I didn't realize it, but there is a bill to exempt small business loans that are crowd sourced from registration. According to Investment News, loans which are less than $5 million in aggregate and less than $10,000 per investor will be exempt from any filing requirements whatsoever. Apparently, this legislation is in response to the proliferation of peer-to-peer lending sites that are proliferating.
I have had a fascination with these site since they started appearing. I have taken a look at a couple of sites and am generally intrigued. The sites are dominated by individuals wanting to borrower money for personal reasons. However, there are some businesses seeking funding and some seem interesting.
The fundamental drawback for intermediaries is that there is insufficient information available on the borrowers to conduct proper due diligence. And the default performance of the loans bears out the skepticism.
I have reached the conclusion that these opportunities my be OK for my portfolio, but I could never fulfill my obligation for establishing a reasonable basis for recommending them to clients. Based on the website structures that I have seen, I don;t think that any independent intermediary could.
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