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Showing posts from July, 2013

Structuring Agreements for Profitable Outcomes

Risk is inherent in lending money.  Creative risk mitigation can help to ensure profitable outcomes.  Smart lenders design their loan agreements to ensure profitability in the face of excellent and terrible borrowers alike.  The interest rate and term of the loan is just the tip of the iceberg for a well designed, profitable agreement.

I chose this topic for an article after rereading the marketplace performance statistics at Prosper.com.  Even beyond my skepticism about their reports and the mathematical correctness of the figures, the outcomes are dismal.  Only the most well qualified borrowers yield a return over the lifetime of the loan – and them at a whopping 4%.  The overwhelming majority of loans end in a net loss.

Meanwhile, the hundreds of lenders I've talked to are reaping consistent returns – from modest to staggering.  One of the main differences between lenders using my Moneylender Professional software and lenders on Prosper.com is that professional lenders carefull…