Table of Contents

Executive Summary...............................................................................................................................................................4
Financial Highlight.............................................................................................................................................................5
Company Overview...............................................................................................................................................................6
Who We Are...................................................................................................................................................................... 6
Vision Statement............................................................................................................................................................6
Mission Statement.........................................................................................................................................................6
Lending Options....................................................................................................................................................................7
What is Online Lending?....................................................................................................................................................7
Loan Originator..............................................................................................................................................................7
What is P2P Lending?........................................................................................................................................................9
Why P2P Lending?.......................................................................................................................................................10
How it works?..............................................................................................................................................................10
Efficient Lending Application Processing......................................................................................................................11
Secure Source of Investments......................................................................................................................................11
Know Your Client (KYC) Requirements.........................................................................................................................11
Role of Credit Advisors & Valuators.............................................................................................................................12
Regulations/Rules........................................................................................................................................................12
The Goals.....................................................................................................................................................................12
Characteristics of P2P Lending Company.....................................................................................................................13
Marketplace Lending.......................................................................................................................................................13
Balance Sheet Lending....................................................................................................................................................13
Unsecured Personal Loans..............................................................................................................................................14
SME Lending.................................................................................................................................................................... 14
Different Asset-based lending classes.............................................................................................................................15
Real Estate....................................................................................................................................................................... 15
What is a Senior Debt?................................................................................................................................................16
Bridge Loan..................................................................................................................................................................16
Development Finance..................................................................................................................................................16

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 Mezzanine Finance......................................................................................................................................................17

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 Auction Finance...........................................................................................................................................................17
Refurbishment Finance................................................................................................................................................17
Payment to Debt-holders................................................................................................................................................18
Short Term Financing Vs Long Term Financing.................................................................................................................18
Pricing................................................................................................................................................................................. 18
Starting Your Own Money Lending business.......................................................................................................................18
Investment Options for p2p company.................................................................................................................................24
Crowdfunding Online Platforms......................................................................................................................................24
AngelList......................................................................................................................................................................24
Crowdfunder................................................................................................................................................................25
Gust............................................................................................................................................................................. 26
WeFunder....................................................................................................................................................................26
Industry Analysis.................................................................................................................................................................27
Why Small Businesses Are Turning to Online Lenders.....................................................................................................42
Customer Analysis...............................................................................................................................................................43
Individuals................................................................................................................................................................... 46
Business.......................................................................................................................................................................46
Geographical Location........................................................................................................................................................47
United Kingdom..............................................................................................................................................................48
United States...................................................................................................................................................................49
Canada............................................................................................................................................................................50
China...............................................................................................................................................................................50
Europe.............................................................................................................................................................................51
Australia.......................................................................................................................................................................... 52
Developing Countries......................................................................................................................................................52
Competitors/Existing Business Models...............................................................................................................................53
Competitors.................................................................................................................................................................... 54
Technology Solutions for P2P companies............................................................................................................................55
White Label Crowdfunding by Rebuilding Society...........................................................................................................55
Mambu............................................................................................................................................................................55

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 Cloud Lending Solutions..................................................................................................................................................57
Madiston Crowdfunding Engine......................................................................................................................................58
Provenir...........................................................................................................................................................................59
Agriya Lending and Borrowing Script..............................................................................................................................59
Zidisha’s Open Source Platform.......................................................................................................................................60
Situation Analysis................................................................................................................................................................60
SWOT Analysis.................................................................................................................................................................60
Promotion of P2P business - Marketing Plan......................................................................................................................61
Print Media.....................................................................................................................................................................61
Press Editorials and Press Releases.................................................................................................................................61
Online Advertising...........................................................................................................................................................61
SEO and Pay-Per-Click......................................................................................................................................................62
Blogging..........................................................................................................................................................................62
Social Network Advertising.............................................................................................................Error! Bookmark not defined.
Word of Mouth Marketing..............................................................................................................Error! Bookmark not defined.
Mobile Advertising..........................................................................................................................................................63
E-mail Advertising.............................................................................................................................Error! Bookmark not defined.
Forum.............................................................................................................................................................................. 63
Aggregators..................................................................................................................................................................... 63
Lender Aggregation by Even Financial.........................................................................................................................63
CreditIQ’s Recycling Formula.......................................................................................................................................64
The Team............................................................................................................................................................................ 66
Technology Team.............................................................................................................................................................66
Finance Team..................................................................................................................................................................66
Audit and Compliance Team............................................................................................................................................66
Marketing and Customer Relationship Team...................................................................................................................66
Credit Team..................................................................................................................................................................... 67
Human Resources Officer................................................................................................................................................67
List of Famous Professional Networking Websites..........................................................................................................67
Financial Model..................................................................................................................................................................67

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EXECUTIVE SUMMARY
Technology has liberated the world, giving people the freedom to access anything anywhere.

Modern technology has provided limitless opportunities and ideas. The creation of the FinTech market
has allowed customers to explore areas of financing that were unheard of. This new arena has caused a
disruption in the financial market, allowing consumers access to cheaper and quicker sources of
finances. This has driven innovation and creativity, allowing people to lead the way to better ideas and
prospective businesses.

The rise of FinTech has changed the way companies do business. From crowdsourcing to mobile
payments, there has never been as much choice to entrepreneurs as there is presently. It’s never been
cheaper to not only set-up your business, but also to expand it.

Crowdsourcing, for example, allows people with big ideas to get funding quickly and easily from
anywhere in the world from people they have never met. Instead of months of investor talks,
entrepreneurs can – thanks to the shop-window that is the internet – pitch directly to the world. Those
with the magic touch can see the funds roll in within a matter of weeks rather than months.

When a savings account returns 1% and the interest rate on credit-card or loan is in the 10% to 20%
range, it is very clear that something is broken. This document explores the numerous opportunities
available for online lending, including P2P Lending, Balance Sheet Lending, Marketplace Lending, and
Online Lending Originator.

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COMPANY OVERVIEW

Who We Are
Vision Statement
To become a reliable and trustworthy source of
information whist promoting growth in a
potentially lucrative market of alternative
lending solutions that will assist people in
getting the term loans they need.

Mission Statement
To utilize a team of well-versed professional
experts that understand the lending market and
have reliable and complete information so that
people may recognize the many alternative
lending options available to them.

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LENDING OPTIONS

What is Online Lending?

Online lending has provided alternative solutions to people’s borrowing needs. People no longer are
bound by the traditional borrowing options that financial institutions provide. Financial institutions are
known for their strict policies and stringent procedures that often result in the loan being rejected. This
can cause a great deal of problems, especially when the borrower is in urgent need of money. Even when
the financial institution does approve the loan, the process is time consuming and the interest rates are
usually extremely high.

Advancements in FinTech and online lending have provided various options for people to choose from.
Although there are significant benefits of obtaining an online loan, the risks are still there and sometimes
the risks are even greater than obtaining a loan from traditional investment options.

Online lending brings together communities of borrowers and lenders in a common forum, or
marketplace. This allows lenders to match with borrowers at a convenient platform. There are
background and credit checks; however, they are not as thorough as those of financial institutions,
allowing borrowers to fulfil their financing requirements in a quicker more convenient way.

Loan Originator
Loan originator is the person/institute that provides the money for the loan. It is important to
understand who it is that is providing the loan in order to understand the risks attached. The term coined
for marketplace lenders encompasses all kinds of online lending. The main differentiator is based on the
origination of the loan. Usually, with P2P lending, the originator of the loan isn’t the actual company;
rather they act as an intermediary. However, in some cases, the intermediary company may actually be
the originator. In contrast to online loans, the originator of the loan is usually the financial institution or
company providing the loan.

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What is P2P Lending?
“Peer to Peer” or P2P lending (also known as crowd lending) is latest trend of online money lending. The
term P2P has be derived from “peering” which means different clusters with similar traits interacting
voluntarily in order to gain mutual benefits. Peering is used for internet connections and any
transactions that happen in between them.

The P2P Lending platform is revolutionizing the way in which asset based loans are dealt with. A P2P
lending network is used to create a platform for connecting borrowers and lenders. This is going to build
a relationship based on trust and values to allow them for investing their money for short-term. The
growing role of technology & networking in people’s lives makes it a big necessity that they have
opportunities to perform financial activities using this platform. Money could be required by anyone
anytime and so many dreams depend on having right amount of finances available on right time. This is
where P2P helps, because it’s quick and easy.

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P2P lending helps to find and connect people who want to lend money using untraditional ways. In
conventional lending, the role of a financial institution becomes mandatory. The lending process could
not be completed unless there is a financial intermediary between lender and borrower.

P2P networks are gaining momentum and popularity, becoming a well-established source of funding that
enable people to meet their liquidity needs in a shorter period of time as compared to financial
institutions.

P2P lending networks are becoming ideal for many people. The network is becoming stronger as more
people are participating by putting their trust and money into it. The biggest benefit of P2P is that it is
easy, fast and short-term and the criteria of entering into network is flexible too.

Why P2P Lending?

It all sounds good in theory, but what are the actual practical implications of P2P lending and why is it
the right type of loan option for you?

The biggest advantage of obtaining a P2P loan is time. Applying for a P2P loan is relatively
straightforward, unlike that of a bank loan. It is quick and simple and you get the money faster than you
would if you were to go to a bank. In addition, banks have tedious paperwork and background checks
that are more thorough and strict. P2P lending is more lenient.

Regulations - Since the emergence of P2P lending, there were many grey areas due to the relatively new
concept and idea. No one knew what to do with it. However, now, P2P lending is more regulated and
consumers are better protected. The regulations came into effect by the Financial Conduct Authority
from the 1st of April 2014.

The regulations require P2P lending firms to provide clear and honest information regarding the risks
associated with P2P lending and what can go wrong.

Furthermore, it is anticipated that firms will have buffer reserves of at least £50,000 worth of capital (or
more for bigger firm).

One major advantage for borrowers and lenders is that their contract is directly with each other. If the
P2P firm was to file bankruptcy, the money will still be owed.

The P2P rates are also fixed, they do not fluctuate. Even if you make a late payment, you will still pay the
same amount of interest.

How it works?
The P2P lending network should be based on strong and well-developed technology infrastructure. The
loans given are provided by a collected pool of funds or investments in the company. The interest rate is
based upon benchmark interest rate index (for example LIBOR), plus any adjustments required to

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eliminate risks. Any individuals who are already engaged into lending the money to the clients are
enlisted into a database and this increases the amount available for lending. Similarly, the P2P company
also partner with other secured lending firms to collect a certain solution for monetary cash flows. A P2P
company will work with lending once there are enough funds supply channels available for lending
purpose. It is possible that a lending company starts by focusing on single asset class and then expand its
business by gradually catering other asset classes as well.

Basically, you sign up for an account and become a member of any chosen P2P lending website. This P2P
lender becomes the intermediary to do all the legal paperwork, recordkeeping and oversee transactions.

Efficieient Lending pllcicieaonon Procieessing

The whole P2P lending business is based on efficiency and quick-processing. People show interest in P2P
as it is an urgent way of getting money supply for their needs. It is very important for a P2P lending
company to have a well-developed system for its functions. Any delay or short-comings in the processing
of lending applications could result into losing the overall impact of P2P lending system.

Secieure Sourciee of Investments

It is essential to have a diversified pool of generated funds. It is not possible to lend the money to others
if the company’s own fund stream is not regular and certain. In order to make sure that we have proper
channel of investments, we diversify and seek for financial security for our own business’s foundation.

Know Your Ccient (KYC) Requirements

This is criteria upon which the loan is approved. All the necessary details of client should be known and
verified as well including any details regarding collateral against the loan. Customer’s eligibility is also
taken under consideration by knowing his credit history & any frauds committed or misinformation.

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 •When a Customer approaches for loan application, we obtain
necessary information from the customer
KYC •Customer provides the documents required
Information

•Documentation provided by the customer is verified and assesed

Verification taking into consideration the viability of approving the laon to
and customer
Assessment

Property
Documenta •Compliance Officer checks and legalize the paperwork according to
tion and the regulations
Valuation

Loan
Approval •The Credit Analyst obtains all the information and reviews customer's file.
and •Once verified, customer is given required loan after making a match
Disburseme with lender
n
t

Roce of Credit pdvisors & Vacuators

The credit advisors and valuators are partners of a P2P in order to verify or evaluate the credit details
and valuating the worth of asset used as collateral. Third party valuators and advisors help to save costs
and also give the services of specialists that a company could not hire otherwise.

Regucaonons/Ruces
P2P lending companies’ websites in UK are now regulated by Financial Conduct Authority from 1 April
2014, which has increased the level of trust by the lenders and borrowers both. The minimum capital
requirements of £50,000 are also introduced and this will become operational by 2017. The minimum
capital requirements help the company in bad times and it works as buffer in times of shocks.

P2P lending regulations in US are checked by SEC after 2008 and some major credit rules also apply. The
privacy, security and anti-money laundering laws are applicable. Fair credit reporting and fair debt
collection rules as stated by country’s law should be abide. After the bankruptcy of many financial banks
and institutions after 2007, SEC had to enter into the regulatory authority for P2P lending market. New
entrants in P2P lending must pay the registration expenses for their securities and compliance services. It
is very important for a P2P to maintain its name by assuring that it is vigilantly following the regulations
and rules of the authorities.

The Goacs
The goals for any P2P establishment could be:

 Having a P2P lending network for different or specific asset classes

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  Creating market awareness for P2P lending ways
 Competing with other P2P lenders in the market
 Establishing a competitive human resource structure
 Working under the supervision of regulatory authorities of respected country
 Collecting legal documentation
 Verifying the data provided

Characieterisoncies of P2P Lending Comlany

No relationship
Profit Based Plays role of
between lender &
Company Intermediary
borrower

Lenders are given

Unsecured loans/
Online opportunity to
Unapproved by
Transactions choose the
Government
borrowers

Loans could be
sold to other
lenders as
Securities

Marketplace Lending
Marketplace lending is a new term that is being used to describe P2P lending. They are basically the same
thing; however, the term marketplace lending is being used as Peer-to-peer lending can be misleading.
Marketplace essentially means a space where commercial dealings occur. The online space is where these
dealings between borrower and lenders take place. This term simplifies what P2P lending is as it grabs the
essence of what is actually happening more closely and is a much clearer term than P2P.

Balance Sheet Lending

Balance sheet lending is similar to P2P lending; however, the money flow is different. It is established in a
similar way; the borrower contacts the lending firm to apply for the loan. In contrast to P2P lending
where the money is provided by another lender and not the intermediary firm, a balance sheet loan is
provided by money that has already been invested in the intermediary firm. So, the originator of the
loan is the intermediary. Balance sheet loans can come from other proprietary capital or from investors.

Unsecured Personal Loans

Unsecured personal loans are a form of lending whereby a borrower is given cash by a lender based on
an initial assessment of the borrower’s ability to repay the loan. Given that there is greater risk of default
involved, unsecured personal loans tend to have greater interest rates attached to them. However,
personal loans are an easy way to get quick cash financing. Another great thing about unsecured
personal loans is that they do not come with strings attached; the loan can be utilized for any personal
expense, including medical bills, student fees and weddings. The lender gives the borrower cash for a
fixed interest rate and the borrower has to make a monthly payment to the lender over the tenure of the
loan to repay the loan. The cash is usually given in the full agreed amount of the loan.

SME Lending
Small and Medium Enterprises, by definition, are usually start-up companies or other mid-sized firms
that do not have the funding nor the capital to invest and compete against the big players in the market.
However, SMEs are significant to the overall economy, as the stimulate growth and encourage positive
competition between firms. In the end, the customers’ benefits as they have more options to choose
from when purchasing their goods/products.

Given that SMEs are different from individuals, the type and size of loans available for SMEs also differ.
Angel investments, venture capitalists and crowdsourcing are extremely popular sources of investments
for SMEs.
Payment to Debt-holders
In all types of real estate financing options, the type of loan could be: Senior, Bridge or Mezzanine. The
Senior debt is usually safest due to its seniority in case of liquidation. The Bridge is the short-term loan
and works to fill any short periods of time where any other loan option is not workable. Mezzanine helps
to eliminate risks but it comes after the senior debts but before equity.

Short Term Financing Vs Long Term Financing

A loan with the short-term period has a duration of around 1 year. The shorter the duration, the less
risky it is. A P2P has to understand carefully if it wants to engage into short-term financing or long-term
financing. Some companies offer both to allow a large group of investors and borrowers to connect with
them.

PRICING

Pricing is the most technical part of any company. Usually, the pricing strategy is directly related to
company’s major goals. For a P2P, the element of low cost and short-term solutions for financial needs,
entitles it to work accordingly. The rates of interest are variable and adjusted in order to maintain a risk-
free portfolio. The interest rate benchmarks help a lot to figure out the pricing strategy.

STARTING YOUR OWN MONEY LENDING BUSINESS

A money lending company is a kind of business which is going viral day by day and becoming more
powerful. It’s all because of the fact that people are now being affected by economic crisis. Money
lending business usually provides the opportunity to the people to gain credit in different ways whether
by means of credit cards, personal loans and other types. The market for money lending companies is
already saturated by big banks , tycoons and other major business that have enough money to lend
people who need it the most. People need money nowadays and that’s why venturing into a money
lending is a massive idea. Furthermore, traditional lending methods (borrowing from financial
institutions) has become an extremely tough and hectic tasks. These institutions require a lot of paper
work and background checks. Market lending has opened doors to alternative and much simpler
borrowing methods for people. That is why the market is growing more and more steadily.

Starting small in the money lending business is a good idea. By establishing your base and focusing on a
small target market, you can attain an investment pool and expand your portfolio slowly. Starting small
will also help you learn your business better and will help you understand the risks of running a lending
business in a practical manner. There are many money lending firms that focus on small market that
provide money via check cashing, payday advance, loans and other credit services. If your business
startup is small you, are already doing it great.
Starting small can also mean operating online. However, having an office can greatly help attract more
clients. Location matters. Choose a location that is accessible and professional. People will not hesitate if
your office is located in professional place and is aesthetically pleasing. If your office and location is not
up to point people might feel uncomfortable about lending/borrowing money from you. Show them that
your environment is friendly and you are the right answer to their problems. Clients will not be scared in
acquiring your services when you have a presentable and sensible office. Furthermore, you should
display your service fee and rates in a professional manner so that customers can easily understand
them. This also demonstrates to customers that you are not trying to hide anything from them, by
displaying all your fees and rates upfront so that they know there are no hidden charges.

Once you have determined your target market and office location, start strategizing a marketing plan in
order to attract people. By planning your marketing strategy, it will help you focus better. This way, you
can also manage your costs by avoiding marketing campaigns that you know will not have the desired
effects on the target market. Research is essential here. Make sure to build a social network too so that
people can refer you to others.

Starting this kind of business takes a lot of money, concentration and effort as well. There are many right
and wrong type of ways in lending. Proper documentation is necessary in your business to keep track of
the money flow. It should be well written and easy to understand and trace documentation. Using a
professional lawyer will make this a much easier task. Contract drafting should be outsourced to a
lawyer. This way you can avoid loopholes and potential fraud opportunities in your contract.

If you are looking for a lead on how to get going, you can download our operational Gantt Chart
developed using an Office Excel Worksheet Template.
As you can see, a majority of private companies are using crowdfunding to gain access to money. This
shows the potential in money lending markets. You may choose to target individuals, initially, but shifting
your focus on small private organizations will help you get a good market share.

UNDERWRITING MODEL

What You Need to Develop an Underwriting Model

What is an Underwrionng Modec
Credit Underwriting is where all the credit magic actually happens. After receiving a loan application, any
financial institution needs to analyze and assess the credit worthiness of the applicant. Each financial
institution has a defined process and procedure that scans and vets each of the applicants through a
series of tests. These tests determine two things, whether the individual has credit worthiness and
sufficient disposable income to be granted a loan and how much of the loan to provide. This also
considers the pricing structure of the loan.

What to Consider When Prelaring an Underwrionng Modec

An underwriting model will determine whether a customer is capable of repaying a loan at a determined
price in a defined time period. The underwriting process is basically assessing the credit worthiness of
the individual as well as the risks involved. Lending companies have created algorithms as their
underwriting model. In order to develop one for yourself, you need to analyze the type of lending you
are providing as this will serve as the base of the underwriting model. Different loans will have different
risks even though the major risk default risk. An underwriter plays a crucial role and having a proper
underwriting model will help you reduce significant risks. Your underwriting model should define an
algorithm that takes into account the following parameters:

 Credit History and credit worthiness (you can use a credit bureau to do this)
 Age
 Residential status (Owned/Rented)
 Existing Debt Obligations
 Loans with other financial institutions
 Salaried/Self Employed
 Employment/Business History (Background checks)
 Salary/Business Turnover (Bank Statements)
 Disposable Income (Gross Income – Existing Debts)
 Ownership and Valuation of Collateral (if any)

These are a few critical elements that you need to consider. However, if you have more parameters, it
will help you minimize your risks better.
Market Lending
Value of global peer to peer lending from 2012 to 2025 (in billion U.S. dollars)

Market of lending business is growing rapidly, but still it remains a relatively small part of the $3.3 trillion
U.S. consumer lending market. By far the largest market place lender, during 2014 lending club increased
its loans incredibly from $1.8 billion to $2.8 billion.

But during the same period, the online platform posted $32 million loss. It would not be surprising to see
some consolidation (either among themselves or with traditional lenders) and market exit given the very
low loan volumes and lack of profitability at most marketplace lenders.

The original innovation with marketplace lending is the ability of liability holders to invest directly in
specific assets. A decade ago this was the heart of the original peer-to-peer model. However, as
institutional investors have become the dominant liability holders, marketplace lending has become
much more passive and allows for the financing of large portfolios of consumer loans. In this way, online
platforms have become networks that allow potential investors the ability to lend to consumers without
having to incur the fixed costs associated with the origination platform.

Marketplace lender websites offer a variety of statistics about historical ranges of interest rates paid by
borrowers, net yields received by investors by risk class and information about their loan performance.

On average, marketplace loans perform similarly—but carry lower interest rates—than credit cards.
Research provided by Cleveland Fed Senior Research Economist Yuliya Demyanyk and Research Analyst
Are marketplace lenders underpricing in an
effort to gain market share and achieve
minimum efficient scale, or do they maintain a
potentially sustainable advantage in terms of
more accurate credit-scoring models, more
efficient information technology systems, or
more pronounced network benefits? Do the
online platforms benefit from lower overhead
costs by not maintaining physical bank branch
networks and avoiding certain regulatory
burdens (at least compared to depository
institutions)? Or are marketplace lenders simply
eroding excess profits earned by incumbent
consumer lenders?

The answer is yes, these potential explanations

are not mutually exclusive. The U.S. Treasury
recently issued a Request for Information seeking
a better understanding of the potential social
benefits and costs of marketplace lending.

The lenders tended to be individuals when P2P

lending began in the mid-2000s. The last several
years have seen a large increase in the number
of institutions, professional traders, and
investment funds acting as lenders. The entry of
investment funds gives lenders (investors) two
ways to participate P2P lending:

1) an individual lender to borrowers.

2) An investor in investment funds where the

funds lend to the individuals.

It would not be wrong to say that Zopa, Prosper

and Lending Club, are P2P market leaders. They
started their operations in 2005 & 2006
respectively. The totally amount of loans
originated by both companies is $6 billion
approximately. The overall purpose of these
groups was to eliminate the role of intermediary and providing easy access to credit markets. The loans
are mostly unsecured, due to which the risk is higher but the interest rates are fixed by carefully
analyzing mutual requirements of lender and borrower.

The P2P markets are growing rapidly as more professional investors and traders are putting their money.
The P2P lenders have options to lend their money directly to some individual borrowers or just invest in
the funds. Today, around 80% needs of the capital are provided by big P2P names, Prosper and Lending
Club, and the individuals seeking for money contact them for finding lending peer. The lenders of today’s
P2P markets have institutionalized themselves.

Other countries are also establishing P2P lending channels now with the rise in using ecommerce and
internet-based services. Technology is still new in many countries and the ways of conducting businesses
are not as well-defined as they should be. With time, the P2P lending trends would be adopted by all
countries. Few existing P2P are conducting international lending services too. In 2009, Zidisha became
first company to serve beyond international borders.

Lending Club and Prosper are almost exclusively focused on funding consumer debt and other verticals
in the online lending space have been similarly infiltrated by institutional capital.

Both SoFi (P2P lending for student loans) and Funding Circle (P2P lending for small businesses) were
originally started as true P2P lending platforms are now being flooded with institutional and Wall Street
money.

More capital for borrowers and greater scale for the platform than would be achievable solely through
individual lenders that is why proponents of this shift argue that it is good for the industry. Although this
argument has some merit, opponents argue that by eliminating peer lenders, the disruptive force of
platforms like LendingClub and Prosper is being only partially realized. The British based P2P lending
platform ZOPA would beg to differ to those that argue institutions are necessary to scale. ZOPA has thus
far focused only on individual lenders and has managed to originate over $1 billion worth of loans since
inception with a default rate of less than 0.5% as the only true P2P lending platform for consumer debt.

It’s even possible that there is a certain synergy between banks and emerging P2P lending platforms that
is not at first obvious. Just for example, platforms like Funding Circle and Ondeck have forged referral
deals with traditional banks that now refer borrowers to these platforms. That is because these
platforms are willing to make smaller loans than most banks are interested in pursuing. In that way,
these platforms are meeting needs that banks just can’t or won’t.
CUSTOMER ANALYSIS
One of the biggest attributes of P2P markets is its diversity and wide borrower base. P2P lending does not
discriminate on the basis of age, gender, race, ethnicity and any other demographic element.

Individuacs
By looking at the recent trends in P2P markets, the borrowers base usually includes young or middle age
people who are more enthusiast to seek money and do not have much time to waste with banks and
other financial institutions for their credit worthiness procedures. Every loan seeker who is amateur in
the credit market and has got minimal chance of being accepted as a prospective borrower from other
institutions is “target customer” of a P2P. The age group usually does not matter but it is a fact that there
are always higher chances of younger slot to apply for loan programs due to their responsibilities and
financial needs. It is also noted recently that as the internet is becoming more accessible and even older
people are now putting their trust in using online financial transaction and e-commerce, it is also
effecting P2P borrowing used by older people. The age range of P2P borrowers is between 20 to 55 years
of age but highest number of applicants are usually under 30.

In P2P, customer’s background check matters a lot, like educational background, schooling, college,
employment, business ideas, residential area and any other personal details. The focus is on evaluating
the borrower by using data apart from the credit history or worthiness. The individuals with “Earning
Potential but Low Credit History” are facilitated by P2P markets.

Intention of using money by these borrowers usually fall in these categories:

 Business
 Wedding
 Event
 House
 Education
 Car
 Medical
 Debt Repayment

Business
Businesses seeking loans for startups or expansions usually go for P2P now and many of these businesses
know that if they will contact a bank or any other business financing method then they would be rejected.
The chances of businesses to use P2P lending are higher as the businesses now develop and grow within days.
The interest rates found over P2P markets are around 8.2%. Any business who borrows once through P2P
market is more likely to borrow again; which is good news for P2P lending companies.
Developing Countries
The P2P lending is a lot more helpful in any under-developed or developing country. The needs to obtain
loans for a better economic situation in these countries are higher. Due to the presence of internet and
online banking, people are now familiar with how things happen online. The level of trust is present but
not all developing countries have adopted legal structures for establishing their P2P lending markets.
Perhaps things become more systematic with time but currently, many P2P companies are just focusing
on big countries. Asian markets are considered very suitable for P2P operations as the size and
prospective financial growth of these regions are higher.
COMPETITORS/EXISTING BUSINESS MODELS

Borrower Applies
for Loan

SIgns up to
Marketplace Firm

Marketplace
Lendor does
background
check

Matches Borrower
with existing
Investors

Connects Lendor
and Borrower
 Borrower Applies for
Loan

SIgns up to
Marketplace Firm

Marketplace Lendor
does background
check

Marketplace uses
existing investment
to provide funds

The lenders earn revenue through loan origination and providing services. Loan origination fees vary
depending on the value and amount of risk for the particular loan. (i.e Prosper charges between 1% to
5% of loan amount). At the time of sale as compensation for its loan origination activities these fees are
charged by the partner bank and then transferred to the marketplace lender.

Servicing fees vary based on investment. Note: whole-loan purchasers pay a monthly servicing fee of
around 1 percent per annum on the outstanding month-end principal balance of loans serviced while
certificate investors pay 1 percent of each monthly payment amount received.

TECHNOLOGY SOLUTIONS FOR P2P COMPANIES

Technology supports all types of businesses these days and there are many already established solutions
for P2P companies who want to start their operations. The good thing about these already available
solutions is that you can save a lot of time and cost by using them. People often think that technology
solutions are costly if purchased but if development costs of individual IT based solutions are compared
then it could be clearly seen that the readily available IT solutions are not just cost-effective but include
many features which could be overlooked by companies.
Here are some IT Solution providers that support P2P companies:

White Label Crowdfunding by Rebuilding Society

URL: https://www.rebuildingsociety.com/

White Label Crowdfunding provides a lot of services to the newly built P2P companies. The
entrepreneurs could start by contacting them by filling a questionnaire. The offer a Project tool and all
the information about it is available on their website. The good thing about White Label Crowdfunding is
that it is available for P2P companies operating internationally.

Mambu
URL: http://www.mambu.com/

Mambu claims to provide services to alternative lending origination companies to start their
independent services with minimal head count and investment. Mambu’s co-founder and CEO explained
how this is done:

When asked how long and how much it will take to start a new originator Mambu’s team answers that it
very much depends on the business plan and geography. They have had startups who, for under $100k
and with a small founding team, did the first loans within 3 months. They have had other customers
whose plan was to start a bank and it took them several million dollars and over a year to obtain the
regulatory licenses they needed.

Mambu was launched in 2011. Their original vision was to develop technology to enable financial
institutions to offer access to products for the billions of people who had just gotten access to smart and
dumb cell phones around the world. Mambu is based in Berlin, Germany, and has grown to 35 people
since it was launched. The company recently announced they raised 8 mil EUR in funding to accelerate
their growth and expect to increase their headcount to 70-100 people by the end of 2016. Their focus is
now on growing the sales, marketing and business development teams with plans to open offices in the
UK, Americas and Asia.

Mambu now provides mission critical software at 140 sites in more than 30 countries. Their customers
are alternative lenders (p2p, marketplace personal and SME lenders), deposit taking institutions and
mobile banking providers. Nearly three quarters of their customers are lenders (originators).

A typical lending originator technology platform is composed of multiple pieces:

 A customer facing front end. This is typically a website with forms. Most companies choose to
develop the front end in house as it is critical for their customer experience and their
differentiation.
 A core system which typically contains all basic operational logic rules and provides reporting.
 An underwriting engine. This piece will typically receive data from other pieces (customer facing
application data, credit bureau, social platforms data and other data sources) and will typically
score the application. Its job is to calculate the probability that the applicant will default.

In Mambu’s experience while there are some technology firms who do provide front ends and
underwriting modules these pieces are often built in house by the newer FinTech companies. This is
because most companies differentiate themselves through their customer experience and acquisition
experience and therefore the customer acquisition technology. And the same applies to the
underwriting technology and know-how where many new companies like SoFi, Avant and more are even
talking about stepping away from using FICO in the US all together. Furthermore companies who
typically provide these technologies typically offer very large and very expensive packages which are not
suited to the needs and budgets of new alternative lenders but were in fact designed for banks.

Mambu’s offering is a Software-as-a-Service (SaaS) for lending or banking institutions very much like an
Netsuit (for ERP) or Salesforce (for CRM): its developers can connect via APIs to multiple systems for
front end, underwriting and anything else they need and the users have a modern web front end for
configuring products, workflows an reports.

Unlike other SaaS providers who charge either per company or per seat, their business model is to align
their fees with the key performance indicators of their customers. In that way they will charge
proportionally to the assets under management of a p2p lender, the total revenue generated for a
consumer lender, or the total deposits for a depositor company.

The pros and cons of renting vs buying vs building are quite standard in most industries. Mambu explains
that the core engine is mission critical. Companies want a system that works, is flexible, cost effective
with a reasonable time to market. Therefore companies can’t rush either the development or testing and
struggle to engineer something flexible for anticipating future needs. The advantage of a SaaS solution is
the availability of a proven reliable and operational core engine which takes configuration to be
operational much faster, has been proven to work and for a clear and predictable cost.

Mambu sees most of the FinTech innovation right now taking place in the US and UK because of the
accessibility to know-how and experienced teams, means and capital. In their view it is the emerging
markets that will be a much more interesting, larger and hot market in the near term. This may be the
case because in these new geographies alternative lenders do not have an existing established, well-
funded and strongly regulated lending ecosystem to fight with for the market.

However who knows how long it will take for alternative lending originators to overcome the
underwriting, source of funds, vague regulations and all the other obstacles to creating a proven lending
industry in these developing geographies?

Cloud Lending Solutions

URL: http://cloudlendinginc.com/peer-to-peer-lending-software-cl-marketplace/

Cloud Lending’s solutions typically constitute mission critical back office systems for clients. The
company leverages Salesforce.com’s platform as a delivery mechanism, using their infra and data center
to build applications for p2p lenders. This gives them an added advantage of a big name safety
apparatus, this is vital as lenders are extremely paranoid about security and with the Salesforce brand
behind them for cloud infrastructure; it becomes easier to convince clients to trust a start-up software
company. The company provides a suite of applications that cover the entire lifecycle of loans, from
origination to syndication to servicing. This creates an obvious question that tech being the biggest
differentiator between p2p lenders and traditional finance companies, are p2p lenders not signing away
their originality and risk becoming a me too player in the market.

Snehal Fulzele met Darpan Saini at Carnegie Mellon University. Both were pursuing a Masters Degree in
Software Engineering and went on to work at companies like IBM, Adobe and Oracle. The founders being
immigrants could not get a credit card and were declined by both Bank of America and Wells Fargo.
While researching for alternative sources of funding, they stumbled on to alternative lending sites like
Lending Club and Prosper. It was at Oracle, while working on Flex Cube (a core banking platform) that
they realized the need for an enterprise tech solution for such Fintech lenders. Enterprise software
solutions were only available for banks and nobody was specifically building a technology infrastructure
platform for catering to the new aged lenders. Considering the traction in cloud, they developed an “end
to end lending solution built natively on Salesforce.com”.

The company was founded in November 2012 with its headquarters in San Mateo. The company has
grown to over 90 employees and now has offices in Bangalore and London. The company raised a pre
series A of little more than 2 million dollars and closed an 8 million dollar series A in August 2015. The
round was led by SF Capital (investors in OnDeck) and COTA, Kodak and Green Visor Capital also
participated in the round. The company’s first customer was Propel Financial Services, a traditional
lending company focused on property tax financing. It has now over 80 customers across 22 countries;
with 50% traditional finance companies and 50% emerging Fintech companies. The start-up is built on
Software as a Service (SaaS) model, where the company does not sell the software as a product but
instead charges the customer on a monthly per user basis. Cloud Lending Solutions digitizes origination,
underwriting, servicing and collections, creating a single system of record for your lending operations.
Clients include banks, traditional finance companies, online lenders, and marketplace platforms. Among
their customers they count Capital Good Fund, Juhudi Kilimo, Encore Capital Group, Dealstruck , Mission
Asset Fund and more.

Snehal, the co-founder and CEO of the company in an interview with Lending-Times.com explains that
each customer has a unique lending model. Their secret sauce is the algorithm on the basis of which
they decide to fund a borrower and at what rate, the rest of the tech involved is similar to a core banking
system which is just a facilitator and adds no value to their business. Cloud Lending is helping them setup
a marketplace in as little as 90 days, this helps the lender in getting the first movers advantage in their
particular niche and more importantly they can start testing their algorithm to iterate their lending
models accordingly. The platform has been developed keeping flexibility in mind. The customer can build
multiple applications on top of the cloud infrastructure to meet his evolving requirements. The company
has complete p2p functionality which supports both Zopa like pure retail model and Prosper like
combined (institutional and retail) model. The end to end solution can cost anywhere between 100 to
200 thousand dollars a year.

Cloud Lending has been able to bring companies like Lending Point, New Zealand based Harmony and
Dealstruck on board as customers. It has been able to tap developing markets with Lenddo (Philippines
and Colombia) and Juhud Kilimo (Kenyan Farmers). The company seems to be winning the buy versus
rent question with its focus on speed and having an experience of serving more than 80 customers
worldwide. The company also touts a 60% lower operating cost as compared to building the
infrastructure from scratch. But as a lender grows, it is difficult to imagine the customer sticking with
Cloud Lending and not building its own systems. This is a question which the founders would be
aggressively trying to address.

Madiston Crowdfunding Engine

URL: http://www.madiston.com/

Madiston Crowdfunding Engine is a well-established P2P services platform. Madiston’s software is based
on all essential networking and P2P elements required.
SITUATION ANALYSIS

SWOT Analysis
We will conduct a SWOT Analysis for the P2P market. It will contain a graphic table which will list down
the strengths, weaknesses, opportunities and threats that exist in the P2P lending business. We can
provide a general list as well as a detailed analysis depending on what you prefer. Usually, SWOT is
relatively straightforward and even a basic list can provide sufficient information to the reader.

INNOVATIVE PRODUCT
FEATURES
HIGHER RISK
LOWER FEES
ASSOCIATED
AVAILABILITY OF FUNDS
LOW START-UP COSTS
TIME SAVING

INCREASING PROSPECTIVE OF WELL-ESTABLISHED

FINTECH COMPETITORS
POTENTIAL AND DEMAND IN LOCAL LAWS AND
P2P LENDING NETWORKS REGULATIONS
HIGH DEMAND FOR SHORT- PROPENSITY FOR
TERM LOANS DEFAULT ON LOANS
PROMOTION OF P2P BUSINESS - MARKETING PLAN

For a start-up company, one of the most difficult tasks is to create brand recognition. Many start-up
businesses have not been able to achieve their expected potential due to failed marketing and
promotion strategies.

Many brands fall into monotony because they lack the factor that ensures their product stands out from
the rest. Addressing the appropriate channels and strategies for promoting and marketing the product
can be a decisive influence in gaining the competitive edge.

Print Media
P2P Company will have to introduce itself and its idea’s importance in the print media, therefore,
business journals, magazines and newspapers will be utilized to do it. The old school ways are still
considered effective because they have their own charms. The appearance in print media also helps to
build a brand name. The target number of viewers of the advertisement would be large and the cost
would be less as compared to other means of advertising. The flyers and brochures could be distributed
to new startups as well to keep them updated about benefits of using P2P as a source of financing.

Press Editorials and Press Releases

Public Relations is an effective way to create brand recognition in the industry. The difference between
advertising and public relations is the way they are perceived by the audience. Adverts are aimed
specifically to promote a product, being biased as to create sales. The consumers may approach the
advertisements with doubt. On the other hand, public relation is a form of communication with the
public and media to reinforce a positive brand image. The information is communicated through a third-
party rather than directly by the organization; therefore, creating a sense of credibility regarding the
source of the information and its content. Public relations can be used in consonance with advertising as
an effective marketing strategy to introduce a brand and create a positive image regarding the brand’s
ideologies and culture while acknowledging the target audience. The appearance in print media also
helps to build a brand name. The target number of viewers of the advertisement would be large and the
cost would be less as compared to other means of advertising.

Online Advertising
Online advertising is taking center stage in the world of marketing and promotion strategies. Because
they are cheap and provide a wide target audience, many startups prefer to use online advertising.
Online advertising has many facets, including social media marketing, search engine optimization,
blogging, content copywriting and many other display advertisements.

Online advertising is also useful in keeping track of the target population. Companies can easily trace
how customers react and interact with these online advertisements, allowing companies to modify their
approach so that the more effective methods are focused on. Given that we live in the era of the
Internet, online advertising is going to continue its prominence in the advertising landscape.

SEO and Pay-Per-Click

SEO is currently the most effective online marketing strategy. It is a method used to improve search
engine results. By using proper content management and writing techniques, the company can improve
its website SEO to increase its online visibility. SEO campaigning will push the website to the top of the
list when people search for certain keywords. The higher up the company is in the search results, the
better. Being the number one search result takes time, but an effective SEO campaign will get the
company there.

Blogging
Blogging is an effective marketing strategy that helps generate inflow and spark interest in your
company. Blogging helps a company create a web presence. Furthermore, with the implications of
Search Engine Optimization techniques, blogging will make a business more prominent in a short span of
time. Every company must maintain a blog that will help attract individuals to the social media webpages
as well as to illustrate a more thorough portrayal of the beliefs to their readers; to promote and aid
startup businesses and individuals in need of finances. Blogging also helps to generate traffic and
promote the website.

Social Media Advertising

Social media has become an extremely powerful tool used by companies all around the world to
promote their business. Social media is not just about keeping in touch anymore; effective marketing
strategies on social media will help improve your online presence. Social media advertising is linked with
word-of-mouth marketing; this means the company has to create a brand image that can go viral.

Another benefit of social media marketing is the ability to directly interact with your target market. Being able
to communicate with them directly will not only show that you care about the customer (which will definitely
improve your brand image) but also provides a source of direct feedback. The company can take advantage of
customer responses and develop/redesign strategies to cover that aspect. It may be that customers like a
particular product/service; therefore the company should focus on increasing the supply of that
product/service and improving the overall quality so that demand increases further.

Social media advertising is a cost effective strategy. It doesn’t cost much to run an effective social media
campaign while the benefits will add significant value to the overall business.

Word of Mouth Marketing

It is important for a market lending company to maintain a good reputation. Without a positive
reputation, people will not be willing to utilize your services. Ensuring positive customer relationships,
maintaining strong bonds, working diligently in customer services and ensuring an overall positive
attitude towards the customer will help your company image. People will be willing to share their
positive experience with your company. In essence, take good care of your customer and your customer
will take care of you.

People will rely more on what their circles have to say about your company. Keeping a positive good will
and always creating a good impression will go a long way in self-advertising your company.

Mobile Advertising
Smartphones have become a dominant form of technology throughout the world. Utilizing effective
mobile advertising techniques can help the company reach out to a huge audience. To access these users
the company will create a push message campaign to a predetermined target market.

Forum
The use of forums help in building an essence of community. People learn to trust when they get to read
and participate in the ideas shared by others. Apart from building trust, forum is a useful platform to stay
in touch with customer for their after sale services. There are private chat options as well which help the
customer to instantly write their problems or queries. With the help of forums, a company could give
direction to desired discussion topics and could also push its content easily.

Aggregators
The role of aggregators in online businesses is becoming vital. Here are the examples of two such
aggregators who provide services to P2P businesses:

Lender pggregaonon by Even Financieiac

Even Financial has created a win-win-win business model for all involved. The three cornerstones of its
business are Originators (like Lending Club and Prosper), Online Partners (Like SmartAsset, Creditshout)
and Customers looking for the right loan at the right APR without the extreme hassles of brick and
mortar banks. It is helping the originators get the right kind of borrower. Every originator has a different
profile set in mind which it is comfortable lending to and a lot of traffic it currently generates is non
optimum leading to more than 90% rejections. For example Lending Club targets Prime and super prime,
Avant targets near prime, LoanNow has sub-prime in focus and SoFi prefers students and young
professionals. Even Financials’ algorithms are able to understand these distinctions and are therefore
able to direct the customer to the lender most likely to approve the loan. The lender in turn increases its
approval rate and its customer service can be focussed on prospective customers who have a better
chance of getting approved. The supply side in Even Financials’ case is sourced through “numerous
integrations with leading partners- from popular content portals, to direct sales channels, to social
media- embedding its industry-leading alternative finance tools and content. “ The online finance
websites embed the Even Financial search tool for helping their readers compare offers from multiple
lenders. This enhances the website users’ experience and the website can monetize their viewership
more effectively.

P2P industry is going through its El Dorado phase where many lenders have been funded to capture the
consumer finance market, especially the millennial segment. EVEN Financial is positioning itself very
smartly as an Enabler for P2P companies as the race to acquire the “right” customer heats up. Even is
striking channel partnerships with companies and publishers who interact with people likely to benefit
from the advantages of alternative lending. Its success will be determined by its ability to strike
partnerships with as many varied channels as possible; only the breadth of its offerings would enable it
to become the sales funnel of choice rather than just become a “me too” lead aggregator.

CreditIQ’s Recieyciecing Formuca

LendingTree is currently focussed on selling you as a lead to multiple lenders. The common usage pattern
for LendingTree is that as soon as you punch in your details, you will be deluded with calls from multiple
agencies hawking their loans. CreditIQ is trying to curate the marketplace by getting the best rate for
you. So you and your information would not be handed over to multiple lenders, but instead their
algorithm will help analyse the best loan for you and give you just the best option. The next stage of
personalization would involve the customer getting an approved loan offer. This should trigger a massive
shifting to an aggregator, as the customer compares all the lenders and gets the loan right through the
same platform.

The company is also obsessed about repeat customers. P2P executives across the world know that
repeat business is the holy grail of this sector. On an average, 45% is indicated to be the repeat business
for top tier lenders like Prosper and OnDeck. But the secret is that almost 50% of these loans are just
rollovers of old loans sitting with the same lender. Therefore the actual repeat business accounts for only
25 to 30% of the loan book. According to the CreditIQ founders, the secret sauce of getting repeat
business is helping the customer get better rates. The company aggressively pushes for refinancing and
its site is peppered with terms like lower rates, savings, better loans etc. The company’s motto is
“enabling credit on the web” and its app is able to leverage the information of the original customer and
push him for refinancing via getting him pre-approved for a lower rate. The company’s revenue model is
through lead generation for 20 around lenders on its platform. The interesting thing is that along with
online marketplace lenders like SoFi, Avant, Upstart etc; it also has a couple of banks on the platform.
The company has API integration with almost 70% of its lenders and has generated more than 30 million
dollars of loans on its platform. The founders have an existing auto loans business and thus auto
comprises a major part of the loan originated currently.

CreditIQ is across the credit spectrum with p2p loans, auto loans, Home loans, student loans etc; it aims
to become a permanent fixture in the credit lifecycle of the customer. The numbers supplied by the
founders of CreditIQ for lead generation have been fantastic. Almost 80% of its users go on to apply for
loans and almost 40% of the user base has been able to get some kind of loan through the platform.
With these kinds of numbers, the obvious question would be how long can the in-house marketing
department of lenders survive. The in-house marketing departments are currently at a measly 10%
versus the 40% reported by CreditIQ. The company leverages its specialization in auto loans to bring
customers onto the website and App and once it has access to their credit reports, it can offer them a
better rate on their existing loans, a whopping 25% of the time. Do these figures indicate that the future
belongs to aggregators? Though the founders believe that these rates would decline as the company
grows and auto becomes a smaller part of their portfolio, it is still a remarkable marketing hack achieved
by the company and its founders.
THE TEAM

A P2P company has specialized staff requirements to handle the financial and technological operations.
The team should consist of people who are highly motivated to work in the competitive online
environment. The team’s leader will usually be the founder of the company and it is possible that same
person is also working as the CEO. The CEO should possess special talent and must be a visionary. It is
not possible to take the business ahead without a visionary team leader. The business purpose and focus
should be clearly mentioned and whole team should be directed to pursue it.

Today, many outsourcing options are available. Freelancers are available all over the internet who are
willing to work in competitive market salary and positions. The company has to check the pros and cons
of hiring the staff on permanent basis or outsourcing. It is also possible that executive staff is permanent
and the support staff is outsourced. It all depends on company’s investment and human resource
budget.

Technology Team
P2P Company needs a lot of technology based staff requirements to perform: web application
development, data warehousing, business intelligence and mobile development. There is a need to
decide carefully if the staff should be outsourced or permanently hired. The technology team should be
agile and efficient. The new trends and cost-effective methods to store and process data should be
adopted and implemented by the technology team.

Finance Team
The finance team will probably hold most of the responsibilities for a newly built company. The duties of
accounting, financial planning and analysis, treasury, tax, fund accounting, trading and settlement, and
investor relations all need to be performed by finance team.

Audit and Compliance Team

The audit and compliance team is responsible for the well-being of the business. Both of these services
could be outsourced to many specialized groups. There is usually no need to have this team sitting on
permanent basis until the business is well-grown and needs constant checks and measures to eliminate
any mismanagement or risks.

Marketing and Customer Relationship Team

The marketing team and customer relationship officer need to work closely and try to find ways to
design and utilize customer-based marketing strategies. There is an equal need to build the relationships
with investors of the company and this duty should also be kept in mind and must be performed by
someone outside the finance group. It is possible to contact market researchers for finding important
information before finalizing any marketing strategies and identifying the target customer.
Credit Team
The credit strategy, risk analysis, product development and underwriting duties are to be performed by this team. This team should consist of
best available personnel as the job duties consist of specialization in the area of credit management and also has financial analysis needs.

Human Resources Officer

There is a need to have a human resources officer for a company that is in the initial phase of performing all staffing duties. This job could be
performed by company’s founder as he/she is the visionary and needs to see that who should join the team for a better future. The recruitment
and hiring process has been made easy by social networking websites where professionals are also listed who are currently seeking for jobs.
LinkedIn is example of one of many listing platforms available. Many other recruitment agencies and companies are working online and any one
of these companies can be hired permanently to facilitate the recruitment process. If there is need to search for freelancers then Upwork is the
best choice.