Direct Lending Investments has committed $250 million in loans to Biz2Credit’s peer-to-peer lending platform for small business owners.
The loans, which will be distributed across the next three years, will range from $25,000 to $500,000 in size for terms of six to 24 months. The downtown Los Angeles fund will cough up the capital, and Biz2Credit, which matches vetted borrowers with loan providers, will handle the rest.
Direct Lending President Brendan Ross said the partnership creates a more direct line for his company to find quality loans. Biz2Credit’s track record of $1.2 billion in small-business funding and its default rate of less than 2 percent also made the New York company a smart move.
Direct Lending specializes in buying high-interest, short-term small business loans. Its fund currently manages 2,000 loans, though the number fluctuates as it buys roughly 300 loans each month. Ross declined to disclose Direct Lending’s returns, but said a fund with a similar portfolio in the same asset class would generate returns of around 11 percent to 13 percent. Direct Lending also announced in September it would provide $73 million in loans for Beverly Hills real estate lending marketplace Realty Mogul.
It’s all part of the growing peer-to-peer lending arena, one that Ross said would define today’s credit cycle.
“We didn’t even use the phrase ‘private credit’ 10 years ago,” he said. “Now, it’s a consistent requirement for institutional portfolios, and it’s really peer-to-peer lending that’s putting it on the map.”
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