Nov. 18--Need to borrow up to $1 million fast?
An online lender -- don't call it a pawn shop -- says it can make the funds available within 24 hours as long as borrowers have enough "collateral."
The company, borro, isn't interested in traditional assets like real estate, stocks or bank CDs but rather personal assets such as high-end jewelry, classic cars, antiques, fine wine and even Grammy Awards.
"We're just a lender. We call it personal asset lending," said Paul Aitken, founder and CEO of the online company that opened a location in New York this year. "We provide people with very fast access to money. Our customers have net worths of a half million to $6 million, but we also have people who are worth more.
PG: Loans against unusual assets (Click image for larger version)
The company deals "with famous sports figures, musicians and people in the media," he said. "The biggest characteristic of people we deal with are those who have their own businesses. Lots of them are in retail or trading businesses, and often they have an opportunity that requires quick money or the opportunity will elapse."
Founded in the United Kingdom in 2008 during the height of the global lending and credit crisis, the company's business model was designed to attract customers who found traditional sources of credit suddenly unavailable.
As financial institutions shut off the pipeline to easy money, a growing number of alternative lenders entered the credit industry, including peer-to-peer lending sites and other online lenders.
To date, borro reports it has made 15,000 personal asset loans, with an average loan value of $10,000. The company reports it is making $4 million to $5 million worth of loans a month, and it has a 10 percent loan default rate.
"Borro is unique in that we are not a bank or pawn broker, and will not come after personal assets or assume ownership of the collateral if the loan defaults," Mr. Aitken said. "We take possession of the collateral and sell it and give back what's left to customers.
"We have interesting customers and the assets we loan on are interesting," he said. "We get lots of fine art -- Andy Warhols and Picassos. Lots of sporting and musical memorabilia and classic cars."
Borro has "done loans secured by Grammy awards," he said, adding that how much the company will lend for a Grammy depends largely on the winner and the year.
The loans typically are short-term, six-month contracts with interest rates ranging from 2.5 percent to 4 percent per month. There are no credit checks, and no negative information is reported to credit bureaus if a borrower defaults.
Mr. Aitken explained that if a customer owned a gold Rolex watch valued at $35,000, for example, borro would loan up to $25,000 using the watch as collateral.
It works like this: Customers go to the company's website at www.borro.com and fill out an application with detailed information about the asset. The company arranges to get the asset to New York, where it is appraised and a loan offer is made within 24 hours. Loans can be repaid with interest with no early repayment fees. When a borrower repays the loan, the asset is returned.
Canaan Partners, a global venture capital firm with more than $3 billion under management, helped borro raise $26 million last month to expand its business. Canaan also is a major investor in Lending Club, an online peer-to-peer lending exchange.
Other players in the alternative lending industry include On Deck Capital, an online lending service founded in 2006 that provides capital to small businesses. Its short-term loans average $30,000 and carry interest rates of 18 percent to 36 percent. The Receivables Exchange, founded in 2008, allows businesses to raise money by selling their accounts receivables to investors in online auctions. Prosper.com, another peer-to-peer lending site launched in 2006, connects people who want to borrow money with those who want to invest.
The concept behind borro is that if people with valuable personal assets need to raise money for short-term needs, it makes more sense to borrow against the asset than sell it.
"Our clients clearly are struggling to get access to capital from other sources," Mr. Aitken said. "They don't want the hassle of going to the bank. Besides, where else can you get $200,000 in a day on valuable collateral?"
(c)2012 the Pittsburgh Post-Gazette
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