Crowdfunding In Europe: The Top 10 'Peer-to-Peer' Lenders

Forbes

The following guest post is by David Drake, founder and chairman of LDJ Capital, a New York City private equity firm, and of The Soho Loft, a global financial media company with divisions in Conferences and Publishing.

Crowdfunders generally fall into different categories: equity, donation, reward, and debt. The last is also known as microfinancing — and commonly referred to in Europe as “peer-to-peer lending.” Here are the top 10 up-and-coming peer-to-peer lenders e making financial waves in Europe:

1. Zopa – This London-based P2P lender offers loans of up to £15,000, with individual borrowers dealing directly with lenders. Zopa categorizes borrowers based on their credit grades, so lenders can offer terms and amounts of money based on the category of the borrower.

2. Ratesetter – Also London-based, Ratesetter was the first to introduce the concept of a “provision fund” into P2P lending. Borrowers pay a “credit rate” fee that is used to diversify risk by reimbursing lenders in the event of a late payment or payment default.

3. Funding Circle – One of the biggest crowdfunding platforms in the U.K., Funding Circle has loaned £90 million to SMEs since its launch in August 2010. The U.K. government, already using the platform, will lend a total of £20 million to SMEs through it. Small businesses can seek loans ranging from £5,000 to £1 million from multiple crowdfunders.

4. Auxmoney – Based in Dusseldorf, Germany, this peer-to-peer loan marketplace raised $12 million in funding just this March. It allows private consumers to take out personal loans of between €1,000 and €20,000 from private investors. More than 10,000 projects, collectively valued at over €43 million, have been financed through the platform.

5. isePankur (iBanker) – The first to allow cross-border lending (open to investors from all EU countries), isePankur now is eyeing a pan-European market, including Central and Eastern Europe. In March, it launched a Secondary Market facility for trading P2P loans. It is a pioneer of social lending in Estonia and the oldest peer-to-peer lending platform in Scandinavia.

6. Pret d’Union – Based in Moulineaux in northern France, this top P2P lender allows private individuals and institutional investors to lend money to borrowers directly through a secured bond marketplace. It received $5.22 million in Series B funding in 2011, and then $4.18 million in series C funding in 2012.

7. ThinCats – As of April 2013, this U.K. P2P lender has £21.80 million total capital deposited from 1,522 lending members. It has provided 111 loans totalling £20.38 million since January, 2011, with its lenders earning an average net interest rate of 10.84%.

8. Smartika – Based in Milan and formerly known as Zopa Italy, Smartika has been providing P2P credit since 2007. Lenders and borrowers get rates 25% lower than on loans financed through traditional banking channels, and lenders enjoy 6.5% annual interest after charges.

9. Comunitae – This leading P2P marketplace in Spain is headquartered in Madrid. It has received two rounds of funding, totalling $4.8 million, since its 2009 launch. Its community of lenders has funded €2,181,025 in loans and received €206,601.25 in interest.

10. Funding Knight – This U.K.-based peer-to-peer crowdfunding platform eliminates the need for banking systems and financial agencies altogether, allowing borrowers and lenders to transact directly. FundingKnight has a membership minimum of £500 and can lend up to  £100,000 to small businesses planning to expand.

While the U.S. currently leads the world in volume of crowdfunding transactions (estimated by the 2013 Crowdfunding Industry Report for this year to be at 72%), a sizable chunk will come from Europe, at 26%, and 2% from the rest of the world.

For more updates on the global crowdfunding industry, latest information on alternative investment activities and events, or if  you have comments about this article, you can leave your comments here or reach out to me directly at David@LDJCapital.com.