Old Wine in New Bottles: The Emergence of the P2P Small Business Lending Securitizations

August 27, 2014

This last year has seen an uptick in activity in the peer to peer commercial loan market in the U.S., which, broadly speaking, includes loans made by non-traditional financing sources to small businesses (“P2P Commercial Loans”). Although there is no standard definition for what constitutes a P2P Commercial Loan, these loans can be as small as $10,000 but are typically less than $250,000. They are generally extended to borrowers who are either shut out of traditional financing sources or find such sources too time-consuming and intrusive or too costly. More recently, a number of institutional investors (such as hedge funds) have shown an increased interest in purchasing these P2P Commercial Loans directly from the originators on a whole loan basis (“Third-Party Purchasers”). These trades are driven by the fact that such investors cannot or will not make these types of loans themselves, but are interested in the attractive yields offered by this asset class.

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