canadian banking industry’s profitability for many years" noted Michael Garrity, Co-Founder and CEO of CommunityLend Inc, “and yet has been virtually unavailable as a direct investment opportunity for private investors. Peer-to-peer lending removes the structural obstacles which prevent private investors from investing directly in consumer loans and provides the potential for a better deal for both sides.”

“By allowing borrowers the ability to connect directly with lenders through a safe and secure online lending system,” said Garrity, “we expect borrowers to get better rates for their loans through price competition while also providing eligible Canadian investors, starting with Accredited Investors, direct access to Canada’s consumer credit market as an investment category.  It’s a win for everyone concerned.”

According to Garrity, the CommunityLend online peer-to-peer lending system aims to satisfy three essential market needs in Canada:

     1.       Helping Canadian borrowers to get better rates on loans by creating real competition for their loan requests.

     2.       Giving Canadian investors (starting with Accredited Investors) the opportunity to directly participate in Canada’s large consumer credit market as an investment category.

     3.       Providing real communities the opportunity to positively influence the lending process for their members by highlighting their collective needs and responsibility.

As of today, the CommunityLend online peer-to-peer lending service is available in the Provinces of Ontario and Quebec at www.communitylend.com.  The company intends to add more provinces in the future.

About CommunityLend Inc

CommunityLend Inc. is Canada’s only peer to peer lending service, a financial services innovation which allows borrowers to cut out banks and credit card companies and to connect directly with lenders through open online loan auctions.  Called “game changing” by financial industry analysts[3], this new lending model permits direct investment by eligible investors in the personal lending market, previously largely the preserve of financial institutions. CommunityLend Inc. is a wholly owned subsidiary of CommunityLend Holdings Inc., a Canadian corporation based in Toronto, ON.  CommunityLend Inc. is registered as a Portfolio Manager and an Exempt Market Dealer in the provinces of Ontario, and Quebec.

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For more information please contact Colin Henderson at colin@communitylend.com.

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[1] Javelin Research 2008, http://www.javelinstrategy.com/2008/01/07/at-last-a-bank-of-your-own/

[2] HBR 2009 http://hbr.harvardbusiness.org/web/2009/hbr-list/forget-citibank-borrow-from-bob

[3] http://www.javelinstrategy.com/2008/01/07/at-last-a-bank-of-your-own/

Erin @ Sprouter writes a piece on the journey for CommunityLend to date.

The importance of perseverance as an entrepreneur: the CommunityLend story | Sprouter

Most entrepreneurs know that nothing happens in the time frame you set out when you’re developing your business. No one knows this better than Michael Garrity, entrepreneur and co-founder of CommunityLend, a recently-launched peer-to-peer lending service, the first of its kind in Canada (p2p lending companies such as Prosper and Zopa operate in Britain and the U.S.).

Today we are featured in the new YongeStreet Canadian online magazine. Carla Lucchetta, a Toronto based writer and TV producer has done a nice write up and we are proud to be one of the features during just their 2nd week of operation.

Peer to peer lending: taking the bank out of banking | YongeStreet

Peer to peer lending (sometimes called social lending) is new to Canada, a fairly conservative country financially speaking, though organizations like Prosper in the US and Zopa in the UK have been running for a number of years now. Borrowers who possess good credit file their information online, requesting from $1,000 to $25,000, with the opportunity to outline why they are asking for funds; home renovation, children’s tuition, or small business seed money. The loan request is then put up for auction to accredited lenders, whether an individual, a group of individuals or an organization who have demonstrated their financial clout.

We needed a technology solution that allowed the marriage of a loan management system with a modern web application. The result was an integration of our Ruby on Rails application with the industry strength Portfolio Plus application from Strategic Information Technology, and the early results indicate we made the right decision.

CommunityLend Goes Live with Peer to Peer (P2P) Lending

“We know its been a lot of work to pioneer this type of lending in Canada and we’d like to congratulate CommunityLend for enduring the numerous regulatory hurdles to make this happen,” said G. Robert Leeming, President of SIT. “We’re also proud that they’re the first customer to employ our Open Banking Interface in a production environment.”

It is with great pride that we announce that the CommunityLend online peer to peer lending service is launching in Ontario today and we welcome you to join us.

The CommunityLend online peer-to-peer lending system aims to satisfy three essential market needs in Canada:

- Helping Canadian borrowers get better rates for their loans through a competitive and empowering process for borrowing money.
- Providing eligible Canadian investors, starting with Accredited Investors, direct access to Canada’s lucrative consumer credit market as an investment category.
- Providing local communities the opportunity to positively influence the lending process for their members by highlighting their collective needs and responsibility.

It’s been a long road for us to get here as my colleague, Colin Henderson has noted in an earlier post, but that long road has made our launch just that much more exciting for our team as we begin the process of build this new market category of Peer to Peer Lending in Canada.

Just in case you missed it, we recently made a number of announcements leading up to our market launch today regarding some new team members and the addition of a new investor and partner for CommunityLend. This is an exciting time for CommunityLend and we are keen to have you join us.

To set expectations properly, we would like to update you on four relevant information points related to the CommunityLend market launch today.

- We are accepting only Borrowers and Lenders resident in the province of Ontario. While it is our full intent to offer a national peer-to-peer lending service over time and to ensure that every region of our great country can have the opportunity to participate in this new lending model, we are restricting participation to start with to only Ontario residents. If this doesn’t apply to you right now, fear not, in the coming months, we intend to add new provinces and territories and will notify you accordingly.
- We are focused only on “good quality” borrowers. We define a “good quality borrower” as someone with a good to strong credit history, reflected in their credit data held by our credit bureau partner and who is in the current financial position to be qualified for a 3 year term loan on CommunityLend. In credit bureau terms, this translates to a credit score of 657 or higher (out of 1000) and a total debt service level (the amount you pay versus the amount you make) not exceeding 30% of your income. The reason for these strict credit standards relates directly to our commitment to creating the best environment possible conducive to a strong and consistent financial return for our lenders.
- We are focused only on lenders in the province of Ontario who qualify as “Accredited Investors” under securities regulations in Ontario. You are an accredited investor if you fit within one or more of the categories listed here. Accredited investors at Communitylend can be both individual and institutional lenders. Over time, we want to make the assets of peer-to-peer lending available more widely to non-accredited investors and will be exploring methods to do so within our regulatory framework.
- These are early days for Peer to Peer Lending and we look forward to building this market category together. We have worked hard over the last 2 years to create a service which we believe meets the core market requirements for operating a robust peer-to-peer lending system in Canada while also operating in a compliant way with Canadian regulations. These early days around our launch will be our opportunity to get committed and qualifying users into and using the system to get valuable market feedback. This will likely mean that not every loan request will get filled and not every lender will get to build a loan portfolio as quickly as they would like. We expect these situations to be short term in nature and we know that by working together, we can make peer to peer lending a strong viable alternative to traditional bank lending.

Starting today, if you are a borrower looking for a better interest rate for an unsecured loan, an Accredited Investor looking for the opportunity to participate directly in the consumer lending market or a community who believes you can do better by working together, there is an alternative now available here at CommunityLend.

We invite you to join us in helping to change the rules of lending in Canada. Just follow this link to get started now!

- Michael Garrity, CEO and Co-Founder

Gartner offer commentary on the state of innovation within the financial services arena here.

What caught our attention is the comment on P2P Lending as that is the space we are obviously interested in. This is the first recent comment on growth potential for peer-to-peer lending since the advent of regulation and the resultant adjustment of the peer-to-peer business model.

Here is the quote from their report summary.

By 2013, P2P lending will soar at least 66 per cent to $5 billion of outstanding loans.

Consumers who lose their jobs can’t get loans to cover periods of unemployment; businesses that encounter trouble due to low demand can’t get credit lines to see them through to recovery. Furthermore, banks are more interested in recapitalising than in lending. Growth in P2P lending will be driven by investors seeking higher returns and borrowers shunning (or being shunned by) banks. Gartner recommends that financial services providers investigate how to partner and collaborate in adding P2P to their existing offerings rather than building their own P2P lending networks.

Toronto, Ontario (January 5th, 2010 ): CommunityLend Holdings Inc. the parent company of Toronto-based peer-to-peer lending company, CommunityLend Inc., today announced a new Chief Compliance Officer and three new additions to its Board of Advisors.

New Compliance Officer

Starting in January 2010, long time financial services professional, Tim Gleeson, will be joining CommunityLend Inc. as its new Chief Compliance Officer. “Tim comes to CommunityLend from a distinguished 30 year career in the financial services industry.” noted Michael Garrity, CEO of CommunityLend Holdings Inc. and Co-Founder and CEO of CommunityLend Inc. “and brings to our team considerable experience in capital markets and a sophisticated understanding of securities related compliance requirements.” Prior to joining CommunityLend, Tim was the founder and Chief Compliance Officer of investment management firm, FairLane Asset Management.

New Advisors

CommunityLend Holdings Inc. is also announcing three new Advisors. The Board of Advisors for CommunityLend Holdings Inc. is comprised of industry leaders who advise and guide the company on strategic decisions and business progress.

“All three of these new advisors to CommunityLend have achieved significant success in their respective industries and it is a great honour to have add their guidance, experience and passion to our team.” said Garrity. “They all represent for us significant professional experience immediately relevant to operating a successful peer-to-peer lending system for the Canadian financial services market.”

Executive Biographies

Tim Gleeson, Chief Compliance Officer

Tim comes to CommunityLend from a distinguished 30 year career in the financial services industry. Prior to joining our team, Tim was the founder of investment management firm, FairLane Asset Management. Tim’s financial services career started when he first joined Merrill Lynch in 1979. He worked subsequently in fixed income trading at Bay street firms Burns Fry Ltd. and Richardson Greenshields . In 1989 Tim switched gears and joined Mackenzie Financial where his role as Senior Vice President included portfolio management and contributing to Investment and Derivatives committee oversight. Fulfilling a lifelong ambition Tim recently earned his Private Pilot’s license and is working towards an instrument rating.

Giles Andrews, Advisor

Giles co-founded the world’s first online lending and borrowing marketplace, Zopa, in 2004. He led 4 fund raisings as CFO and then led the UK business as MD before taking over as CEO in January 2009. Giles spent the first ten years of his career in the motor industry pursuing his interest in all things automotive. This included co-founding Caverdale in 1992, a start-up taken to a £250m revenue motor retailer and sold in 1997. After an MBA at INSEAD he set up his own consultancy business whose clients included Tesco and Tesco Personal Finance and which also provided start up advice and early stage funding for new businesses.

Roger Couldrey, Advisor

Roger is the acting Vice President Administration at McMaster University. He was CommunityLend’s Chief Operating Officer until 2009 and is a long time banking professional. Roger joined the Bank of Montreal in 1971 and had a variety of executive responsibilities including his last position as Vice President of Electronic Financial Services. After leaving the bank in 1999, he was Executive Vice President of Operations with epost (www.epost.ca), was the General Manager of Corporate Services for Orlick Industries Ltd in Hamilton before returning to epost in 2004 as President and CEO. Roger has extensive experience serving on community boards, most noticeably McMaster University, where he is Chair of both the Finance and Audit Committees. He completed the Financial Studies Diploma, the senior qualification of the UK Institute of Bankers, in 1982 as the top candidate.

John Prato, Advisor

John Prato is a Managing Director in the Equity Capital Markets (ECM) group of TD Securities Inc., the investment banking division of The Toronto Dominion Bank Financial Group. He has been a member of the ECM group since 1998, and has worked on a variety of equity underwritings, including initial public offerings, common equity, convertible and exchangeable debentures, income trusts and private placements for companies in diverse sectors. From 1996 to 1998, Mr. Prato worked in merchant banking with TD Capital Group Limited on a variety of mandates including early-stage investments, private equity, mergers and acquisitions and leveraged buy-outs. Mr. Prato has served on the Board of Trustees of the Royal Ontario Museum, including the executive committee of the Board, and currently sits on the board of St. Michael’s Hospital Foundation, Toronto. Mr. Prato holds a Masters of Business Administration from Queen’s University in Kingston, Ontario and is a CFA charter holder.

We a happy to welcome Stone & Co to the CommunityLend team.

CommunityLend

Toronto, ON (December 18th, 2009): CommunityLend Holdings Inc., the parent company of Canadian Peer-to-Peer lending company, CommunityLend Inc., today announced a $1 Million investment through a convertible debenture from Stone & Co. Limited Flagship Stock Fund Canada (“Stone”).  As part of their investment, Mr. Richard Stone, Founder and CEO of Stone, will join CommunityLend’s Board in an Observer role.

“We were very intrigued with the possibilities created for Canadian investors through direct participation in consumer lending, a model which has proven successful in foreign markets such as the United Kingdom and USA,” said Richard Stone, Founder and CEO of Stone.

“Consumer Loans have been one of the major drivers for the Canadian banking industry’s profitability for over 100 years,” noted Michael Garrity, Co-Founder and CEO of CommunityLend Inc, “and yet are virtually unavailable as a direct investment opportunity for private investors.  When CommunityLend launches in the next few weeks, we intend to remove these obstacles through the introduction of Canada’s only peer-to-peer lending system, a new lending model which removes the middleman in lending transactions by allowing borrowers the ability to connect directly with lenders through a safe and secure online lending system.”

“We are very excited to have attracted a seasoned asset management organization as an investor in our company. Stone’s participation in our innovative Peer-to-Peer lending model is a great honour and we look forward to their partnership in the coming years.”

About Stone & Co. Limited

Stone & Co. Limited is an independent, 100% Canadian-owned fund company offering the Stone mutual funds, flow-through limited partnerships, and a TSX-listed fund to investors through financial advisors in all provinces and territories of Canada.

About CommunityLend Holdings Inc.

CommunityLend Holdings Inc. is a Canadian corporation based in Toronto, ON, which wholly owns CommunityLend Inc.

About CommunityLend Inc.

CommunityLend Inc. is Canada’s only peer–to-peer lending service, a unique financial services innovation which allows borrowers to cut out banks and credit card companies and to connect directly with lenders through open online loan auctions.  Called “game changing” by financial industry analysts[1], this new lending model permits direct investment by eligible investors into the personal lending market, previously largely the preserve of financial institutions. CommunityLend Inc. is a wholly owned subsidiary of CommunityLend Holdings Incorporated, a Canadian corporation based in Toronto, ON.  CommunityLend Inc. is registered as a Portfolio Manager in Ontario, and is a registered as an Exempt Market Dealer in the Province of Ontario.

All press inquiries can be made via email to Colin Henderson (CTO) at colin@communitylend.com.

For more information on Stone & Co. Limited, contact Brian Edelstein, Managing Director, Investor Relations

e. briane@stoneco.com | www.stoneco.com

When we began the CommunityLend “journey” back in early 2007, there was a broad sense of optimism in the general economy and the potential in web based business. We started out by studying everything we could on peer-to-peer lending (also known as social lending) and focused on a way to design the right model for Canada. Primarily we saw the need to replace the rapid de-personalization of the financial services industry in Canada with the transparency, social openness and smart self service that came along with web 2.0. Peer-to-peer lending seemed an ideal model to achieve this.

Little did we know back then that the world’s financial system would come to the brink of collapse shortly after September 2008 and that out of the ashes of that calamity would come a call from all of the G20 governments for better financial systems built on transparency and more stringent risk management.

All of this talk though still seems lost on the “average” bank customer who just wants access to credit at a reasonable rate. Unfortunately, this is the opposite of what is happening internationally today. The outcome of tougher regulations and oversight of banking has in fact been a tightened supply of available capital and increased price of that capital in most markets, despite the fact that central bank rates in most industrialized countries have never been lower. So what’s the way out?

Our answer is simple (albeit with our own bias). When we look at what is being achieved by peer-to-peer lenders in other countries, it appears the potential exists that peer-to-peer lending can be one answer to both the need for more capital at a reasonable price as well as the need for more transparency in lending.

This quote from a recent piece at Contrarian Profits sums up the premise of peer-to-peer lending and contained a graphic depicting base loan rates at LendingClub and a sampling of US Banks:

“They call it “peer-to-peer (or P2P) lending,” and the premise is simple: I have money I am willing to lend; you would like to borrow some; these companies bring us together and facilitate the loan. Because their systems are automated and connect lenders and borrowers more directly, the companies can afford to take much smaller commissions on the loan than a traditional bank.”

The peer-to-peer lending model eliminates middle men, and also eliminates what can appear to be obtuse processes that sit between people and their money. Processes such as securitization of mortgages, whereby a mutual fund in France becomes the ultimate lender under a derivative contract with a series of US and Canadian banks. It is quite evident from the last two years that such contracts were bad for borrowers and investors alike, because of the trust factor.

The “spiders web” of connections that lies between borrowers and lenders in modern finance has become so commoditized and distant that the relationship which used to exist between them is much less than before. The processes that have evolved for borrowers in particular have little sense of participation in a process that offers little other than a loan at a cost that is seemingly driven by factors outside the borrower’s control.

Peer-to-peer lending is small potatoes in the grand scheme of things. But we can’t help but believe that somewhere between 19% ++ credit card rates and the 0.25% paid on savings accounts, there is some room to offer a better way for those who choose to be different.

So that brings it back to us. It has been a LONG journey. In many respects, too long. But there is good news. We are really close . We do have the usual last minute paperwork and technology stuff to smooth out prior to launch but we are nearly there. We will update you here on a regular basis with information related to our launch.

We hope that it has been worth the wait and that you will join us as we aim to change the rules of lending™ here in Canada.

Let’s start being different by telling you that questions and comments are welcome.

- CL Team