P2Binvestor Loans Powered by Crowdfunding Denver Business Journal

Elisabeth Saucier of Zaza Raw and Doug Michaels of Noble Savage

This article originally appeared in the Denver Business Journal
by Monica Mendoza, Reporter – Denver Business Journal

Krista Morgan has spent about $2.5 million to develop a Denver-based lending company that blends the fairly new idea of crowdfunding with age-old idea of cash-advance lending.

She calls the financial mash-up P2Binvestor Inc. and launched in May 2014. By now, the company’s roughly 300 accredited investors have purchased $60 million in invoices — advancing lines of credit to companies of up to 90 percent of their receivables balance.

It translates to cash in hand for dozens of small Colorado businesses, said Morgan, CEO of P2Binvestor.

“The company’s aim is to improve access to working capital for growing businesses,” she said.

Morgan, 33, was working in digital marketing when she started studying marketplace lending. She liked the idea of peer lending and took a page from San Francisco-based Lending Club’s book when it went public last December and published its notes. But she tweaked her lending plan.

“The problem we see in the market is that the [typical] company does about $1 [million] to $10 million in revenue and they are growing 50 percent year over year — they keep needing more cash,” she said.

She assembled a group of accredited investors that loan money to business owners against their accounts receivables – money owed by their customers – as collateral. But she’s lowered the risk to investors because they can put a little money into a lot of deals, she said. They are not just matched up with one business, like in other marketplace lending programs.

“No one is tackling it the way we are,” she said.

Morgan is part of the wave of entrepreneurs entering the small business lending scene that some experts predict will shortly become a trillion-dollar industry.

“It’s a nice alternative for people to borrow money without going to a bank,” said Fred Taylor, president and co-founder of Northstar Investment Advisors LLC. “Banks are so regulated, it’s easier and quicker this way if you have good credit.”

Borrowers might save 2 to 4 percent, Taylor said, “and, that can be a ton of money.”

It’s not a lending model that would put community banks out of business, he said. But it’s something they should pay attention to.

“You might even see banks acquire these [companies],” he said. “The bottom line is this lending is still in its infancy and we don’t know yet what it will do.”

The risk for investors is that the businesses are just getting started and have little or no credit history. But the money is coming, said Elisabeth Saucier, founder and CEO of Boulder-based food company Zaza Raw.

Once she started working with a distributor, orders for her paleo, vegan and gluten-free desserts were picking up at a fast clip. In some instances she was waiting two months to get paid for her product. She took out a loan with P2Binvestor on her invoices.

“Oh my gosh, I have all this money tied up,” Saucier said. “When we get orders, we still have to buy the ingredients, pay the rent. But I have to wait 60 days to get paid. To have [P2BInvestor] cover this gap is tremendous.”

Morgan has 20 employees and she’s looking for the big billion payday that Lending Club got when it went public.

“We don’t want to go slow,” she said about her company’s fast growth. “We are a Colorado startup. It is our intention to build a big company. We want to build a big platform like Lending Club.”

David Pinster, an investor with P2Binvestor, said he expects to see more of this lending/investing model. It provides high yield with minimal risk, he said. He’s seeing 8 to 15 percent rate of return.

“It’s relatively liquid – 60 to 90 days liquidity,” he said. “You are not locking your money up for years.

“It takes an age-old way for a business to manage their cash flow but is modernizing it in a way, that frankly, is better for businesses. I think the whole crowdfunding sourcing is a trend that is going to grow. We are just at the beginning.”

Monica Mendoza covers banking and financial services, legal services, the economy and economic development, and sports business and contributes to the “Finance & Law” blog. Phone: 303-803-9230.

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