In 1994 Bill Gates said one of the most visionary statements of the last century. “Banking is necessary, banks are not.” So long before crowdfunding became a term there was a necessity for crowdfunding and marketplace lending (MPL).
Marketplace lending (MPL) is an alternative method for loan borrowers, hard money lenders, and venture funders to bypass other financial institutions. Therefore, institutions such as banks and mortgage companies are eliminated in the funding process.
Why should marketplace lending be your next asset class? Here are a few points from the white paper below.
Why Marketplace Lending is Popular Among Investors and Borrowers
1. Investors and borrowers searched for a new asset class to invest in real estate and diversify their investment portfolios since the recession of 2008. Marketplace lending, specifically crowdfunding offers this new asset class. It entails more security, greater transparency, and higher potential returns per investment vehicle.
2. Real estate marketplace lending is a niche within equity-based crowdfunding. It allows investors a way to earn monthly dividends by funding the project of other investors. Furthermore, these platforms provide borrowers access to much needed money for purchasing property, funding rehab, and paying for other maintenance and management fees.
3. Also, MPL platforms perform due diligence on the real estate loan borrower. The borrower is vetted on their track record, experience, credit score, and personal guarantee. The success rate of the borrower on managing various types of projects, a high credit score rating, and if the borrower can personally guarantee the loan with other assets, are signs of potential return against risk.
4. In addition, the investment property goes through an underwriting process. The investment property is evaluated by its loan-to-value, lien position, location, occupancy, and development phase. As a result, these factors total a risk rating for the real estate investment.
These are just a few points as to why MPL should be the next asset class of every savvy investor who wants to invest in real estate, and diversify their portfolio.
The marketplace lending vertical is growing and catching the attention of different generations. Millennials are 10% more likely to use marketplace lending platforms versus the aging Baby Boomers.