Money360 may revolutionize "hard money" lending

Biggerpockets.com, Chris Martin, Real Estate Investor from Holly Springs, North Carolina - July 10, 2011


Money360, like prosper.com, provides a peer-to-peer lending platform to allow people to lend money to other people in an open transparent marketplace. As a prosper.com lender* for many years, my biggest disappointment with the P2P concept is that their lending has been unsecured lending. I still have a bunch of uncollected money that I'll probably never see. And I only lent to top tier borrowers (over 70% AA rated, the rest A rated)! With secured lending, at least there is collateral to go after.

Now from a business standpoint, a lot of people probably think man, they get a percentage (although small) of each payment and payment up front for 'originating' the loan. They must be making a killing!" Unfortunately, this is not the case. As a company, prosper has lost over $50M since inception and the losses continue. They originated (for their borrowing members) about $27M in loans last fiscal year and their net loss was $10M. With the cash they have, they won't survive long. Their plan calls for increasing transaction volume to increase revenue until they reach profitability and become cash-flow positive. They need a capital infusion.

Enter Money360. Different model. Different lender base (accredited investors vs. casual social lenders). Different borrowers (profit seeking RE projects vs. debt consolidation on declining value assets). And, key IMO, Money360 loan sizes will be 50 to 100 times bigger and I believe more profitable than prosper or lendingClub. Also Money360 doesn't have to educate the world on the concept of P2P lending, prosper and LendingCLub did that.

As I posted on 7/4/11 (I didn't know Money360 existed at that time) I think secured P2P real estate lending will change/revolutionize hard money lending. I also think this type of lending will be widely available in a year to 18 months. Money360 claims to be the first focused on real estate. I've not seen any others and I have looked... though not recently... so I believe this is true.

So I for one am highly encouraged. Outside CA, I believe the minimum investment ($50K in CA) and loan sizes ($200K in CA) will be a lot smaller. I'd like to hear what BP nation has to say. Would you be a lender? Borrower? Does anyone have experience with them already?