Peer-to-peer lending firm Prosper is in talks with a group of investment firms to sell $5bn worth of loans over the next five years.
The institutions in discussion with Prosper, which was valued at $1.9bn last April when it raised $165m in a round of venture funding, include Fortress Investment Group, Soros Fund Management, Third Point and Jefferies.
The reported talks come at a time when peer-to-peer online lending marketplaces face growing scepticism around the practice of funding loans by selling them to investors rather than using customer deposits, as traditional banks do.
Prosper also saw the volume of loans it facilitated dropping 12% in Q1 2016 from $1.1bn in Q4 2015, prompting a layoff of 25% of its staff.
Other companies in the space have also faced a difficult first half of 2016 with rival startup Lending Club’s CEO being forced to resign over falsification of loan data. This further damaged confidence in online, algorithm-driven lending.
If Prosper can successfully reach deals with investment banks, it will go some way to restoring belief in its loan-funding method, as well as highlighting mainstream financial institutions belief in the peer-to-peer model.
Under the reported terms of the deal the investment firms would pay face value for the loans and potentially receive equity in Prosper as they make purchases. This may also provide liquidity to some of Prosper’s existing investors who have pumped almost $355m into the five-year old firm.
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