Prosper, a San Francisco-based online peer-to-peer lending service with 460,000 members and $96.4 million loaned since its launch in 2006, announced today that it filed an S-1 form with the SEC in order to start a secondary resale marketplace for its loans. Prosper can't talk about the filing until it becomes effective—a date that's up to the SEC—but digging in to the 60 page filing does shed some light on what Prosper might be planning.
In short, it's an auction marketplace for loans. According to the document, if an original lender wanted to re-sell his loan, he would need to hold it for three months before posting it to Prosper's resale platform. (Loans bought on the resale market could be resold again without a wait.) For a listing fee of 25 cents paid to Prosper, a lender can auction the loan to the highest bidder. To sell at a fixed price, the fee is 50 cents. Auctions can run for three, five, or seven days and a seller must pay 1% of the sale price as a transaction fee if he successfully finds a buyer. Because the amount and term of the loan are already fixed, re-sale theoretically would allow buyers to earn higher return rates than the initial interest rate of the loan, providing they get a good price at auction.
Techcrunch points out a section of legalese which indicates that prosper expects to have $500 million in loans on its site in the coming year. That figure is also used to calculate the cost of the filing: $15,350.
