Swap-A-Debt seeks regulatory approval

Swap-A-Debt recently became the latest p2p lending company to seek approval from the SEC. They filed on December 9th - four days after Prosper. On December 22nd they updated their registration.

Here are excerpt from the filing which can be read here:

Business Overview

We are a development stage company in the peer-to-peer (P2P) lending space and we have not generated any revenues since 2005 . Our mission is to establish the most efficient Internet non-institutional lending organization with more services than present privately held competitors. Person-to-person lending or peer-to-peer lending or social lending is, in its broadest sense, the name given to a certain breed of financial transactions (primarily lending and borrowing) which occurs directly between individuals (peers) without the intermediation/participation of a traditional financial institution. The biggest enabling technology for person-to- person lending has been the Internet, where person-to-person lending appears in two primary variations: an “online marketplace” model and a “family and friends” model.

We are an on-line site for borrower’s who want to borrow $1,000 to $25,000 and for lenders who can make educated decisions on credit scores, intended use etc., to receive a higher rate of interest than available at traditional financial institutions. This is all facilitated with an Internet website and a highly efficient back office system to completely automate a process that has become ever more cumbersome at brick and mortar banks. Our fully automated Internet website which utilizes16 high level programmers is ninety five percent complete (for further details please refer to page 1 “Our Corporate Information” section). Because of the high automation of its website the personnel requirements for the company are relatively modest. Swap-a-debt will embark on a major marketing campaign to expand its client base. It is in discussions with major marketing companies to execute this program.

Benefits to Borrowers

We created our peer-to-peer lending community to specifically address the needs of small loan borrowers with few alternatives in the current financial market place. Several key advantages to borrowers participating in the company’s online lending program include the following:
  • Access to needed funds in the small loan range of $1,000 to $25,000
  • The ability to pay a comparatively favorable interest rate, typically ranging from an average of 10% to 16+%, relative to the higher rates often charged by alternative sources such as 25+% for cash advances, credit card changes and payday advances, among others
  • The ability to independently source funding from a anonymous third party lender, rather than face the potentially awkward experience of having to approach family and friends for money
  • The convenience of an online “banking-like” experience, whereby the borrower can apply for a loan online and monitor the results of their application and “lender hits” anytime, anywhere online.

Benefits to Lenders

Likewise, we believe our lending program offers several advantages and incentives for lenders to participate in our peer-to-peer community as below.
  • Compared to the estimated return typically earned on cash deposits, which can range from 2.0% and below, we offer lenders the chance to participate in an investment opportunity with average returns as high as 10% to 16+% on loans made
  • As part of the features of the company’s online lending program, lenders are able to diversify their investments in a portfolio of loans by electing to disperse their funds amongst one or several different borrowers. Additionally, a single lender may choose to provide just a fraction of a borrower’s requested amount, with the remainder coming from other participating lenders in the online community. By choosing to practice lending diversification, lenders should better be able to insulate their returns from the default of any one/few borrowers while still earnings superior returns
  • The convenience of an online “investing” experience, whereby the lender can create his/her own portfolio of borrower loans


Competitors are listed as follows:

Prosper was the first on-line peer-to-peer matchmaker which started in February 2006 and has over 600,000 users, over 10,000 deals and loans over $200 million. They were initially funded and founded by Chris Larson who founded E-Loan before Prosper.

In April 2007, Ebay moved into peer-to-peer lending space with the purchase of pre-launch, San Francisco based MicroPlace.

Circle lending started in October 2007 and sold a majority stake in the company to Richard Branson’s Virgin USA, re-branding itself as Virgin money. The site manages more than $200 million in loans between friends and family.

The Online Banking Report predicts that within five years, the total market for P2P lending in the U.S. could surpass 1,000,000 loans annually.

Resources Requirements

The resources and necessary know-how to create a successful online community for the purpose of conducting financial transactions, including the borrowing and lending of funds, are extensive. In addition to technical programming skills, the builder must have a thorough understanding of the complex laws and requirements of United States, on a state by state basis, that regulate the online banking industry and dictate its permissible transactions. Effectively, all code must be written to comply with virtually hundreds of laws at every stage and consideration of the transaction process, including the requirements of the Securities and Exchange Commission, the Department of Homeland Security and federal and state laws, among others. Failure to identify and comply with all of these laws as part of peer-to-peer provider’s business plan can delay, halt or even close down an operator’s efforts.

We have invested many thousands of man-hours, and the expertise equivalent of over one hundred years in the programming industry via 16 high level programmers to complete our fully automated Internet website. These efforts were undertaken to ensure all code comprising our platform is logically written to comply with the laws of United States. Furthermore, while we believe our website provides an easy-to-use platform for users, the actual technical framework behind our site is extremely sophisticated. We believe this level of complexity limits the ability of new players to easily enter the market.

Otherwise, we will utilize the proceeds of the investment to bring on senior management to the company. Because of the high automation of our website the personnel requirements for our company are relatively modest. We will also embark on a major marketing campaign to expand our client base. It is in discussions with major marketing companies to execute this program.

Potential Future Business

We are the only online peer-to-peer lending platform for the underserved, small loan market of sub-$25,000 that offers an array of additional credit and financing services to potential borrowers. At present, we do not use any of it own funds for making loans to would-be borrowers, rather the entire amount of funds invested in loans is sourced from other lender participants in the company’s online platform. Going forward, we may choose to pursue a “hybrid model” whereby loans to individual borrowers are sourced in part from the peer-to-peer lending community and in part directly from our own corporate funds.

We believe this hybrid model would be unique to the industry as, at present, the industry of online lending is comprised of players participating either solely as a banking organizations with the deployment of their own funds/customer deposits, or as a peer-to-peer operation where no “house” funds are involved.

Additionally, going forward, we envision extending our lending services small businesses seeking up to approximately $10 million in funding.


As of December 8 , 2008, we have two full-time employees, Marco Garibaldi and Edward DeFeudis. Marco Garibaldi is the CEO and Co-Founder, and Edward DeFeudis is the President and Co-Founder. Mr. Garibaldi and Mr. DeFeudis each spend in excess of 50 hours per working on behalf of the company. As we launch and begin to generate revenue, we will look to raise capital and hire 9 additional staff members over the next 12 months.

Read the rest of the filing here. In October Lending Club became the first p2p lending company to receive SEC approval. Prosper filed with the SEC on December 5th.