LendingKarma poised to launch at Finovate

**Disclosure: This post has been edited. Since it's original posting, we have been contacted by Lending Karma founders with new information and have adjusted the post accordingly. Changes in bold.


Sometimes I just can’t get enough Karma.

Here’s another “Karma” company that will also be presenting at Finovate 2009 later this month. LendingKarma.com isn’t officially launched yet, but I used Google’s handy cache system to investigate further to see what they’re all about. They appear to be a re-branding of the San Francisco-based company LoanBack.com, which provides a system for generating promissory notes. (LendingKarma.com went live on 4/7/09). LendingKarma is not affiliated wtih Loanback.com, except that LendingKarma's founder was once a founder of LoanBack, but left the company a few years ago. Lending Karma is a compeitor but plans to add additional services in the near future.

I’ve investigated LendingKarma with the SEC and was unable to find a record of them, so I’m presuming the business model remains the same: To provide a system for creating a mutually-agreeable peer-to-peer loan. They offer services to “invite” someone to lend to you, based on the agreement you write up with the assistance of their system. They also provide email reminders to the borrower about payment. Both companies are based in San Francisco.

According to cached LendingKarma.com pages, rates for services vary from $29.95 to $59.95 per year.


In my house, I’ve recently had occasion to write up a simple promissory note for my ten-year-old daughter. I’m happy to loan her a little bit of money (I think the balance owed is $10.00) but I can see that later on in life, I would like to be able to loan her money in greater sums, with understanding the payment expectations. If I were to loan a teen or young adult money for a car or home downpayment, this might be just the product I need.

LendingKarma doesn’t appear to handle the collections but does remind borrowers of a balance owed, and tracks the amount outstanding, which could help manage both parties’ recordkeeping. It also provides a legally-enforceable promissory note. As the old adage goes, “good fences, make good neighbors.” This written agreement is tailored to be specific to the circumstances and may reflect a secured, or unsecured loan. Also, being enforceable could settle a financial dispute without damaging an existing relationship.

Jessica Ward is a freelance writer and blogger based in Seattle, WA. She also blogs at http://www.pennywisefamily.blogspot.com/.

P2P Lending Report: Disruptive service or market niche?

Veteran analyst Jim Bruene, who runs NetBanker, has just published a 48-page report about Prosper, Lending Club and Zopa - Person-to-Person Lending 2.0 - Disruptive service or market niche? As part of the research process he became a lender and a borrower at all three major U.S. P2P lending exchanges: Prosper , Zopa, and Lending Club. He also set up friends and family loans at Virgin Money USA and LoanBack.

The report was originally expected to come out earlier but due to the rapid changes in the market he delayed the report. As he explains on Netbanker, "I had originally intended on publishing it in early December. But as I was trying to wrap things up, Zopa launched its new U.S unit. So I stopped the presses and added an analysis of its unique model. Then as I was finishing that, Lending Club made a significant change last week, becoming a national lender instead of state-sanctioned one. That too is now in the report."

Here's the abstract:

Person-to-person lending is the perfect product for the Web 2.0-social-networked consumer. Why, then, has growth been relatively slow compared to other networked services? Because it’s a difficult business. Not only are P2P lenders competing with 20,000 other financial institutions for good borrowers, the are up against thousands of investment alternatives for funds to lend, all the while waging a fierce battle with fraudsters and deadbeats. It’s not a business for the faint of heart.

In this report, we look at the market as a whole, examining the strengths and weaknesses of existing products. We list opportunities both for web-based startups and existing financial institutions and lay out a ten-year market forecast. Finally, we take a close look at the four major U.S. P2P lenders: Prosper, Lending Club, Zopa and Virgin Money.

If you would like to have a copy of the report you can get it here. It's only $595.