Peer-to-Peer lending company, Prosper, announced last week that they have received a $1 million investment from the founder of Capital One, Nigel Moris, who now leads and investment group called QED Investors.
The terms of the loan made in the SEC Form 8-K filing describes the loan in some more detail. Under the deal, the loan provided by QED investors is due fully on November 11th, 2010. Prosper.com is also paying 15% for the privilege of receiving the cash infusion. The terms also state that if Prosper.com takes on additional financing of $5 million or more before the loan is fully repaid, the loan amount will be converted into preferred shares of the company at the financing price, otherwise the loan will convert to preferred shares at the Series C financing (June 2007) price.
The new funding that Prosper.com received is a relatively small investment in the company compared to the $40 million in equity that it has received since the company began in 2006. Typically companies receiving a small level capital such as in this most recent round of funding are looking to pay operating expenses while they search out their next major round of capital.
Many analyst predict that more financing will be needed to keep Prosper.com afloat until it can reach profitability. After shutting down in the fall of 2008 so that it could meet SEC and relaunching in July of 2009, Prosper.com has had a tough year. Since the firm re-opened, it has originated over $2 million in loans, but it’s still lagging behind its largest competitor, Lending Club, that is funding between $4 million and $5 million per month in loans.
