Prosper Marketplace Must Repay $2 Million Bridge Funding by April 1st

Prosper Marketplace entered into an agreement yesterday with its existing venture capital partners to receive a new $2 million bridge loan. Details of the funding agreement have been made available to the public via an SEC filing and Prosper Marketplace must repay the loan in full on April 1^st, 2010 if it does not receive a “Series D” round of funding.

The $2 million bridge funding round that Prosper Marketplace received is a $2 million “warrant and note purchase” agreement (a loan) from its existing investors, including Accel Partners, Benchmark Capital, DAG Ventures, Meritech Capital, Omidyar Network, and Volition (formerly Fidelity Ventures). Prosper Marketplace is paying a 15% interest rate on the money that it is borrowing.

According to Prosper Marketplace’s SEC filing, the company must repay the loan and interest on April 1^st, 2010. If Prosper Marketplace completes a “Series D” round of funding by April 1^st, the note purchasers will have an option to have their notes paid in full with interest or have their funds converted into shares of preferred stock at going share purchase price of the new round of financing.

Many believe that Prosper Inc is running low on operating capital and that the company may face bankruptcy if it does not receive a “Series D” round of funding. On September 30^th, 2009, Prosper Marketplace reported to the SEC that they had just over $2 million in operating capital. The company received a $1 million bridge loan in November 2009 before the new bridge loan that was announced earlier this week.

The amount of operating capital that Prosper Marketplace has on hand does not bode well given its current burn rate. Using Prosper Marketplace’s June 30^th 2009 and September 30^th 2009 SEC filings, the company is spending approximately $27,600 per day in cash. At this burn rate, Prosper would still only have enough capital to last through April 2^nd 2010.

The latest SEC filing that Prosper Marketplace has made indicating that it only has 2 months to earn a “Series D” round of funding or it must repay its $2 million loan in full lead many to believe that the company will run out of cash if it does not receive a “Series D” round of funding by April 1st.

Here is an excerpt from Prosper Marketplace’s latest SEC filing:

On February 1, 2010, Prosper Marketplace, Inc. (“Prosper”) entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) with certain of its existing investors, pursuant to which, Prosper issued and sold to such investors a series of Convertible Promissory Notes (each, a “Note” and, collectively, the “Notes”), dated as of February 1, 2010, in the aggregate principal amount of $2,000,000.  The Note purchasers (each, a “Note Purchaser” and, collectively, the “Note Purchasers”) are as follows: Accel IX L.P. and certain of its affiliates (collectively, the “Accel Investors”); Benchmark Capital Partners V, L.P.; Agilus Ventures IV, Limited Partnership, and certain of its affiliates (collectively, the “Agilus Investors”); Meritech Capital Partners III, L.P., and certain of its affiliates; DAG Ventures I-N, LLC and certain of its affiliates; and Omidyar Network Fund LLC. Interest on the Notes accrues at a per annum rate of 15.0%.  All principal and accrued interest under the Notes are due in a single payment on April 1, 2010 (the “Maturity Date”).  If, prior to the Maturity Date, Prosper consummates a preferred stock financing for an aggregate purchase price of $5,000,000 or more, each Note Purchaser will have an option to have its Note paid in full or converted into shares of the preferred stock sold pursuant to such financing at the per share purchase price for such financing.  Prosper’s obligations under the Notes are unsecured.