Who Needs Equity Crowdfunding? Dealstruck Builds Crowdlending Market
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our next adventures. Not only did we become good friends quickly, but we realized we had highly complementary skill sets and decided to join forces on Dealstruck.
The Dealstruck CEO says individual investors are unhappy with the kind of returns available from traditional short-term, fixed income instruments. U.S. corporate bonds pay just above 3 percent, while average yields on investment-grade debt worldwide has been trading at record lows of roughly 2.3 percent. At the same time, many business owners are dissatisfied with their financing options amid much stricter requirements imposed by the banking industry following the excesses that triggered the great recession of 2008-09.
“Everyone is out there trying to find ways to juice their returns,” Senturia says. “It’s really hard to find anything that pays more than 3 percent.”
Dealstruck says it can offer investors more attractive returns at risk-appropriate rates between 5 and 15 percent. Borrowers submit their loan request online, and learn within 48 hours whether they are eligible to be listed on the Dealstruck website. Once approved, information about a business and its capital needs are listed on the website for a prescribed time, typically 30 days. The website also provides a way for prospective lenders and businesses to exchange messages about aspects of the deal. A borrower gets one loan (from a Dealstruck subsidiary) and repays the loan through one regular payment. Dealstruck administers the fractional payments to lenders, who essentially view their part of the deal as a fixed income investment.
The startup makes money mostly through fees that come with originating a business loan, although lenders also are charged a service fee, Senturia says.
Dealstruck combines a credit analysis of each deal offering with the ability for lenders to select the businesses in which they want to invest. In the process, Senturia says Dealstruck transforms small business debt into a potentially scalable asset class. He could turn out to be a bond trader after all.