Peerform Making a Comeback With a New Underwriting Model


I first wrote about Peerform over three years ago. They had just launched and were looking to be the number three platform in the industry. But they failed to gain much traction and never established themselves as a viable platform.

But CEO and co-founder Mikael Rapaport clearly does not give up easily. Even though he never attracted the equity funding needed, he never closed his operation. And every few months he would contact me to reassure me that Peerform was still operational and one day they would get some momentum again.

Apparently that day has now arrived. Last month they closed on a new $1 million angel round and they now have a new Chairman, Gregg Schoenberg. I talked with both Rapaport and Schoenberg last month about the reborn Peerform.

Allowing Borrowers Down to a 600 FICO Score

This is the really interesting thing about Peerform now. They have created a new underwriting model that assesses risk in very different ways to Lending Club and Prosper. They call this approach the Peerform Loan Analyzer.

According to Rapaport their underwriting model will take a more holistic approach to assessing risk. Rather than having a strict 660 FICO score cutoff they believe that there are creditworthy borrowers all the way down to a 600 score.

“A borrower with a 620 FICO score does not necessarily mean they are riskier than someone with a 660 FICO,” said Rapaport when I spoke with him recently. “FICO score is not the best measurement for risk anymore.”

Two Products for Accredited Investors

Peerform is open to accredited investors in all 50 states and they have two product offerings just like Lending Club and Prosper: whole loans and fractional loans. Whole loan investors have a minimum investment of $250K, although if you are investing in loans with a $10,000 average (as stated by Rapaport) then most investors will want to put in more than $250K I imagine in order to create a diversified portfolio.

A couple of weeks ago Peerform announced that Looking Glass Investments will be investing in their whole loan platform. Given the supply constraints at Lending Club and Prosper I imagine they will not be the last institutional investor to participate on Peerform’s platform.

Issuing Three-Year Loans

Peerform will be focused on one product for borrowers: three-year loans. The interest rates will range from 7% up to 28% with 16 different loan grades. They are available for borrowers in 23 states with a few more states coming on board soon.

They have entered into a partnership with Cross River Bank, a New Jersey-based bank that is starting to make some inroads in the p2p lending industry. Cross River Bank will issue the loan and then immediately assign it to Peerform in a similar way that WebBank works with Lending Club and Prosper.

Series A Funding is Coming Later This Year

Peerform will need to raise more than $1 million in angel financing if they are to become a serious competitor in this space. And they do plan to complete a more substantial Series A round before the end of the year.

As Schoenberg put it, “We are not cursed by having an overabundance of resources.” That is certainly true but Rapaport also pointed out that unlike other platforms looking to get going they are well positioned to do more with limited resources. They have their entire infrastructure in place; nothing really needs to be added.

With this limited funding Rapaport expects to originate around $5 million in new loans by the end of the year. Once they close their Series A, the loan volume will increase.

Will Peerform Rise from the Ashes?

At this early stage it is difficult to tell whether Peerform will become a strong alternative to Lending Club and Prosper. But their timing is far better now. They will find it much easier raising institutional capital today than in 2011 when they first launched. And the VC firms are very interested in the space right now, more so now than ever before.

Having said that, it will not be easy. But Rapaport has shown tremendous persistence thus far. This persistence will serve him well as he moves Peerform into their second act. I wish the new Peerform team well, I hope they can continue to execute their plan and become a strong player in this industry.

  • Peter Renton

    Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.