CommunityLend, the Canadian peer-to-peer (P2P) lending startup, is seeing big growth in its recent subsidiary project Financeit. The more recent venture, which was released in January 2011, is an in-house financing solution run by the company aimed at home improvement businesses, vehicle and retail operations. Using Financeit, vendors can provide home-owners with immediate approvals on loans to help finance their purchases of things like door installations, kitchen cabinetry and more. The model has been so successful, in fact, that CommunityLend has actually pivoted away from P2P lending to focus on the merchant lending provider business entirely.
While CommunityLend will remain the name of the parent company, CEO and founder Michael Garrity said in an interview that the name will be phased out in terms of its product offerings in favor of the Financeit brand. The company’s growth numbers, released this week, tell the tale of why. Since launch, Financeit has done $70,000,000 in loan applications across over 1,000 merchant partners, and is on pace to cross the $100,000,000 mark sometime within the next few months (the company approves approximately 60 percent of all applications). Garrity explains how his company went from the P2P lending model to the one they currently favor.
“The market opportunity for this service [Financeit] was really created while operating the other business, from the massive exodus of a set of U.S.-based sales finance companies starting in 2008 after the U.S. financial services ‘meltdown,’” he said. “We kept both businesses operational for a while until it became evident just how much more scalable the latter business would be and so we closed the P2P business completely to focus solely on the larger opportunity.”
Financeit has caught on in part because of its value proposition to merchants, who can use the service completely free and receive the funds from CommunityLend’s financing partners in full as soon as the loan closes. Rates are competitive for consumers, too, compared to piling debt onto credit cards or higher-interest lines of credit, ranging between 6.99 percent and 12.99 percent for the three-to-five year loans. Borrowers also pay a small administration fee when the loan closes, Garrity told us, but the company makes most of its money from its lending partners in exchange for their brokering and management services.
Garrity credits a changing financial landscape in Canada as both cause of the model’s success, and the source of the company’s biggest challenges. “We have had to find our way in what can be described as one of the most tumultuous times in financial services history,” he said. “That said, industry change of this scale has led to market opportunity of this scale and our current model is growing at breakneck speed as a result.”
In the U.S. and the UK, former CommunityLend competitors in the P2P space like Zopa and LendingClub continue to prosper, but Zopa has cited recent SEC regulations as a barrier to getting into business in the U.S., and other regulatory concerns still hang over the market. CommunityLend’s pivot may have been perfectly timed, providing it an avenue to much more growth that would be possible by pursuing the P2P model, which for all its early promise, still faces an uncertain future.