The Funding Network arrived on the alternative finance scene in early March – offering users 8 distinct varieties of finance, ranging from the traditional to the cutting edge. Symbid, a Dutch equity crowdfunding platform, is the driving force behind the initiative. The Dutch advisory firm Credion signed up from the outset, and committed to driving a considerable weight of deal flow through the Network. The Network subsequently spread to Italian shores, through a strategic partnership with Gruppo Banca Sella. We now learn that over $100m in funding has been facilitated by the Funding Network in its first 3 months of operation.
Now the Funding Network has partnered with Catena – an offshoot of European treasury and risk management firm Zanders. Catena will be making INRISC (a credit risk assessment and pricing service) available to the Network’s investors. INRISC will analyse “loan crowdfunding” opportunities – which will be arriving on the platform soon – on behalf of the platform’s investors.
In other words, the Funding Network will veer away from the Funding Circle method of pricing risk; a “market sets the rate” model – one that is not without its critics. Some observers suggest that heightened investor demand can on occasion serve to drive borrowing rates below appropriate levels. On the other hand, the marketplace method of risk pricing typically ensures a lower cost of finance for borrowers, and lower and upper caps are used to ensure that the final rate falls within a fair range of potential rates.
Catena’s objective take on risk will be the only factor in pricing loans on the Funding Network – an unusual, if not unique approach to P2P lending. Most alternative lenders are either reliant on internal credit teams to price risk sensibly, or have adopted the "market decides" approach. Catena will make use of data provided by “Monitoring by Symbid” in its credit assessments. Monitoring by Symbid provides lenders with regular statistical insights into the performance of business borrowers on a fully-automated basis. The whole chain, from monitoring to Catena analysis, is fully automated and transparent.
Of course, one take on this development is that Symbid has simply chosen to outsource the credit process because the platform lacks the appropriate expertise to handle loan assessment in-house. And that wouldn’t be wholly surprising, given that Symbid was first and foremost an equity crowdfunding platform.
“We’re delighted to announce this strategic partnership with Catena Investments while The Funding Network™ continues to grow and mature. As our monthly transaction volume exceeds $35 million it is right that we keep pushing for more professionalism. With Catena on board, we’re confident that our upcoming loan crowdfunding product will be the most transparent on the market. Looking ahead, instant scoring and pricing will be a cornerstone of our offering to professional investors. This is a big step forward in our mission of simplifying the way small businesses are funded.”
The $35m a month figure is an impressive achievement for so early-stage an outfit, although Symbid has admitted that these volumes do not yet equate to a significant revenue stream. There is reportedly the chance of a monthly recurring revenue model surfacing in the near future – which would presumably be fuelled by either matchmaking and/or Network usage fees.
What we can say for certain is that the Funding Network is a bold undertaking. Everything from the blended offering of traditional and alternative funding facilities, to this fresh approach to P2P risk assessment and pricing, is driving the Network, and alternative finance, in new directions.
Marco Behling of Catena Investments also commented:
“With INRISC we mean to provide the market off-the-shelf solutions that will ultimately enable the investment industry to benefit from more transparency on risk and pricing, specifically for alternative investments such as crowdfunding. Working together with Symbid represents a unique opportunity for us to link to the day-to-day needs of the crowd with independent and state-of-the art scoring models and adequate pricing of requested credit facilities.”