Prosper Takes Debt Financing Bridge at 15% interest
American P2P lending service Prosper announced on their blog today that they had received a new round of “investment” from Nigel Morris of QED Investors, the founder of CapitalOne. This investment is much different than the previous $40 million in equity financing that the P2P lender has taken in the past, since this is a 1-year, 15% loan.
The loan is described in more detail in an SEC Form 8-K filing made by Prosper today. The note accrues interest at a rate of 15% per year, and the full $1,000,000 is due in two years on Nov 11, 2010. If Prosper takes additional financing of $5 million or more before the loan is repaid, the loan amount will be converted to preferred shares at the financing price. If not, the loan will convert to preferred shares at the Series C financing (Jun 2007) price.
Yet more financing will be needed to keep Prosper afloat until profitability. After shutting down in the fall of 2008 for SEC registration, then coming back in July of 2009, Prosper has had a rough year. Since reopening in July, loan volume has grown to over $2 million in October, but Prosper continues fighting an uphill battle against Lending Club, who saw over $6 million in loans funded during the same month.
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