As filed with the Securities and Exchange Commission on February 22, 2010
Registration No. 333-XXXXXX
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
United Power and Media, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 6199 30-0563092
(State or Other
Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Classification Code No.) Identification No.)
Organization)
United Power and Media, Inc.
510 Market Loop, Suite 102
W. Dundee, IL 60118
(847) 586-3880
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Wayne R. Kanter, Chief Executive Officer
United Power and Media, Inc.
510 Market Loop, Suite 102
W. Dundee, IL 60118
(847) 586-3880
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared
effective.
If any of the securities being registered on this form are offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), check the following box. x
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer o Accelerated filer o
Non-accelerated filer o (Do not check if a Smaller reporting
company x
smaller reporting company)
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities
Amount of to be Proposed Maximum
Aggregate Offering Registration
Registered Price (1) Fee (2)
Borrower Member Payment
Dependent Notes
$40,000,000 $2,852.00
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Calculated pursuant to Rule 457(o) based on an estimate of the
proposed maximum aggregate offering price.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED February 22, 2010
$40,000,000
United Power and
Media, INC
Borrower Member Payment Dependent Notes
This is a public offering to United Power and Media's lender
members of up to $40,000,000 in principal amount of Borrower Member
Payment Dependent Notes issued by United Power and Media, Inc. In this
prospectus, we refer to our Borrower Member Payment Dependent Notes
as the "Notes."
We will issue the Notes in series. Each series will correspond to a
single commercial loan originated by United Power and Media, Inc.
(hereinafter referred to as InvestP2P.com), or by a national or state
chartered lending institution to be selected in the future. Throughout this
prospectus, we refer to these loans generally as "borrower loans," and we
refer to a particular loan that is funded by proceeds from the sale of Notes
in a single series as the "corresponding borrower loan" for that series.
Important terms of the Notes include the following, each of which
is described in detail in this prospectus:
All of the Notes in a series will be issued with the same fixed interest
rate, which will also be the rate on the corresponding borrower loan for that
series. Interest rates on borrower loans are determined by InvestP2P.com
and/or the lender members and/or the borrower, and can range from 1.0%
to 36.0%. Control of spending of the funds may be determined by lending
member votes on spend requests. The required number of lender member
votes may range from 0-100% of lender members committed to the
corresponding loan and said percentage requirement will be posted on the
site at the time the loan request is made by potential borrower or at time
lender members make a commitment to lend on a loan request.
The time from spend request to vote approval may take a significant
amount of time, spanning days, weeks or more and may not be approved,
thus possibly affecting the borrowers ability to use the proceeds as he/she
desires, which could negatively affect the course of their business or
affairs and subsequent ability to repay the loan.
We may elect not to report performance on the loans to credit reporting
agencies and lenders should assume we will not, as these loans are often
high risk loans made to businesses that are interested in growing a
business without risking personal financial ruin.
Some borrowers may commit their own money to the loan, which is then
subject to lending member voting on spend requests, of which, borrower
may or may not be allowed to vote, and such determination will be noted
on the loan request.
Depending on the term of a particular Note's corresponding borrower
loan, the Notes will have initial maturities of 12, 24, 36, 48, or 60 months,
plus 4 business days. Maturities of Notes can be extended for up to one
year, as described in this prospectus. The Notes will bear interest from the
date of issuance, be fully amortizing and be payable monthly, and in some
cases may allow up to two years of deferment of principal and/or interest
payments, which will be declared at loan request. InvestP2p.com may also
offer interest only payments with a balloon feature at maturity.
The Notes are unsecured, and are special, limited obligations of
InvestP2P.com only. The borrower, co-borrower, or business entity
members will make payments on their outstanding loans to
InvestP2P.com, and the Company will then make payments on the Notes
to lender members. The payments that InvestP2P.com makes on a Note
held by a lender member will be limited to an amount that equals the
lender member's pro rata share of the payments that InvestP2P.com
receives on the corresponding borrower loan, net of a 1.0% servicing fee
and, from time to time, net of certain other fees as described in this
prospectus.
InvestP2P.com does not guarantee payment of the Notes or of the
corresponding borrower loans.
We will offer Notes to our lender members at 100 percent of their
principal amount. The Notes will be offered only through the United
Power and Media website at www.InvestP2P.com, and there will be no
underwriters or underwriting discounts.
The Notes will be issued in electronic form only and will not be
listed on any securities exchange. The Notes will not be transferable
except through our planned Internet-based Note trading platform, which
will be operated by a registered broker-dealer to be selected in the future.
However, there are no guarantees that a broker-dealer relationship will be
established for the purpose of operating the Note trading platform, or that
a market for Notes will develop if such a platform is created. Therefore,
lender members must be prepared to hold their Notes to maturity.
This offering is highly speculative and the Notes involve a high
degree of risk. Investing in the Notes should be considered only by
persons who can afford the loss of their entire investment. See "Risk
Factors" beginning on page 19.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is February 22, 2010.
Table of Contents
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
i
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WHERE YOU CAN FIND MORE INFORMATION
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PROSPECTUS SUMMARY
THE DECLARATION
QUESTIONS AND ANSWERS
RISK FACTORS
RISKS RELATED TO THE NOTES AND THE CORRESPONDING
BORROWER LOANS
RISKS RELATED TO InvestP2P.com AND THE LENDING
PLATFORM
RISKS RELATED TO COMPLIANCE AND REGULATION
FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
PLAN OF DISTRIBUTION
ABOUT THE LENDING PLATFORM
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
BUSINESS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GOVERNMENT REGULATION
MANAGEMENT
EXECUTIVE COMPENSATION
TRANSACTIONS WITH RELATED PERSONS
PRINCIPAL SECURITYHOLDERS
EXPERTS
INDEX TO FINANCIAL STATEMENTS
Table of Contents
ABOUT THIS PROSPECTUS
This prospectus describes the United Power & Media, Inc.
(hereinafter referred to as InvestP2p.com) offering of Borrower Member
Payment Dependent Notes, referred to herein as the "Notes." This
prospectus is part of a registration statement filed with the Securities and
Exchange Commission, which we refer to as the "SEC." This prospectus,
and the registration statement of which it forms a part, speak only as of
the date of this prospectus. We will supplement this registration statement
from time to time as described below.
Unless the context otherwise requires, we use the terms "United
Power and Media," "InvestP2P.com," "the Company," "our company,"
"we," "us" and "our" in this prospectus to refer to United Power and
Media, Inc., a Delaware corporation. United Power and Media, Inc. was
incorporated in Delaware in September 2009.
The offering described in this prospectus is a continuous offering
pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act"). After the date of this prospectus, we will offer Notes
continuously, and we expect that sales of Notes on our Internet-based
platform will occur on a daily basis.
Pursuant to Rule 424(b) under the Securities Act, we will file a
supplement to this prospectus, which we refer to as a "posting report,"
within two business days of the initial posting of each new loan request
that is made by a borrower member on our platform. These posting reports
will provide specific information about the series of Notes being offered
for sale that will correspond to the posted borrower loan request, as well
as information about any other series of Notes being offered for sale at
that time. We will also file, and post on our website, weekly supplements
to this prospectus pursuant to Rule 424(b) under the Securities Act, which
we refer to as "sales reports." Sales reports will provide information about
sales of Notes since the filing of the previous sales report, and will specify
the principal amount, maturity and interest rate of each series of Notes
sold through the platform, as well as the InvestP2P.com credit grade on
the corresponding borrower loan provided we perform a credit grade
rating on the specified corresponding loan, which we often may not
perform.
We will also prepare prospectus supplements to update this
prospectus for other purposes, such as to disclose changes to the terms of
our offering of the Notes, provide quarterly updates of our financial and
other information included in this prospectus and disclose other material
developments. We will file these prospectus supplements with the SEC
pursuant to Rule 424(b) and post them on our website. When required by
SEC rules, such as when there is a "fundamental change" in our offering
or the information contained in this prospectus, or when an annual update
of our financial information is required by the Securities Act or SEC rules,
we will file post-effective amendments to the registration statement of
which this prospectus forms a part, which will include either a prospectus
supplement or an entirely new prospectus to replace this prospectus. We
currently anticipate that post-effective amendments will be required,
among other times, when we change material terms of the Notes offered
through our Internet-based platform. We currently expect that these
changes will be disclosed in prospectus supplements posted on our
website at the time of filing of the post-effective amendment, rather than
through complete revisions to this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC
in connection with this offering. In addition, upon the effectiveness of our
registration statement, we will be required to file annual, quarterly, and
current reports and other information with the SEC. You may read and
copy the registration statement and any other documents we have filed at
the SEC's Public Reference Room at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information about the Public Reference Room. Our SEC filings are
also available to the public at the SEC's Internet site, http://www.sec.gov.
This prospectus is part of the registration statement and does not
contain all of the information included in the registration statement and
the exhibits, schedules and amendments to the registration
statement. Some items are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to us and the
Notes, we refer you to the registration statement and to the exhibits and
schedules to the registration statement filed as part of the registration
statement. Whenever a reference is made in this prospectus to any of our
contracts or other documents, the reference may not be complete and, for
a copy of the contract or document, you should refer to the exhibits that
are a part of the registration statement.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. You should read the following summary together with the
more detailed information appearing in the rest of this prospectus,
including the financial statements and related notes to those statements,
and the Risk Factors beginning on page 19, before deciding whether to
purchase Borrower Member Payment Dependent Notes from
InvestP2P.com.
Overview
InvestP2P.com operates an Internet-based, "peer-to-peer" or "peer-
to-business" lending platform where individual or corporate lender
members can purchase Borrower Member Payment Dependent Notes, the
proceeds of which are designated by those lender members to fund
specific commercial loans made to business borrower members. While the
lender members who purchase the Notes are technically investors in the
Notes, and do not lend monies directly to InvestP2P.com borrower
members, we refer to them as "lender" members in this prospectus, and on
our website, for the sake of simplicity.
About the InvestP2P.com Lending Platform
InvestP2P.com's Internet-based platform allows users to register as
borrower members, co-borrower members, lender members, and/or
vendor members. We verify the identities of all borrower, co-borrower,
lender, and vendor members that participate on the platform by checking
their social security number, Tax Id Number and/or other personal
information against a fraud solutions database that we access through a
relationship with Experian, or another credit rating agency or identity
verification provider. Borrower members will have a one time verification
fee of $100.
Once registered, borrower members can post requests for
unsecured business loans by stating a maximum interest rate they are
willing to pay and a preferred term of 12, 24, 36, 48 or 60 months.
Currently our loan model consists of 60 month term at a maximum of
36% annual interest . The minimum and maximum loan values that can be
requested vary by state, but no borrower loan can currently be originated
above $50,000, unless a directed, captured group uses the "Friend and
Family" (F&F) format offered on our site. Borrower members are limited
to taking out a maximum of one loan within any six-month period, and
may not have more than 2 loans outstanding at the same time. F&F loans
do not count against the limitations set for non-related loans. All borrower
members have the option, and some may be required, to have a co-
borrower on their loan. A co-borrower serves as a co-signer, or guarantor,
on the borrower loan, and is obligated to make payments on the loan if the
primary borrower member becomes delinquent, as described in this
prospectus.
After internal review by InvestP2P.com to ensure compliance with
our terms and conditions, borrower member loan requests are posted on
the InvestP2P.com website for review by lender members. Loan request
postings may display borrower and, if applicable, co-borrower member
credit information that we may access through our relationship with
Experian, or another credit rating agency or id validation provider. Loan
request postings may also include, but are not limited to, a description of
the borrower member's potential intended use of the loan proceeds, a
description of their company, company business plan, as well as certain
financial and employment information that is self-reported by borrower
and, if applicable, co-borrower members. Borrower listings may include
photos and the borrower's narrative description of why the loan is being
requested, and of the borrower's financial situation. Borrowers are
identified by a InvestP2P.com screen name but may be able to disclose in
listings their identity or contact information to lenders, and are
encouraged to do so. Listings are displayed publicly on our platform,
although certain information is only viewable by registered lender
members. Borrower members may also choose to purchase our planned
MVP Verification service, in which we verify financial, employment and
other information that is self-reported by borrower and co-borrower
members and if so, results will be displayed on loan request posting. Also
included would be the status of any previous or currently active loans
through Borrower Member Payment Dependent Notes.
As lender members review borrower member loan requests posted
on the platform, they can make loans they find attractive by indicating the
dollar amount they are willing to commit to the purchase of a Note, the
proceeds of which are designated by the lender member to fund all or part
of the corresponding borrower loan.
The minimum required loan is $100, but lender members may loan
as much as the entire loan amount. When 100% of the loan is funded, the
loan is originated by InvestP2P.com, and the corresponding series of
Notes is sold to the lender members. Borrower members may also choose
to have their loans originated in whole or in part by InvestP2P.com when
lender members do not commit to fund 100 percent of the amount
requested, if at least 35 percent of the total loan amount requested has
been committed by the end of the funding period. We refer to this option
as the "partial funding feature" (also referred to as a borrower member's
"revised request").
Upon origination of the loan, the funds are allocated to a trust
account for the benefit of the borrower. The borrower must submit and
request approval of the lending members for the use of the funds. Spend
requests may be posted by the 1st and 14th only and committed lenders get
a digest email on the 7th and 22rd with all spend requests for that period.
Then lenders have to the 14th and 28th respectively to place their votes.
The Borrower Member may use the forum to discuss the merits of
the requisitions, including, but not limited to, the vendors that will receive
the funds. The Borrower Member can use this forum to promote his
vendors and may encourage the vendors to use the forum to describe their
services.
Recurring payments may be requested and voted on once. An
example may be location rent of $800 on the 1st for the next 4 months
beginning x date and all payments approved in one spend request vote.
Currently all recurring payments must be voted on again after it is in
effect for six months.
In the event that InvestP2P.com partners or enters into an
origination agreement with a national or state chartered lending institution
in the future, the borrower loans will then be originated by said institution,
said institution being posted on our site. In this case, the originated loans
will be sold and assigned to InvestP2P.com, without recourse to the
lending institution, at a price equal to the principal amount of the
borrower loan. After origination, InvestP2P.com will service the borrower
loans and collect monthly payments from the borrower and, if applicable,
the co-borrower members throughout the life of the loans. See "About the
Lending Platform" for more information.
The Borrower Member Payment Dependent Notes
InvestP2P.com's lender members will be eligible to buy Borrower
Member Payment Dependent Notes issued by InvestP2P.com. By making
an offer on a borrower member loan request posted on the InvestP2P.com
platform, a lender member is committing to purchase a Note equal in
principal amount to the dollar value of that offer at the stated interest rate
and term, if the loan is funded and subsequently originated by
InvestP2P.com, or by an alternate institution to be selected in the future.
The proceeds of the Notes will be designated by the lender members to
fund corresponding borrower loans and subsequently allocated to a trust
account for the benefit of the borrower.
The Notes are unsecured, and are special, limited obligations of
InvestP2P.com only, rather than obligations of any borrower or co-
borrower member. Holders of the Notes do not have a security interest in
the corresponding borrower loans or in the proceeds of those loans, even
though payment on a Note depends entirely on payments that
InvestP2P.com receives on the corresponding borrower loan. If
InvestP2P.com were to become subject to a bankruptcy or similar
proceeding, the holder of a Note will have a general unsecured claim
against InvestP2P.com that may or may not be limited in recovery to the
payments a borrower or co-borrower member makes on the corresponding
borrower loan. See Risk Factors If we were to become subject to a
bankruptcy or similar proceeding for more information.
Depending on the term of a particular Note's corresponding
borrower loan, the Notes will have initial maturities of 12, 24, 36, 48, or
60 months, plus 4 business days to allow for all Automated Clearing
House (ACH) transactions to conclude. Maturities can be extended for up
to one year, as described in this prospectus. The Notes will bear interest
from the date of issuance, be fully amortizing and be payable monthly,
with a possible deference of up to two years from origination. We may
include an interest only option with a balloon payment at maturity.
InvestP2P.com will pay principal and interest on each Note in a series in
an amount equal to each such Note's pro rata share of the principal and
interest payments, if any, that InvestP2P.com receives on the
corresponding borrower loan for that series, net of a 1.0% servicing fee.
InvestP2P.com will also pay to lender members late payment fees, when
charged and received on delinquent loans, on a pro rata basis, subject to a
1.0% servicing fee assessed against the value of the late payment.
However, InvestP2P.com will not pay to lender members any failed
payment fees, collection fees we or a third-party collection agency charge
and any payments due to InvestP2P.com with respect to the portion of a
corresponding borrower loan, if any, that InvestP2P.com has funded in its
capacity as a lender member on the platform.
The Borrower Loans
All borrower loans originated by InvestP2P.com are unsecured
obligations of InvestP2P.com's borrower and, if applicable, co-borrower
members. The borrower loans have a fixed interest rate that is set by
InvestP2P.com and/or the lender members and/or borrower members, and
a maturity of 12, 24, 36, 48 or 60 months. Unless a borrower member
purchases our MVP Verification service, or if a loan request has been
selected for random or targeted verification by InvestP2P.com, borrower
loans are made without obtaining any documentation of a borrower or co-
borrower member's ability to afford the loan. However, even in instances
where borrower or co-borrower income, employment or other information
is verified by InvestP2P.com, there are no guarantees that a borrower loan
will be fully repaid. All borrower members are encouraged to purchase
their own loan as to demonstrate commitment to the other lender
members. Those funds would join the loan and are subject to the
requisition voting requirements.
Each borrower loan is originated by InvestP2P.com through the
Company's Internet-based platform, and is funded by the proceeds that
InvestP2P.com receives from the sale of Notes to lender members.
In the event that InvestP2P.com partners with a an alternate
lending institution in the future, the borrower loans will then be originated
by the national lending institution. In this case, the originated loans will be
sold and assigned to InvestP2P.com, without recourse to the lending
institution, at a price equal to the principal amount of the borrower loans.
The lending institution will have no obligation to purchasers of the Notes.
See "About the Lending Platform" for more information. Is this paragraph
repeated?
In most cases, it is anticipated that the borrower will be a start-up
or early phase business entity and therefore is considered very speculative.
Co-borrower Loans and MVP Verification
A co-borrower member on the InvestP2P.com platform is a co-
signer, or guarantor, who is individually and jointly liable for repayment
of a borrower loan, alongside the primary borrower. The co-borrower
feature is optional for borrower members. If the primary borrower is
unable to make a payment by the 19th day after the monthly due date of
such payment, the co-borrower member will be required to make the
payment on the 26th late day, plus any late fees that have been assessed.
Having a co-borrower on a loan, however, is no guarantee that a loan will
be repaid. There remains a substantial risk that co-borrower loans will
become delinquent and go into default. See "About the Lending Platform
Co-borrower Members" and "Risk Factors Risks Related to the Notes
and the Corresponding Borrower Loans" for more information.
On the InvestP2P.com platform, primary borrower members can
also purchase a service called MVP Verification, in which borrower and, if
applicable, co-borrower members provide InvestP2P.com with certain
documentation so that we can verify employment, financial and other
information. These documents can include all or some of the following, at
the borrower or co-borrower member's choosing: a notarized statement
affirming their legal commitment to repay the loan; photo identification
such as a driver's license or passport; recent employment pay-stubs; an
authorization form that permits us to confirm income tax return data with
the IRS; a utility bill to match names with addresses; and recent monthly
bank statements.
When MVP Verification loans are posted on the platform, lender
members can see which information has been verified for borrower and
co-borrower members before making an offer on borrower loan requests.
However, even in instances where borrower or co-borrower income,
employment or other information is verified by InvestP2P.com, there are
no guarantees that a borrower loan will be fully repaid.
About United Power and Media, Inc.
United Power and Media, Inc. was incorporated in Delaware on
September 11, 2009. Our headquarter is located at 510 Market Loop, Suite
102, W. Dundee, IL 60118, and our telephone number is (847) 586-3880.
Our website address is www.InvestP2P.com. We own and operate
InvestP2P.com and our lender platform and data is hosted at
InvestP2P.appspot.com, using Google's service. Our host can change to
another third-party at any time. Information contained on our website is
not incorporated by reference into this prospectus.
THE OFFERING
Issuer: InvestP2P.com
Notes offered: Borrower Member Payment Dependent Notes, issued in
series, with each series of Notes related to one corresponding borrower
loan.
Offering price: 100 percent of principal amount of each Note.
Initial maturity date: Depending on the maturity of a Note's corresponding
borrower loan, maturities are 12, 24, 36, 48, or 60 months, plus 4 business
days, following issuance. All of the Notes in a series will have the same
maturity as the corresponding borrower loan for that series, plus 4
business days.
Final maturity date: One year after the initial maturity date.
Extension of maturity: Each Note will mature on the initial maturity date,
unless any principal or interest payments in respect of the corresponding
borrower loan remain due and payable to InvestP2P.com upon the initial
maturity date. In such cases, the maturity of the Notes will be
automatically extended to the final maturity date. If there are any amounts
under the corresponding borrower loan still due and owing to
InvestP2P.com after the final maturity date, we will have no further
obligation to make payments on the Notes in the series even if we receive
payments on the corresponding borrower loan after the final maturity date.
Interest rate: Each series of Notes will have a stated, fixed interest rate,
which is the same as the interest rate on the corresponding borrower loan
for the series.
Setting the interest rate: Interest rates on all of the Notes in a series
will be the same, but rates on Notes in different series can vary.
Interest rates are determined by InvestP2P.com and/or the lender members
and/or borrower members. Borrower members indicate the maximum interest rate
they are willing to pay on a loan, and lender members offer the maximum dollar
amount they are willing to commit to the Notes corresponding to that
loan. The interest rate for all of the Notes in a series, and therefore the rate
on the corresponding borrower loan for that series, will be determined at
the beginning of the loan request for the corresponding borrower loan.
Offering periods are selected by borrower members, and can range from 1
to 28 days. A lender member's "declaration" on a loan is considered a
commitment to purchase a Note that will have a principal amount equal to
the dollar value of the declaration, at the interest rate indicated by the loan
request. If a funding period expires and the loan has received purchase
commitments in an aggregate amount equal to at least 35 percent of the
dollar value requested, but below 100 percent of that value, the borrower
may elect to accept or decline the partially funded loan. If the borrower
accepts the partially funded loan, the loan will be originated by
InvestP2P.com, or by a alternate institution to be selected in the future. If
an offering period expires and the loan has received purchase
commitments in an aggregate amount equal to 100 percent of the dollar
value requested, the loan is automatically originated by InvestP2P.com, or
by an alternate institution to be selected in the future, and allocated to the
trust account for benefit of the borrower, to which spend requests will be
made, at the interest rate declared to all lender members.
Payment on Notes: InvestP2P.com will pay principal and interest on any
Note purchased by a lender member in an amount equal to the lender
member's pro rata share of the principal and interest payments, if any, that
the Company receives on the corresponding borrower loan, net of a 1.0%
servicing fee. InvestP2P.com will also pay to lender members late
payment fees, when charged and received on delinquent loans, on a pro
rata basis, subject to a 1.0% servicing fee assessed against the value of the
late payment. However, InvestP2P.com will not pay to lender members
any failed payment fees, collection fees we or a third-party collection
agency charge and any payments due to InvestP2P.com with respect to the
portion of the corresponding borrower loan, if any, that InvestP2P.com has
funded in its capacity as a lender member on the platform. We will make
any payments on Notes within four business days after receiving payment
from borrower or co-borrower members on the corresponding borrower
loan. The Notes are not subject to any credit enhancement. See "About the
Lending Platform" for more information. In the event a borrower decides
to use a deferment scenario, the borrower must pay the servicing fee due
United Power and Media, Inc.
Corresponding borrower loans: Lender members who make a
"declaration" on loan request postings are committing to purchase Notes
in a series, thereby designating InvestP2P.com to apply the proceeds from
the sale of the Notes of that series to the funding of the corresponding
borrower loan for that series. The corresponding borrower loans are
originated by InvestP2P.com through the Company's Internet-based
platform, and are issued to a trust account for the benefit of the business
consumers who are InvestP2P.com borrower members, to be voted on by
the lenders per the borrowers' specific spending requests.
Each borrower loan originated through the InvestP2P.com platform is a
fully amortizing loan made by InvestP2P.com to a borrower member, with
a term of 12, 24, 36, 48, or 60 months. In the event that InvestP2P.com
partners with a alternate lending institution in the future, the borrower
loans will then be originated by that lending institution. In this case, after
the loans are originated by the lending institution, they will be sold and
assigned to InvestP2P.com, without recourse to the lending institution, at a
price equal to the principal amount of the borrower loan. Borrower loans
have an interest rate determined by InvestP2P.com, the borrower, the
lenders, or any combination thereof. Rates can range from 0.0% to 36.0%.
Borrower loans are repayable in monthly installments and are unsecured
and unsubordinated. Borrower loans can be repaid by borrower or co-
borrower members before the initial maturity date without a prepayment
penalty. If a borrower or co-borrower member partially prepays a loan, the
amortization schedule for that loan will be automatically recalculated for
the remainder of the loan's term, and the borrower member's monthly
installment is thereafter reduced accordingly. Unless a borrower member
purchases our MVP Verification service, or if a loan request has been
selected for random or targeted verification by InvestP2P.com, borrower
loans are made without obtaining any documentation of a borrower or co-
borrower member's ability to afford the loan. However, even in instances
where borrower or co-borrower income, employment or other information
is verified by InvestP2P.com, there are no guarantees that a borrower loan
will be fully repaid. See "About the Lending Platform" for more
information.
Ranking: The Notes will not be contractually senior or contractually
subordinated to any other indebtedness of InvestP2P.com. The Notes will
be unsecured special, limited obligations of InvestP2P.com. Holders of
Notes do not have a security interest in the corresponding borrower loan,
or in the proceeds of that loan. The Notes will rank effectively junior to
the rights of the holders of InvestP2P.com's existing or future secured
indebtedness with regard to the assets securing such indebtedness.
In the event of a bankruptcy or similar proceeding of InvestP2P.com, the
relative rights of the holder of a Note as compared to the holders of other
unsecured indebtedness of InvestP2P.com are uncertain. If InvestP2P.com
were to become subject to a bankruptcy or similar proceeding, the holder
of a Note will have a general unsecured claim against InvestP2P.com that
may or may not be limited in recovery to the payments a borrower
member makes on the corresponding borrower loan. See Risk Factors
If we were to become subject to a bankruptcy or similar proceeding for
more information. The Notes do not restrict InvestP2P.com's incurrence of
other indebtedness or the grant or imposition of liens or security interests
on the assets of InvestP2P.com, including on the borrower loans
corresponding to the Notes.
Servicing fees and other charges: InvestP2P.com will deduct a servicing
fee equal to a 1.0% annualized rate based on the outstanding principal
balance of a loan before payments on Notes corresponding to the loan are
disbursed to the lender members holding those Notes. This servicing fee
will lower the effective yield on the Notes below their stated interest rate.
We will also charge a servicing fee on any late payment fees that we
receive on the borrower loans before crediting lender member accounts.
This servicing fee will be equal to 1.0% of the lender member's pro rate
share of any late payment fees that are received. In the event that
collection action must be taken on a delinquent loan, the Company or its
designated third-party collection agency will charge a collection fee
between 20.0% and 35.0% on any amounts that are obtained. These fees
will thereby reduce the amounts of any payments lender members receive
on their Notes. We may adjust the amounts of these servicing fees from
time to time. See "About the Lending Platform Servicing Fees Charged
to Lender Members and Impact on Annual Returns" for more information.
Use of proceeds: We will use the proceeds from the sale of each series of
Notes to facilitate the funding of the corresponding borrower loan as
requested by the borrower and committed to by the lending members for
that series. These funds will then be allocated to a trust account for
benefit of the borrower to be voted on by the lenders per the borrowers'
specific spend requests. See "About the Lending Platform" for more
information.
Electronic form and transferability: The Notes will be issued in electronic
form only and will not be listed on any securities exchange. The Notes
will not be transferable except through our Internet-based Note trading
platform, which will be operated by a registered broker-dealer to be
selected in the future. However, there are no guarantees that a broker-
dealer relationship will be established for the purpose of operating the
Note trading platform, or that a market for Notes will develop if such a
trading platform is created. Therefore, lender members must be prepared
to hold their Notes to maturity. See "About the Lending Platform" for
more information.
U.S. federal income tax treatment: While the matter is not free from
doubt, InvestP2P.com intends to treat the Notes as debt securities of
InvestP2P.com that have original issue discount, or OID, for U.S. federal
income tax purposes. Therefore, holders of Notes will be required to
include the OID in income as ordinary interest income for U.S. federal
income tax purposes as it accrues (which may be in advance of interest
payments being made on the Notes), regardless of the holder's regular tax
accounting method. Prospective purchasers of Notes should consult their
own tax advisors regarding the U.S. federal, state, local and non-U.S. tax
consequences of the purchase, ownership, and sale of the Notes, including
any potential differing treatments of such Notes. See "Material U.S.
Federal Income Tax Considerations" for more information.
Financial suitability requirements: Lender members should be aware that
we may apply financial suitability standards and/or maximum investment
limits to residents of certain states, or to all lender members, at some point
in the future. If such standards are established, each lender member will
be required to represent and warrant that he or she meets the minimum
financial suitability standards and has not exceeded the maximum
investment limits. See "About the Lending Platform Financial
Suitability Requirements" for more information.
The following diagram illustrates the basic framework for the sale of a
single series of Notes through the InvestP2P.com platform. The sections of
the diagram drawn with dashed lines indicate the framework for the sale
of a single series of Notes in the event that InvestP2P.com establishes a
relationship with a national lending institution in the future. The diagram
does not account for many details of the platform, including the effect of
prepayments, late payments, late fees or collection fees. See "About the
Lending Platform" for more information about the transactions that occur
when a sale of Notes takes place.
QUESTIONS AND ANSWERS
Q: What is InvestP2P.com?
A: InvestP2P.com operates an Internet-based, peer-to-peer lending
platform where business borrower members can take out loans that are
funded by proceeds from the sale of Borrower Member Payment
Dependent Notes to individual or corporate lender members. Lender
members commit to the purchase of these Notes when they make their
"declaration" on borrower loan requests on the InvestP2P.com lending
platform. While we use the terms "lender" members and "peer-to-peer" in
this prospectus and on our website for the sake of simplicity, all borrower
loans will be funded and originated by InvestP2P.com, or by a national
lending institution to be selected in the future. When a borrower loan is
originated, a series of Notes that is dependent for payment on payments
that InvestP2P.com receives on that loan is sold to the lender members
who declared offers on the loan. After borrower loans are originated,
InvestP2P.com collects monthly payments from the borrower and, if
applicable, the co-borrower members and makes corresponding payments
on the Notes to lender members.
Q: What is the lending platform?
A: The InvestP2P.com lending platform is an Internet-based forum where
individuals and/or companies can post requests for unsecured commercial
loans, and where other qualified individuals or corporations can evaluate
those loan requests and purchase Notes from InvestP2P.com whose value
will depend on payments we receive on borrower loans corresponding to
those Notes. On the platform, borrower members indicate the desired
principal amount for their loan, their desired term or maturity, the interest
rate they are willing to pay, what percent of lenders must vote in the
affirmative to allow distribution for business uses, the max spend request
they can make, the amount they invest themselves. Currently all loans
have a 36% fixed rate which may be changed in the future. Lender
members then place commitments in varying amounts on the loan. The
interest rate is fixed at the beginning of the process, which takes place
throughout the 1 to 28 day offering period for a loan. All loans originated
by InvestP2P.com, or by a alternate lending institution to be selected in the
future, will bear a fixed interest rate and fixed maturity schedule.
Once the loan is funded by the lender members, the proceeds are allocated
to a trust account for the benefit of the borrower. The borrower then must
submit "Spend Requests" to the lender members describing the use of the
funds. The lender members will vote whether they are believe the fund
usage has merit and therefore an acceptable request for funds. If the
"Spend Request" is accepted, InvestP2P.com will direct the funds directly
to the end user. If the vote fails to receive the previously stated number of
affirmative votes, the borrower will have to resubmit the request with
possible further explanation or make a different request.
As part of the member registration process that takes place on the
platform, InvestP2P.com verifies the identities of all individual lender,
borrower and co-borrower members. We may obtain credit scores and
credit histories for all borrower and co-borrower members through a
relationship with Experian, or another identity reporting company. We
may then assign an InvestP2P.com credit grade based on this information
to the borrower and co-borrower members. Borrower and co-borrower
credit information provided by Experian, or another credit reporting
company may be displayed in loan request postings, in addition to other
financial and employment information, as well as business or personal
references that are self-reported by the members. Lender members can
evaluate the loans posted on the platform by examining this information,
before deciding whether or not to place an offer on a loan.
The platform also enables InvestP2P.com to service the borrower loans on
an ongoing basis.
Q: What are the Borrower Member Payment Dependent Notes?
A: InvestP2P.com's lender members may purchase Borrower Member
Payment Dependent Notes issued by InvestP2P.com, Inc., which are
referred to in this prospectus as the "Notes." The Notes will be issued in
series, with each series of Notes related to one borrower loan, which we
refer to as the "corresponding borrower loan" for that series. The proceeds
of the Notes will be designated by the lender members to fund
corresponding borrower loans trust accounts that will be originated
through the platform. The Notes are special, limited obligations of
InvestP2P.com only and not of the borrower or co-borrower members of
InvestP2P.com. The Notes will be unsecured and do not represent a
security interest in the corresponding borrower loans.
Depending on the term of a particular Note's corresponding borrower
loan, the Notes may have initial maturities of 12, 24, 36, 48, or 60 months,
plus 4 business days to allow for all ACH transactions to conclude.
Maturities can be extended for up to one year, as described in this
prospectus. The Notes will bear interest from the date of issuance, be fully
amortizing and be payable monthly. In some instances, the borrower may
defer principal and interest payments for a period not to exceed two years
from origination or may pay interest only with a balloon payment at
maturity. These terms will be disclosed during the offering period of the
Notes.
Interest rates are determined by InvestP2P.com and/or the lender members
InvestP2P.com's Internet-based platform, as described in "About the
Lending Platform." All of the Notes in a series will have the same interest
rate as, and a maturity that is 4 days longer than, the corresponding
borrower loan for that series. InvestP2P.com will pay principal and
interest on any Note purchased by a lender member in an amount equal to
the lender member's pro rata share of the principal and interest payments,
if any, that the Company receives on the corresponding borrower loan, net
of a 1.0% servicing fee. The servicing fee will reduce the effective yield
on the Notes below their stated interest rate. InvestP2P.com will also pay
to lender members late payment fees, when charged and received on
delinquent loans, on a pro rata basis, subject to a 1.0% servicing fee
assessed against the value of the late payment. However, InvestP2P.com
will not pay to lender members any failed payment fees, collection fees
we or a third-party collection agency charge and any payments due to
InvestP2P.com with respect to the portion of the corresponding borrower
loan, if any, that InvestP2P.com has funded in its capacity as a lender
member on the platform.
Q: What are borrower loans and corresponding borrower loans?
A: We refer in general to the loans that are originated through
InvestP2P.com's Internet-based platform as "borrower loans," and we
refer to a particular loan that is funded by proceeds from the purchase of
one or more Notes in a series as the "corresponding borrower loan" for
that Note or that series. The borrower loans are unsecured obligations of
the business borrower, in certain cases, co-borrower, and/or individual
members with terms of 12, 24, 36, 48, or 60 months, and a fixed interest
rate determined by InvestP2P.com and/or the lender members as described
in "About the Lending Platform." In the event that InvestP2P.com
establishes a relationship with a alternate lending institution in the future,
the borrower loans will be originated by the said institution. In this case,
the originated loans will then be sold and assigned to InvestP2P.com,
without recourse to the lending institution, at a price equal to the principal
amount of the borrower loan.
Unless a borrower member purchases our MVP Verification service, or if
a loan request has been selected for random or targeted verification by
InvestP2P.com, borrower loans are made without obtaining any
documentation of a borrower, co-borrower, or business member's ability
to afford the loan. However, even in instances where borrower or co-
borrower income, employment or other information is verified by
InvestP2P.com, there are no guarantees that a borrower loan will be fully
repaid.
A borrower loan will be issued to a borrow member if, at the end of the
offering period, the full amount of their loan request has been committed
by lender members, or if at least 35 percent of the amount has been
committed and the borrow member chooses to accept partial funding of
the loan. These loans will be dispersed as the lender group votes on
requested distributions. Each loan will detail the percentage of
affirmative votes necessary for distribution.
Q: Who services the loans issued by InvestP2P.com, and what
happens if the Company goes out of business?
A: InvestP2P.com services all loans originated through the platform. In the
event that the business operations of InvestP2P.com become impaired, the
Company's ability to collect repayments from borrower members may by
adversely impacted. We currently do not have any arrangements in place
for backup servicing of our borrower loans in the event that we fail to
maintain operation of the InvestP2P.com platform, although we are
pursuing negotiations with potential third-party backup loan servicers. If
no third party can be found to continue servicing outstanding loans if we
go out of business or if the InvestP2P.com platform becomes disabled,
borrower and co-borrower members will still be obligated to make
payments on their loans, but a lender member's ability to collect payments
on the Notes related to those loans may be significantly impaired. See
"Risk Factors Risks Related to InvestP2P.com and the Lending
Platform" for more information.
Q: How are the Notes being offered?
A: The Notes are being offered directly to lender members only through
the InvestP2P.com website for a purchase price of 100 percent of their
principal amount. There will be no underwriters or underwriting discounts
involved in the sale of the Notes.
Q: Will Note purchasers receive a certificate for their Notes?
A: No. The Notes will be issued in electronic form only, which means that
each Note will be stored on the InvestP2P.com website. Holders of Notes
can view their Notes online and print copies for their records by visiting a
secure, password-protected web page in their "My InvestP2P.com" section
on our website.
Q: How does the borrower receive the loan proceeds?
A: The loan proceeds will be allocated to a trust account for the benefit of
the borrower to which "spend requests" will be made and voted on by the
lender members. The borrower will detail the reason for the requisition
through a "Spend Request." The borrower will include all necessary
details, such as landlord, vendor information, or final destination in the
spend request. The borrower will use this request to explain the need for
the funds. The lender group will have up to two weeks to do discuss and
vote on the website as to the merits of the fund usage. Lenders members
do not have to vote. The required percentage of affirmative votes will be
declared at the time of loan request. If the vote reaches the required
percentage of affirmative votes, the money will be distributed as
requested.
Q: What happens if the vote fails to reach the required percentage of
affirmative votes?
A: The spend request will be denied. The borrower can reapply for the
requisition, possibly addressing the concerns of the lender group until
such a time as the affirmative vote is reached.
Q: Will the Notes be listed on any securities exchange?
A: No. The Notes will not be listed on any securities exchange.
Q: Will Note holders be able to sell their Notes?
A: The Notes will not be transferable except through our Internet-based
Note trading platform, which will be operated by a registered broker-
dealer to be selected in the future. However, there are no guarantees that a
broker-dealer relationship will be established for the purposes of operating
the trading platform, or that a market for Notes will develop if such a
platform is created. Therefore, lender members must be prepared to hold
their Notes to maturity. See "About the Lending Platform" for more
information.
Q: Are the Notes secured by any collateral?
A: No. The Notes are not secured by any collateral. In particular, the
corresponding borrower loans are not collateral for the Notes. The Notes
are not guaranteed or insured by any governmental agency or
instrumentality or any third party. The Notes are not subject to any credit
enhancement. At a later date, InvestP2P.com may offer collateralized
loans.
Q: Are there any risks associated with an investment in the Notes?
A: Yes. The Notes are highly speculative and involve a high degree of
risk. Investing in the Notes should be considered only by persons who can
afford the loss of their entire investment. See "Risk Factors" and "About
the Lending Platform Financial Suitability Requirements" for more
information.
Q: How are the Notes treated for United States federal income tax
purposes?
A: While the matter is not free from doubt, InvestP2P.com intends to treat
the Notes as debt securities of InvestP2P.com that have original issue
discount, or OID, for U.S. federal income tax purposes. Therefore, holders
of Notes will be required to include the OID in income as ordinary interest
income for U.S. federal income tax purposes as it accrues (which may be
in advance of interest payments being made on the Notes), regardless of
the holder's regular tax accounting method. Prospective purchasers of
Notes should consult their own tax advisors regarding the U.S. federal,
state, local and non-U.S. tax consequences of the purchase, ownership,
and sale of the Notes, including any potential differing treatments of such
Notes. See "Material U.S. Federal Income Tax Considerations" for more
information.
Q: Who are the lender members on InvestP2P.com?
A: In this prospectus, we refer to individuals that have an opportunity to
purchase our Notes as "lender members." All lender members must
register on the InvestP2P.com website in order to purchase Notes. During
registration, all lender members must agree to a authorization statement
for identification purposes, a tax withholding statement and the terms and
conditions of the InvestP2P.com website, and must enter into a Lender
Member Registration and Note Purchase Agreement with InvestP2P.com,
which will govern all purchases of Notes a lender member makes.
Currently, any United States resident who is 18 years of age with a social
security number and bank account can become a lender member on
InvestP2P.com, provided they pass our identity verification and fraud
solutions processes. Also, any institution with a taxpayer identification
number can be a lender member on InvestP2P.com. In addition, financial
suitability or other requirements for lender members may be implemented
in the future.
Q: Does InvestP2P.com participate on the platform as a lender
member?
A: Yes. From time to time, InvestP2P.com, Inc. may act as a lender
member on the platform to provide additional funding for the borrower
loans. After the funding period for a loan request expires, InvestP2P.com
may, at its discretion, fund part or all of the difference between the
funding commitments made by lender members and the total value of the
loan request. As a result, InvestP2P.com's participation on the lending
platform will not impact the lender member funding process on the Notes
or the corresponding borrower loans.
Moreover, InvestP2P.com directors, management or other personnel may
in the future, participate on the platform as lender members. We have
strict policies and procedures in place to ensure that participation on the
platform by InvestP2P.com, or by any of its personnel in their private
capacities, does not lead to any manipulative or otherwise unfair offering
practices that could put our lender members at a competitive disadvantage
during the declaration process for borrower loans.
Q: What is a declaration?
A: If lender members want to commit to the purchase of a Note, the
proceeds of which will fund part of a corresponding borrower loan, they
submit a "declaration" for the loan during the offering period for that loan.
The minimum required commitment value is $100, and can be for as
much as the entire amount of the loan request. While lender members are
declaring on loan request postings, they are not declaring to purchase
loans directly. Instead, they will be purchasing Notes dependent for
payment on payments that InvestP2P.com receives on the corresponding
borrower loans.
Lender members on a borrower loan that is originated will be sold a Note
equal in principal amount to the dollar value of their bid, and with an
interest rate equal to or greater than that indicated in the bid. Because we
charge a 1.0% annual servicing fee, and, as described in this prospectus,
certain other fees from time to time to our lender members, the return on
the Notes will be less than the return on the corresponding borrower loans.
Lender members may declare on more than one borrower loan at the same
time, but in order to make a declaration, lender members must have funds
in their InvestP2P.com account equal to or greater than the value of any
new bid that will be made, plus all outstanding bids. Once a commitment
is made it is irrevocable. See "About the Lending Platform" for more
information.
Q: How do lender members purchase Notes?
A: InvestP2P.com members can become registered lender members by
successfully completing our identity verification and fraud solutions
processes. Once users have successfully registered as lender members,
they will need to deposit money into their online InvestP2P.com account.
When their account has funds available, they can review different
borrower profiles and loan requests and commit on loan postings they find
attractive. Once the offering period for a loan expires, the dollar value of
the "declaration" will automatically be debited from the lender member's
account to pay for the Note that is purchased from InvestP2P.com.
Q: Do lender members loan funds directly to borrower members?
A: No. Lender members are not directly lending money to borrower
members on the InvestP2P.com platform. While we use the terms "lender"
members and "peer-to-peer" in this prospectus, and on our website, for the
sake of simplicity, all borrower loans will be originated by InvestP2P.com,
or by a alternate lending institution to be selected in the future. The
proceeds received from the sale of the Notes will be used to fund the
corresponding borrower loans for those Notes. Even though lender
members do not directly lend money to borrower members, they will
nevertheless be wholly dependent on payments from those borrowers for
payment on the Notes they purchase from InvestP2P.com. If a borrower or
co-borrower defaults on a borrower loan, InvestP2P.com will have no
obligation to make any payments on the Notes corresponding to that loan.
Q: How much money can lender members bid on the lending
platform?
A: Lender members can bid as little as $100, or as much as the maximum
loan limit of $50,000 on any particular loan request, unless involved in the
Family and Friend loan option. Family and Friend loans do not have
limitations and may avoid the "Spend Request" requirements if that is
previously agreed upon. Individual lender members may not have more
than $1,000,000 in committed bids plus the amount outstanding on their
previously purchased Notes. A corporate lender member may not have
more than $1,000,000 in committed bids plus the amount outstanding on
its previously purchased Notes.
Q: What types of lender fees are associated with the Notes?
A: Lender members are charged an annual servicing fee of 1.0% of the
outstanding principal balance on the corresponding borrower loan for each
Note they hold. The fee accrues daily the same way in which borrower
member interest payments are calculated, and is deducted from each
monthly borrower member payment before lender members receive their
pro rata share of the payment amount. The servicing fee will lower the
effective yield on the Notes below their stated interest rate, and reduces
both the principal and interest payments on Notes. InvestP2P.com will
also pay to lender members late payment fees, when charged and received
on delinquent loans, on a pro rata basis, subject to a 1.0% servicing fee
assessed against the value of the late payment. In the event that collection
action must be taken on a delinquent loan, the Company or its designated
third-party collection agency will also charge a collection fee between
20.0% and 35.0% on any amounts that are obtained. These fees will
thereby reduce the amounts of any payments lender members receive on
their Notes. We may adjust the amount of these servicing fees from time
to time.
Q: What are InvestP2P.com credit grades?
A: InvestP2P.com may assign a credit grade to each borrower and co-
borrower member on the platform as an indication of the level of credit
risk that they pose. The credit grade is based on a credit score assigned to
the borrower and co-borrower members by Experian, or another credit
reporting company. In general, the higher the credit score, the better the
credit history, which means that the borrower or co-borrower member
probably has a relatively lower level of outstanding debt and has typically
paid back previous loans on time. Lower credit scores generally indicate
relatively larger amounts of outstanding debt and a history of delinquency
and default on previous or currently outstanding loans.
We may establish borrower and co-borrower member credit grades by
converting their numerical VantageScore credit score from Experian into
one of the InvestP2P.com credit grade categories defined below:
Experian VantageScore Range InvestP2P.com Credit Grade
Assigned
784-990 A+
728-783 A
701-727 B+
692-700 B
668-691 C+
660-667 C
633-659 D+
624-632 D
604-623 D-
569-603 E
501-568 F
No Score NC
Borrower member and, if applicable, co-borrower member credit grades
and the related VantageScore numerical ranges may be displayed in loan
request postings and may be available for viewing by lender members.
However, the exact numerical VantageScores for borrower and co-
borrower members are not displayed or disclosed to anyone on the
platform.
We may also use a proprietary rating based on loans that were originated
on InvestP2P.com and successfully repaid in a timely fashion or being
repaid in a timely fashion.
Q: How does InvestP2P.com access the credit histories of its borrower
and co-borrower members, and what does it do with the information?
A: InvestP2P.com has established a relationship with Experian, a credit
reporting company, to access information about the credit scores and
credit histories of its borrower and co-borrower members. At any time, we
may change credit reporting agencies. InvestP2P.com may conduct what is
commonly referred to as a "soft" inquiry to obtain data for a loan request
posting. While this data is the exact data from a borrower or co-
borrower's credit report, the soft inquiry is not reported or recorded on
their credit report, and therefore does not have any impact on their credit
score. However, once a loan is approved and originated, InvestP2P.com
may, but is not required, conduct a "hard" inquiry, which will be reported
and recorded on borrower and co-borrower member credit reports. If
borrower members do not have a credit report due to a lack of credit
history or otherwise, they will be assigned a credit grade of "NC," which
stands for "No Credit."
InvestP2P.com may use borrower and co-borrower credit reports for
identity verification, to obtain their VantageScore credit score and to
assign to them an InvestP2P.com credit grade based on that score, to
determine their current amount of non-mortgage debt so as to determine
their debt-to-income ratio and to display as part of their loan request
postings certain other information from their credit profiles, including, but
not limited to, the number, age, type and status of their currently reported
credit lines, public records (such as bankruptcies and judgments) and
mortgage loans, and the number of their recent requests for credit.
Information from credit reports may be displayed on the InvestP2P.com
website with borrower member loan requests and may be available for
registered lender members to review.
Q: Who are the borrower members on InvestP2P.com and what are
the minimum credit criteria for borrowers?
A: In order to borrow money on the InvestP2P.com platform, a borrower
member must be at least 18 years of age, a resident of the United States,
have a valid social security number. Also, a borrower may be a business
and must have and employer identification number. Borrower members
must also be residents of states in which InvestP2P.com is currently
licensed to issue loans or where the Company is exempt from any
licensing requirements, unless we establish a relationship with a national
lending institution, which would allow us to issue loans on a uniform
basis across the United States. Borrowers must also have a valid e-mail
address and a bank account at a financial institution with a valid routing
transit number. Otherwise, there are no minimum income, net worth, or
employment requirements for borrowers, nor any other standards
regarding credit history. InvestP2P.com reserves the right to restrict access
to the InvestP2P.com platform by setting such guidelines in the future.
There is currently no minimum credit criteria for the borrower or co-
borrower. This may be subject to change.
Q: How do borrower members take out loans on the InvestP2P.com
platform?
A: InvestP2P.com members can become registered borrower members by
successfully completing InvestP2P.com's identity verification, fraud
solutions and, in some cases, credit scoring processes. Once members
have successfully registered as borrowers, they can then create a loan
request and post it on the InvestP2P.com website. Once a loan request is
posted, lender members can review borrower profiles and make
declarations on loans. If a loan receives declarations totaling 100 percent
of the amount requested by the end of the offering period, it will be
originated by InvestP2P.com (or by a alternate lending institution to be
selected in the future) after internal review. If a loan receives bids totaling
less than 100 percent but greater than 35 percent of the amount requested
by the end of the offering period, borrower members may accept the lesser
amount, or cancel their request and try again.
Q: What types of loans are available on InvestP2P.com?
A: All loans are unsecured, fully-amortizing, fixed-rate loans with
maturities of 12, 24, 36, 48 or 60 months. Loans are payable monthly, and
can be prepaid in part or in full without penalty. In some cases, principal
and interest or interest payments may be deferred up to two years from the
origination date. The deference will be declared at the time of loan
request.
Q: What is a loan request posting?
A: A loan request posting is a description of the nature and terms of a loan
that has opened for declaration on the InvestP2P.com platform. A posting
may include both self-reported information from the registered borrower
member requesting the loan, credit information about the borrower and
possibly other information about the borrower's financial situation. A
posting states the principal amount of the loan request, the term and the
interest rate the borrower will pay, currently 36%, which may change for
future offerings. A posting will also indicate if there is a co-borrower on
the loan and, if so, the co-borrower's credit and financial information may
also be displayed. Also, the posting will declare what percentage of
positive votes are necessary for requisition requests. Postings will also
indicate if a borrower member has opted for MVP Verification and, if so,
which information was verified by InvestP2P.com on behalf of the
borrower and, if applicable, the co-borrower member.
There will also be an explanation written by the borrower of what the
proceeds of the loan will possibly be used for. Specific uses will be voted
on by the lender members at a later time on the website forum and "Spend
Request" responses. General information about all postings, requisitions
and related voting statuses, and borrower's business status reports is
available to the community on the InvestP2P.com website, but more
specific information such as a specific borrower's credit score and selected
financial information is only available for viewing by registered lender
members.
Q: How do borrower members select an interest rate for their loan
request posting?
A: Currently, rates are fixed at 36% interest per year. Considering the
potential risks of these unsecured loans, we expect this fixed rate to stay
high, but as new criteria are added to the borrower's profile, we may
decide to lower the offered rate. In addition, we may eventually allow
higher or lower interest rates upon borrower requests.
Borrower members can request lower rates, but considering the unsecured
nature of these loans it is unlikely they will fill their loan requests.
InvestP2P.com will monitor the market and will adjust the loan rates as
necessary.
Q: How much money can a borrower member borrow on the
InvestP2P.com platform, and are there any interest rate restrictions?
A: Each U.S. state imposes different restrictions on the values and
maximum interest rates of the borrower loans, which may change from
time to time. On the InvestP2P.com website, borrower members can view
the minimum and maximum loan values and the maximum interest rate
that their state allows. The platform will not permit borrower members to
request loans that do not conform to the lending laws of their state.
However, if InvestP2P.com partners with a national or state chartered
lending institution in the future, borrower members residing in most U.S.
states will then be able to request loans between $1,000 and $50,000 in
value, and with interest rates up to 36%. No entity may have more than
two loans outstanding at any one time. Family and Friend loans do not
count toward the total loan or dollar amount allowed at any one time. At
no point, may any entity loan more than $1,000,000.
Q: What are Family and Friend loans?
A: Family and Friend loans are captured and directed loans that a
borrower brings to the InvestP2P.com website strictly to fund that
borrower's loan. F&F loans have lower origination fees but all members
must follow all verification procedures. The group will use the lending
platform and all services that members are entitled to. These loans will not
be counted against the maximum number of loans outstanding or the
dollar amount borrowed restrictions. The platform will not permit
borrower members to request loans that do not conform to the lending
laws of their state.
Q: How are interest rates determined and payments on the loans
calculated?
A: Interest rates are determined prior to a loan request by InvestP2P.com
and/or the borrower members request. The monthly payments on the
loans, and, therefore, on the Notes, are based on a fully-amortizing
repayment schedule. All monthly payments on the loans are the same,
except for the final payment, which includes the remaining principal
balance at that time, any unpaid accrued interest and any unpaid late fees
and failed payments fees due on the Notes. See "About the Lending
Platform" for more information. In some instances, payments may be
deferred for up to two years from issuance. Also, an interest only option
with a balloon payment, may be available for some future loans.
Q. How does deferment affect payments?
A: All deferred payments will continue to compound at the stated interest
rate and will be payable after the deferment period in the remaining time
schedule originally allotted. This will significantly increase the monthly
payment schedule when the payments begin and may hinder the ability of
the borrower to repay the loan.
Q: What types of borrower fees are associated with the borrower
loans?
A: InvestP2P.com charges borrower members a one-time origination fee
that is deducted from the principal amount of their loan, before the loan is
disbursed to their trust account or Ip2p virtual account that is planned but
not yet available. The origination fee is 5.0% for all requested loans.
Borrowers are also subject to failed payment fees, which InvestP2P.com
retains, and late payment fees, which are passed along to lender members,
net of a servicing fee. Borrowers are subject to a verification and soft
credit check fee of $100. There is an additional flat fee of $100 (or $150
with a co-borrower) for our MVP Verification service. See "About the
Lending Platform Origination and other Fees Charged to Borrower
Members" for more information.
Friend and Family loans will have a 1.5% origination fee. F&F loans do
not need MVP Verification services but if they choose to use the service,
all fees will be the same.
Q: Can a borrower member take out more than one loan at a time on
InvestP2P.com?
A: Yes. Borrower members may take out one additional loan if: (1) they
are current on their existing borrower loan, and have not been more than
30 days past due in making their most recent monthly loan payments for a
period of at least six months; (2) their previous loan origination took place
at least 6 months before their second loan request; and (3) the total
amount of their outstanding loans does not exceed the maximum amount
that InvestP2P.com is permitted to lend to an individual and/or business in
their state of residence. See "About the Lending Platform Borrower
Member Loan Requests" for more information.
Co-borrower members may serve as a co-borrower on two loans, but the
aggregate value of those loans must not exceed $50,000, or a lesser value
as permitted by applicable state law. Borrower members who have been
issued loans may also serve as co-borrowers on one other loan, provided
that the aggregate value of their borrower loan and the loan for which they
are serving as a co-borrower does not exceed $50,000, or a lesser value as
permitted by applicable state law. See "About the Lending Platform Co-
borrower Members" for more information.
F&F loans do not count against the maximum number of loans allowed.
Q: What happens if loan payments are late or if a loan goes into
default?
A: If a borrower member's payment becomes more than 15 days late, a
late fee will be charged that is equal to the greater of 5.0% of the amount
of the unpaid installment, or $15, or a lesser amount as permitted by
applicable law. If a loan continues to be delinquent the borrower will also
be charged additional late fees after 45 days, 75 days and 105 days.
InvestP2P.com will also pay to lender members late payment fees, when
charged and received on delinquent loans, on a pro rata basis, subject to a
1.0% servicing fee assessed against the value of the late payment.
InvestP2P.com reserves the right to waive late payment fees if borrower
members make a good faith commitment to pay late installments within a
reasonable period of time.
In the event that a borrower member becomes more than 30 days
delinquent on a borrower loan, InvestP2P.com may refer the loan to its in-
house collections department or to a third-party collection agency. Once a
loan is past 120 days late it will be considered in default. When a loan
goes into default, InvestP2P.com may pursue further collection efforts on
its own or through a third-party collection agency, sell the loan to an
unaffiliated third-party debt purchaser or charge off the loan and deem it
uncollectible.
For co-borrower loans, the co-borrower becomes responsible for making a
monthly payment if we are unsuccessful in
debiting the primary borrower's bank account on the due date and on the
9th and 19th days after the due date. In such cases, the co-borrower's bank
account will be debited on the 26th late day. If neither the borrower nor the
co-borrower member is able to make a payment by the 30th late day,
InvestP2P.com may refer the loan to its in-house collections department or
to a third-party collection agency.
To the extent that primary borrowers become late on their borrower loan
payments, InvestP2P.com will not make payments on the corresponding
Notes until such time as the Company has received payment from the
primary borrower or a co-borrower. Loan delinquencies and defaults,
where required by law may be reported to the credit agencies, but will not
be where not required, as we want to encourage entrepreneurship and job
growth in America without jeopardizing entrepreneurs personal credit
history The borrower and, if applicable, the co-borrower members will
also be legally liable for the debt and there may be formal legal action
taken by the debt holder if a payment arrangement cannot be reached.
Borrower and co-borrower members who default on a loan are prohibited
from posting any further loan requests on the InvestP2P.com platform and
from serving as co-borrowers on any subsequent loans that are originated.
If InvestP2P.com does not receive payment on a defaulted loan through a
third-party collection agency or by other means, holders of related Notes
will not receive any payments on their Notes from InvestP2P.com.
InvestP2P.com has no obligation to make any payments of principal or
interest on a Note unless we receive payments on the corresponding
borrower loan. In the event that InvestP2P.com does receive payment on a
borrower loan after an event of default, Note holders will receive their pro
rata share of whatever amount is received by InvestP2P.com, less any
applicable service or collections fees, unless the amount is collected after
the final maturity date. See "Risk Factors Risks Related to the Notes and
the Corresponding Borrower Loans" for more information.
Q: Can lender members collect on late payments or defaulted loans
themselves?
A: No. Lender members agree as part of the Lender Member Registration
and Note Purchase Agreement that they cannot attempt to collect on any
late payments or defaulted loans themselves. Instead, lender members
must rely on InvestP2P.com or its designated third-party collection agency
to pursue collection on delinquent loans. In the event that collection action
must be taken on a delinquent loan, the Company or its designated third-
party collection agency will charge a collection fee between 20.0% and
35.0% on any amounts that are obtained. These fees will thereby reduce
the amounts of any payments lender members receive on their Notes.
Q: What is a co-borrower?
A: An InvestP2P.com co-borrower member is a co-signer, or guarantor,
who is individually and jointly liable for a loan alongside the primary
borrower member. Because they are legally obligated to make payments
on a loan if the primary borrower becomes delinquent or defaults, co-
borrowers will normally be trusted friends or family members of the
primary borrower. In order to be a co-borrower on a loan, an individual
must be at least 18 years of age, a resident of the United States, and have a
valid social security number. In addition, for as long as InvestP2P.com is
issuing loans on a state-by-state basis, the co-borrower must reside in a
state where InvestP2P.com is authorized to issue loans, or is exempt from
any licensing requirements, and that has a maximum interest rate cap
equal to or greater than the interest rate indicated in the primary borrower
member's loan request. Co-borrowers must also have a valid e-mail
address and a bank account at a financial institution with a valid routing
transit number. See "About the Lending Platform Co-borrower
Members" for more information.
Q: What happens if a co-borrower defaults on a borrower loan?
A: If both the primary borrower and co-borrower default on a loan,
holders of Notes may not receive any further payments on their Notes.
Having a co-borrower on a loan is not a guarantee that the loan, or the
corresponding Notes, will be paid.
Q: After borrower loans are originated, how do lender members
receive payments on their Notes?
A: All payments on the Notes are processed through the InvestP2P.com
platform. Each month, when a borrower member's payment is due,
InvestP2P.com will automatically debit the borrower or, if applicable, the
co-borrower member's Ip2p virtual account or other bank account on file
and subsequently credit the InvestP2P.com accounts of the lender
members holding the corresponding Notes within 4 business days, net of
our 1.0% servicing fee. Lender members may elect to have available
balances in their InvestP2P.com accounts transferred to their bank
accounts at any time, subject to normal execution time-frames (generally
2 to 3 days).
Q: Are there any penalties if a borrower member repays a loan early?
A: No. There are no prepayment fees of any kind if borrower or co-
borrower members pay their loans early. Borrower or co-borrower
members may prepay part or all of a loan before the maturity date.
Borrowers and co-borrowers are only required to pay accrued interest and
other charges up to the day in which they pay off their loan. If a borrower
or co-borrower member partially prepays a loan, the amortization
schedule for that loan will be automatically recalculated for the remainder
of the loan's term, and the borrower member's monthly installment is
thereafter reduced accordingly. This means that payments on the
corresponding Notes will be reduced by the amount that the borrower
member's monthly payment is reduced, plus our 1.0% servicing fee. If a
borrower or co-borrower member partially or fully prepays the remaining
unpaid principal on a loan, InvestP2P.com will pay to holders of the
related Notes their pro rata share of the prepayment, net of our 1.0%
servicing fee. Interest will cease to accrue after the date on which
InvestP2P.com receives the prepayment.
Q: Does InvestP2P.com guarantee that borrower loans will be repaid?
A: No. InvestP2P.com does not guarantee that any loan payments will be
made by borrower or co-borrower members. All loans are unsecured, and
as such, there is risk involved in purchasing Notes whose value depends
on payments that InvestP2P.com receives on the corresponding borrower
loans. Holders of Notes will not receive any payments on their Notes if
InvestP2P.com does not receive any payments on the corresponding
borrower loans. See "Risk Factors Risks Related to the Notes and the
Corresponding Borrower Loans" for more information.
Q: Does InvestP2P.com verify all of the information provided by
borrower and co-borrower members?
A: No. Only limited information provided by borrower and co-borrower
members is verified by InvestP2P.com. InvestP2P.com submits every new
borrower and co-borrower member's personal data, including their name,
address, social security number and other information to an Experian
database, and requires each user to confirm their identity by answering a
series of questions about their financial position, employment status, and
past addresses, among other topics. Information is also submitted through
Experian to the U.S. Treasury's Office of Foreign Assets Control (OFAC)
to check for known criminals, terrorists, money launderers or other
flagged individuals. If InvestP2P.com users attempting to register as
borrower or co-borrower members do not pass these identity verification
and fraud solutions processes, they are prohibited from borrowing on the
InvestP2P.com platform. Despite our best efforts, which are dependent on
the mentioned third parties above, it may still be possible for fraudulent
users to gain access and create loan request.
However, in most cases, all other information presented in a borrower or
co-borrower member's profile, including their income, employment
status, and description of the purpose of the loan, is completely self-
reported and unverified by InvestP2P.com. This unverified information
includes certain financial statistics that InvestP2P.com calculates on behalf
of the borrower members, including their debt-to-income ratios, which is
determined from their self-reported income and information from their
credit report. However, InvestP2P.com does not review or verify any
information in the credit report.
The Company reserves the right in its Borrower/Co-Borrower Member
Registration Agreement to verify, at any time, all statements and
information provided by borrower and co-borrower members during their
registration process and/or in their final loan request posting, and we have
the right to cancel listings or to refuse to fund a borrower loan if material
misstatements or inaccuracies are found. In the limited instances where
we do verify income, employment status or other information provided by
borrower or co-borrower members, lender members will be unaware that
this information has been verified for a borrower, unless the borrower has
purchased our MVP Verification service. There are no guarantees that a
borrower loan will be repaid because borrower or co-borrower income,
employment or other information has been verified by InvestP2P.com. See
"Risk Factors Risks Related to the Notes and the Corresponding
Borrower Loans" and "About the Lending Platform Borrower Member
Financial Information is Generally Unverified" for more information.
Q: What is MVP Verification?
A: On the InvestP2P.com platform, primary borrower members can
purchase a service called MVP Verification, in which borrower and, if
applicable, co-borrower members provide InvestP2P.com with certain
documentation so that we can verify their financial, employment and other
information. These documents can include all or some of the following, at
the members' choosing: a notarized statement affirming their legal
commitment to repay the loan; photo identification such as a driver's
license or passport; recent employment pay-stubs; an authorization form
that permits us to confirm income tax return data with the IRS; a utility
bill to match names with addresses; and recent monthly bank statements.
Lender members can see which information has been verified for
borrower or co-borrower members before committing on borrower loan
requests. However, even in instances where borrower or co-borrower
income, employment or other information is verified by InvestP2P.com,
there are no guarantees that a borrower loan will be fully repaid. See
"About the Lending Platform MVP Verification" for more information.
Q: How is InvestP2P.com compensated for its services?
A: InvestP2P.com charges an origination fee to borrower members at the
time their loan is originated and charges lenders a servicing fee for the
servicing and collection of outstanding loans. The origination fee charged
to borrower members is calculated as a percentage of the gross principal
amount of a loan, and is currently set at 5.0% (there is a minimum
origination fee of $95). Friend and Family loans have a 1.5% origination
fee. The lender member servicing fee is assessed each time a lender
member receives a payment on their Notes, and is calculated at a 1.0%
annualized rate, accruing daily, on the outstanding principal balance of the
corresponding borrower loan. InvestP2P.com also derives income from its
MVP Verification service, for which the Company charges a flat fee of
$100. InvestP2P.com also derives revenue from collections, failed
payment and certain other fees it assessed, and from Borrower Credit
reporting opt-in fee of $100
Q: Can members earn referral fees?
A: Currently there is no referral program in place, but we may offer one in
the future.
Q: How does the voting for loan disbursement work?
A: Upon origination of the loan, the funds are allocated to a trust account
for the benefit of the borrower. The borrower must submit and request
approval of the lending members for the use of the funds. Spend requests
may be posted by the 1st and 14th only and committed lenders get a digest
email on the 7th and 22rd with all spend requests for that period. Then
lenders have to the 14th and 28th respectively to place their votes. The
necessary percentage will be set at the time of loan posting. If the request
does not meet the necessary affirmative votes, then the distribution is
denied and the borrower will either address the members concerns and
reapply or will make a different request when necessary. It is possible that
some loans will have the distributions sent directly to the vendor or
service that was requested by the borrower. There is no guarantee that the
funds will be used as requested even though the vote was taken.
InvestP2P.com will make every effort to register vendors as "In-Network"
to further assist the lender members in spend controls.
Q: How is InvestP2P.com regulated?
A: The issuance of the borrower loans and the servicing of Notes are
subject to state and federal regulations. As a consumer and business
lender, InvestP2P.com must adhere to applicable state laws and
regulations, including licensing and disclosure requirements.
InvestP2P.com must also comply with applicable sections of the federal
Consumer Credit Protection Act, including, but not necessarily limited to,
the Fair Credit Reporting Act, Equal Credit Opportunity Act, Fair Debt
Collection Practices Act, Electronic Fund Transfer Act, and the Truth-in-
Lending Act, in addition to the federal Electronic Signatures in Global and
National Commerce Act (ESIGN) and other laws and regulations
regarding privacy, fair business practices and data security. InvestP2P.com
is subject to examination, supervision and potential regulatory
investigations and enforcement actions by state and federal agencies, such
as the Federal Trade Commission, that administer the federal consumer
protection laws. The company lends money only in states where it either
has a valid lending license or is exempt under certain state codes of law.
See "Government Regulation" for more information.
RISK FACTORS
The Borrower Member Payment Dependent Notes issued by
InvestP2P.com, Inc. involve a high degree of risk. The risk factors
described below should be carefully considered before you decide to
purchase the Notes. These risks could have a negative material impact on
the value of the Notes, and may cause you to lose all or part of your
investment.
RISKS RELATED TO THE NOTES AND THE CORRESPONDING
BORROWER LOANS
Investing in the Notes is highly speculative and risky. You should only
purchase Notes if you can afford to lose the entire value of your
investment.
The Notes are highly speculative and risky investments. Notes are
special, limited obligations of InvestP2P.com. Their value depends
entirely on payments that InvestP2P.com receives on corresponding
borrower loans, which are unsecured commercial finance obligations of
individual and/or business borrower members and, in some cases, co-
borrower members. Purchasing Notes is only suitable for investors with
adequate financial means. You should not attempt to purchase Notes if
you cannot afford to lose your entire investment. You should not assume
that a particular Note is an appropriate investment for you because it
corresponds to a borrower loan that is listed on the InvestP2P.com
platform, or because the borrower loan involves a co-borrower or MVP
Verification.
Payments on the Notes depend entirely on payments that InvestP2P.com
receives on corresponding borrower loans. You will not receive any
payments on your Note if a borrower does not make any payments on
the corresponding borrower loan.
InvestP2P.com will make payments on the Notes, net of a 1.0%
servicing fee, only after receiving payments from individual and/or
business borrower or co-borrower members on corresponding borrower
loans. Lender members will not receive any payments based on failed
payment fees or collection fees that InvestP2P.com or a third-party
collection agency may assess. If InvestP2P.com does not receive
repayments on a corresponding borrower loan, you will not be entitled to,
nor will you receive, any payments under the terms of the Notes. If a
borrower or co-borrower fails to repay a loan, this will not be considered a
default under the terms of the Notes.
The Notes are special, limited obligations of InvestP2P.com only. They
are not secured by any collateral and they are not guaranteed or insured
by any third party.
The Notes will not represent an obligation of borrower or co-
borrower members, or of any other party except InvestP2P.com. The
Notes are special, limited obligations of InvestP2P.com. The Notes are not
secured by any collateral and are not guaranteed or insured by any
governmental agency or instrumentality, or any third party.
Borrower loans are not secured by any collateral or guaranteed or
insured by any third party. You must rely on InvestP2P.com and/or a
third party collection agency that we may designate in the future to
pursue collection against borrower or co-borrower members.
Borrower loans are unsecured obligations of InvestP2P.com
borrower and, in some cases, co-borrower members. The loans are not
secured by any collateral, nor are they guaranteed or insured by any third
party. They are not backed by any governmental authority in any way.
InvestP2P.com and any third-party collection agency that it may designate
in the future will, therefore, be limited in their ability to collect on the
loans.
Borrower loans are obligations of individual and/or business
borrower and co-borrower members to InvestP2P.com, not obligations to
holders of Notes. Holders of Notes will have no recourse to
InvestP2P.com borrower or co-borrower members and no ability to pursue
them to collect payments under the terms of the borrower loans. Holders
of Notes may look only to InvestP2P.com for payment of the Notes, and
InvestP2P.com's obligation to make payments on the Notes is limited as
described in this prospectus. If an InvestP2P.com borrower or co-borrower
fails to make any payments on a loan corresponding to a Note, the holder
of that Note will not receive any payments on that Note. The holder of the
Note will not be able to pursue collection efforts against any
InvestP2P.com borrower or co-borrower member and will not be able to
obtain the identity of the borrower or co-borrower in order to contact them
about the delinquent or defaulted loan. In addition, as described in this
prospectus, in the unlikely event that we receive payments on a
corresponding borrower loan after the final maturity date, you will not
receive payments on your Notes.
Credit information for borrower and co-borrower members may be
inaccurate or may not accurately reflect their creditworthiness, which
may cause you to lose all or part of your investment.
InvestP2P.com may obtain borrower and co-borrower member
credit information and their VantageScore credit score from Experian, a
credit reporting company. The VantageScore that Experian assigns to
consumers is a numerical credit score ranging from 501 to 990. The
InvestP2P.com credit grades that we assign to all borrower and co-
borrower members may be based on these scores, and range from A+ to
NC as described in "About the Lending Platform Borrower Member
Credit Criteria and Underwriting." Credit scores assigned to borrower and
co-borrower members by Experian may not accurately reflect their
creditworthiness at the time a loan request is posted, and therefore the
InvestP2P.com credit grades based on those scores may not accurately
reflect their creditworthiness.
Credit scores may be calculated using outdated, incomplete or
inaccurate data, and InvestP2P.com does not verify the information in
borrower or co-borrower member credit reports. There is also a risk that,
after InvestP2P.com receives a credit report from Experian, a borrower or
co-borrower member may become delinquent or may default on an
outstanding debt obligation, take on additional personal debt or become
subject to adverse financial conditions. Moreover, lender members will
not be able to review financial statements or other detailed financial
information for borrower or co-borrower members.
InvestP2P.com may only retrieve a new credit report for a
borrower or co-borrower member with an active loan request when a
previous report that we have retrieved becomes more than 30 days old.
This means there is a risk that, within that 30 day period, a borrower or
co-borrower member may have become delinquent or may have defaulted
on an outstanding debt obligation, taken on additional personal debt or
become subject to adverse financial conditions. If any of these events
were to occur, the InvestP2P.com credit grade assigned to the borrower or
co-borrower member would not accurately reflect their current
creditworthiness.
Information supplied by borrower or co-borrower members may be
inaccurate or intentionally false.
Borrower and co-borrower members supply a variety of unverified
information that is included in loan request postings on the InvestP2P.com
platform. This information may include annual income, employment
status, descriptions of what the loan proceeds will be used for, social or
professional affiliations and other information. Additionally, certain
financial statistics that InvestP2P.com calculates on behalf of borrower
and co-borrower members may be based on unverified information,
including, for example, debt-to-income ratios. Unverified information also
appears in the posting reports and sales reports that the Company will file
with the SEC.
In certain limited instances where InvestP2P.com does verify
income, employment status or other information provided by borrower or
co-borrower members, the verification may be done before or after a loan
request posting is displayed on the InvestP2P.com platform. However,
lender members will be unaware that any information has been verified,
unless a borrower member has purchased our MVP Verification service as
described in "About the Lending Platform MVP Verification." In cases
where MVP Verification has been selected, InvestP2P.com will examine
and review certain documentation provided by borrower and, if
applicable, co-borrower members, and take reasonable steps and use its
best efforts to verify the validity of the self-reported information in the
loan request. The MVP Verification process will take place before a loan
request is posted on the platform, and lender members can see which
information has been verified before committing on borrower loans.
However, even in instances where borrower or co-borrower income,
employment or other information is verified by InvestP2P.com, there are
no guarantees that a borrower loan will be fully repaid.
If you rely on false, misleading or unverified information supplied
by borrower or co-borrower members in deciding to purchase Notes, you
may lose all or part of the purchase price you pay for a Note. Loan request
postings and other borrower and co-borrower member information
available on the InvestP2P.com website will be statements made in
connection with the purchase and sale of securities, and therefore subject
to Rule 10b-5 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Loan request postings and borrower and co-borrower
member information filed in prospectus supplements will be subject to the
liability provisions of the Securities Act. In this prospectus, we advise
potential investors as to the limitations on the reliability of this
information, and a lender member's recourse in the event this information
is false will be extremely limited. As a result, lender members should not
rely on unverified information provided by borrower or co-borrower
members.
While we take precautions to prevent borrower and co-borrower
member fraud, it is still possible that fraud may occur and adversely
affect a lender member's ability to receive payments on their Notes.
Every user that registers as a borrower or co-borrower member on
the InvestP2P.com platform must pass our fraud solutions and identity
verification processes. We use services from Experian to verify borrower
and co-borrower identities, to access their credit histories and to check
their names and other information against lists of known perpetrators of
Internet-based and other kinds of fraud. However, despite these anti-fraud
efforts, there is still a risk that fraud will occur and remain undetected.
While InvestP2P.com will repurchase Notes in certain limited instances,
such as in cases of loan defaults resulting from verifiable identity theft,
the Company has no obligation to repurchase Notes for any other reason.
In cases of verifiable identity fraud where InvestP2P.com has decided to
repurchase Notes corresponding to a defaulted loan, holders of the Notes
will only receive payments equal to the unpaid principal amount of their
Notes. However, InvestP2P.com may be unable to meet its repurchase
obligations in such circumstances, and if this is the case you may lose the
entire value of your investment. See "About the Lending Platform
Identity Fraud Reimbursement" for more information.
InvestP2P.com does not have significant historical data about the
performance of borrower loans issued through its platform. Default
rates on borrower loans in the future may be high, and may increase.
InvestP2P.com has a no operating history and is in the early stages
of development. Therefore, the Company does not have significant
historical data about the performance of borrower loans issued through its
lending platform. We plan to launch live operations as soon as possible.
Default rates on borrower loans may increase as a result of economic
conditions beyond the Company's control and beyond the control of
borrower or co-borrower members.
Default rates on borrower loans issued through the InvestP2P.com
platform may be significantly impacted by economic downturns or other
general economic conditions beyond our control and beyond the control of
individual and/or business borrower and co-borrower members.
Specifically, default rates on borrower loans on which the Notes depend
for payment may rise due to factors such as changes in prevailing interest
rates, the unemployment rate, the consumer confidence level and changes
in consumption, residential real estate values, the value of the U.S. dollar,
energy prices, the number of personal bankruptcies declared, general
disruptions in credit markets and other factors.
If a borrower loan corresponding to your Notes becomes more than 30
days delinquent, it is unlikely that you will receive the full principal and
interest payments on the Notes due to collection fees, and it is possible
that you will not recover any of your original purchase price.
In the event that a borrower loan becomes more than 30 days
delinquent, InvestP2P.com will pursue reasonable collection efforts with
regard to the loan. Referring a delinquent loan to our in-house collections
department or to a third-party collections agency on the 31st day of its
delinquency will be considered reasonable collection efforts. If
InvestP2P.com refers a delinquent loan to a collection agency, the
Company will have no further obligation to pursue collection efforts with
regard to that loan. If we or any third-party collection agency are
successful in collecting payments on a corresponding borrower loan after
30 days of delinquency, then the Company, or the third-party collection
agency, will retain a percentage of the funds recovered from the borrower
or co-borrower member as a collections fee before any principal or
interest from recovered funds become payable on the Notes. Collections
fees will range from 20.0% to 35.0% of the amount recovered. See
"About the Lending Platform Post-Loan Closing Servicing and
Collection" for more information.
It is possible that InvestP2P.com, or its designated third-party
collections agency, will be unable to recover part or all of the unpaid
balance on a delinquent loan. Lender members that have purchased Notes
dependent for payment on payments received by InvestP2P.com on such
delinquent loans would then receive no further payments on their Notes,
or they would receive payments much lower in value than the total
amount of unpaid principal and interest on the Notes. Note holders must
rely solely on the collection efforts of InvestP2P.com and our designated
third-party collection agency, and are prohibited from pursuing any
collection efforts with regard to borrower loans on their own.
If you purchase only one Note through the platform, your entire return
will depend on the performance of a single borrower loan, which
substantially increases the risk that the value of your investment will be
lower than expected, and that the value of your investment will be
reduced to zero if the corresponding borrower loan goes into default.
We recommend that lender members who purchase Notes on the
platform diversify their risks by offering smaller amounts of money on
several different loans, rather than concentrating their entire investment in
a Note that is wholly dependent for payment on a single loan. If you
decide to devote your entire investment to the purchase of a single Note or
to multiple Notes for the same corresponding borrower loan, the value of
those Notes will depend entirely on a single borrower loan, which greatly
increases the risk that you will lose the entire value of your investment, as
we expect that some borrowers will default on their loans. For example, if
you plan to purchase $1,000 worth of Notes, and choose to invest the
entire $1,000 in a single Note instead of investing $100 in 10 different
Notes corresponding to 10 different borrower loans, your entire $1,000
investment will depend on the performance of a single borrower loan.
Failing to diversify your Note holdings increases the risk of losing your
entire investment due to borrower or co-borrower default. However,
diversification does not eliminate your investment risk, and even well-
diversified Note holdings are at risk of full or partial loss of value.
If we receive payments on a corresponding borrower loan after the final
maturity date, InvestP2P.com will have no obligation to make payments
on the Notes.
Each Note will mature on the initial maturity date unless, at that
time, there are any principal or interest payments that remain due and
payable to InvestP2P.com on the corresponding borrower loan. In such
cases, the maturity of the Note will be automatically extended to the final
maturity date. If any amounts on the loans remain due and payable to
InvestP2P.com after the final maturity date of a Note, InvestP2P.com will
have no further obligation to make payments on the Note even if the
Company receives payments on the corresponding borrower loan after the
final maturity date.
Borrower members who have taken out loans on the InvestP2P.com
platform are not restricted from incurring additional secured or
unsecured debt, nor are any financial restrictions imposed on borrower
or co-borrower members for the duration of the loan. This may impair
your ability to receive the full principal and interest payments that you
expect to receive on a Note.
Borrower members who are issued loans through the
InvestP2P.com platform, and, when applicable, the co-borrowers on those
loans, may incur additional debt from other lending sources. This
additional debt may impair a borrower or co-borrower's ability to make
payments on a borrower loan, and therefore may impair your ability to
receive payments on your Notes. Additional debt may also negatively
impact a borrower or co-borrower's creditworthiness in general, and could
result in financial distress, insolvency or bankruptcy of the borrower or
co-borrower member. To the extent that borrower or co-borrower
members cannot pay off all of their indebtedness, they may choose to
make payments to creditors other than InvestP2P.com.
Because the borrower loans are unsecured credit obligations of
individual and/or business borrower, and, in some cases, co-borrower
members, to the extent that borrower or co-borrower members incur other
indebtedness that is secured, the ability of the secured creditors to pursue
action against their assets may impair their ability to make payments on a
borrower loan, which would impair your ability to receive payments on
your Notes from InvestP2P.com. Borrower or co-borrower members may
also choose to pay off secured indebtedness before repaying an unsecured
borrower loan from InvestP2P.com because they have no collateral at risk
with regard to the borrower loan from InvestP2P.com. Lender members
will not be made aware of any additional debt incurred by borrower or co-
borrower members, or whether such debt is secured.
The borrower loans do not contain any cross-default or other similar
provisions. The Company's ability to collect on borrower loans on which
your Notes are dependent for payment may be substantially impaired if
borrower or co-borrower members default on debt obligations other
than their borrower loans.
The borrower loans do not contain cross-default provisions. A
cross-default provision makes a default on certain debt of a borrower an
automatic default on other debt of that borrower. Because the borrower
loans do not contain cross-default provisions, a borrower or co-borrower
member's loan will not be automatically placed in default upon that
borrower or co-borrower member's default on any other outstanding debt
obligations, unless there are independent reasons to place the borrower
loan in default. If a borrower or co-borrower member defaults on
outstanding debt obligations other than on his or her borrower loan and
continues to make payments under the borrower loan, the creditors on the
borrower or co-borrower's other outstanding debt obligations may seize
their assets or pursue other legal action before the borrower or co-
borrower defaults on his or her borrower loan. Payments on your Notes
may be substantially reduced if the borrow or co-borrower member
subsequently defaults on the borrower loan, and you may be unable to
recover part or all of your expected principal and interest payments on
those Notes.
Borrower or co-borrower members may seek debtor relief protection
under federal bankruptcy or state insolvency laws. This may result in
nonpayment of your Notes.
Borrower or co-borrower members may seek protection under
federal bankruptcy, state insolvency or other similar laws. If a borrower
member files for bankruptcy or becomes the subject of an involuntary
petition, a stay will take effect that will automatically put pending
collection actions with regard to the borrower on hold and prevent further
collection action absent bankruptcy court approval. If InvestP2P.com
receives notice that a borrower member has filed for protection under
federal bankruptcy laws, or has become the subject of an involuntary
bankruptcy petition, we will put the borrower's loan account into
"bankruptcy status." Co-borrower loans will only be put into "bankruptcy
status" in the event that both the primary borrower and the co-borrower
file for protection under federal bankruptcy laws, or become the subjects
of involuntary petitions.
When a borrower loan is put into bankruptcy status, we terminate
any automatic monthly ACH debits from the borrower member's bank
account and do not pursue collection actions absent bankruptcy court
approval. The borrower member's particular financial situation will
ultimately determine whether any payment will be received on a borrower
loan after bankruptcy status is declared. It is possible that the borrower
member's personal liability on the borrower loan will be discharged in
bankruptcy. In most bankruptcy cases, unsecured creditors such as
InvestP2P.com, as holder of the borrower loan, will receive only a
fraction, if any amount, of the outstanding balance on the borrower loan.
Federal law entitles borrower members who enter active military service
to an interest rate cap and certain other rights that may impair our
ability to collect on loans. In addition, this may reduce the interest rate
on a borrower loan, and therefore the amount of interest paid on your
Notes.
Federal law, including the Servicemembers Civil Relief Act
(SCRA), provides borrower members who have entered active military
service with certain rights that may delay or impair the Company's or a
third-party collection agency's ability to collect on a borrower loan
corresponding to your Notes. The SCRA requires that interest rates on
outstanding debts, such as borrower loans issued through the
InvestP2P.com platform, be set at a maximum rate of 6.0% for borrowers
who are qualified servicemembers or reservists on active duty. Holders of
Notes that are dependent for payment on such borrower loans will not be
paid the difference between 6.0% and the original stated interest rate on
the borrower loan during any such period. If only the co-borrower on a
loan enters active military service, the primary borrower member's
payments will not be reduced under the SCRA, but if the co-borrower
member becomes obligated to make a payment on the loan in a given
month, the terms of the SCRA will be applied to that payment. In cases of
co-borrower loans where only the primary borrower member enters active
military service, the terms of the SCRA will be applied to all payments,
even if the co-borrower member is making those payments.
The SCRA also permits courts to stay proceedings and executions
of judgment against servicemembers and reservists on active duty, which
may delay recovery of payments on any borrower loans in default, and,
therefore, payments on Notes that correspond to these loans. If there are
any amounts still due and payable to InvestP2P.com after the final
maturity date of Notes corresponding to such loans, the Company will
have no further obligation to make payments on the Notes, even if
payments on the corresponding loans are later received. InvestP2P.com
does not take military service into account when assigning InvestP2P.com
credit grades to borrower or co-borrower members. See "Government
Regulation Servicemembers Civil Relief Act" for more information.
If a borrower or co-borrower member with an outstanding borrower
loan dies, your ability to recover the full purchase price of Notes that
correspond to that loan may be impaired. You may also be unable to
receive the interest payments that you expected to receive on the Notes.
All borrower and co-borrower members are individuals and/or
businesses. If a borrower with an outstanding borrower loan dies while the
loan is still outstanding, we will attempt to work with the executor,
executrix or administrator of the borrower's estate to obtain repayment of
the loan. However, the borrower's estate may not contain sufficient assets
to repay the borrower loan on which your Notes depend. If a borrower
member dies toward the end of the term of a borrower loan, it is unlikely
that any further payments will be made on the corresponding Notes,
because the time required for the probate of the estate may extend beyond
the initial maturity date and the final maturity date of the Notes.
Notwithstanding the foregoing, in the event that a deceased borrower or
co-borrower member is survived by a spouse and resides in a "community
property state," the surviving spouse may be held legally responsible for
continued payment on the outstanding loan.
Borrower and co-borrower members on InvestP2P.com may prepay
their borrower loans at any time, without penalty. Prepayments of
borrower loans will terminate or limit your ability to receive additional
interest payments on your Notes.
There are no fees of any kind if borrower or co-borrower members
pay their loans off early. This is known as "prepayment," and borrowers
may prepay part or all of a loan before the initial maturity date. Borrowers
are only required to pay accrued interest and other charges up to the day in
which they pay off their loan in full. If a borrower or co-borrower member
partially prepays a loan, the amortization schedule for that loan will be
automatically recalculated for the remainder of the loan's term, and the
borrower member's monthly installments will thereafter be reduced
accordingly. This means that payments on Notes corresponding to
partially prepaid borrower loans will be reduced by the amount that the
borrower's monthly payments are reduced, plus our 1.0% servicing fee. If
a borrower or co-borrower member prepays the remaining unpaid
principal on a loan in full, InvestP2P.com will pay to holders of the
corresponding Notes their pro rata share of the prepayment, but interest
will cease to accrue on the Notes after the date on which InvestP2P.com
receives the prepayment. Prepayments are subject to our 1.0% servicing
fee, even if the prepayment occurs immediately after you purchase a Note.
You will not receive all of the interest payments that you expected to
receive on Notes corresponding to borrower loans that are prepaid, and
you may be unable to reinvest the payments that you do receive on your
Notes at a rate of return equal to the rate you expected to receive on the
Notes.
If market interest rates change while the borrower loan on which your
Notes are dependent is still in repayment, the value received on your
Notes may be less than the value that could be gained with other
investments. Additionally, changes in interest rates may prompt
borrower or co-borrower members to prepay their borrower loans, and
you may be unable to reinvest the payments that you receive on Notes
that are dependent on a prepaid borrower loan at a rate of return equal
to the rate you expected to receive on the Notes.
The borrower loans on which the Notes are dependent have terms
of 12, 24, 36, 48, or 60 months and bear fixed, not floating, rates of
interest. Although you may still receive a return on the purchase price of
your Notes through receipt of payments from InvestP2P.com equal in
value to the interest payments that the Company receives on the
corresponding borrower loan, if market interest rates exceed the rate of
interest payable on a corresponding borrower loan, the interest rates on
your Notes might be lower than the rate of return you could earn if you
invested in other investments.
In addition, there is no prepayment penalty for borrower or co-
borrower members who prepay their loans in part or in full before the
initial maturity date. Borrower or co-borrower members may choose to
prepay their borrower loans with money they borrow from other sources if
market interest rates on commercial loans decrease. If a borrower member
prepays a borrower loan on which your Notes depend for payment, you
will not receive the interest payments you expected to receive on those
Notes, and you may not be able to realize a rate of return equal to the rate
that was originally expected on the Notes when you invest the prepaid
funds in other investments.
Lender member funds in InvestP2P.com accounts do not earn any
interest.
Funds held in a InvestP2P.com lender member account represent
an interest in a pooled "for the benefit of" (FBO) bank account that does
not earn any interest. See "About the Lending Platform How the
Platform Operates Treatment of Lender Member Balances" for more
information.
The Notes will not be listed on any securities exchange and will not be
transferable except through the Internet-based Note trading platform
operated by a registered broker-dealer to be selected in the future. The
Notes can only be held by our lender members, and all Note holders
should be prepared to hold their Notes to maturity.
The Notes will be issued in electronic form only and will not be
listed on any securities exchange. Notes can only be held by our lender
members. The Notes will not be transferable except through our Internet-
based Note trading platform, which will be operated by a registered
broker-dealer to be selected in the future. However, there are no
guarantees that a broker-dealer relationship will be established for the
purpose of operating the Note trading platform, or that a market for Notes
will develop if such a platform is created. Therefore, lender members
must be prepared to hold their Notes to maturity. See "About the Lending
Platform" for more information.
The U.S. federal income tax consequences of an investment in the Notes are
uncertain.
There is no authority that directly addresses how the Notes or
instruments similar to the Notes should be treated for U.S. federal income
tax purposes. While the matter is not free from doubt, InvestP2P.com
intends to treat the Notes as debt securities of InvestP2P.com that have
original issue discount, or OID, for U.S. federal income tax purposes.
Therefore, holders of Notes will be required to include the OID in income
as ordinary interest income for U.S. federal income tax purposes as it
accrues (which may be in advance of interest payments being made on the
Notes), regardless of the holder's regular tax accounting method.
However, this characterization of the tax treatment of the Notes is not
binding on the Internal Revenue Service (IRS), and the IRS and/or other
authorities may take differing positions. Prospective purchasers of Notes
should consult their own tax advisors regarding the U.S. federal, state,
local and non-U.S. tax consequences of the purchase, ownership, and sale
of the Notes, including any potential differing treatments of such Notes.
Any such differing treatment could significantly impact the amount,
timing and nature of income, gain or loss with regard to an investment in
the Notes. See "About the Lending Platform Material U.S. Federal
Income Tax Considerations" for more information.
Some of the borrower members on InvestP2P.com have credit scores
that are considered "subprime." These borrowers have poor or no credit
histories, and present a higher-than-average degree of credit risk.
Loans made to these borrowers may have a high risk of delinquency
and default. If you have purchased a Note dependent for payment on
payments the Company receives on a loan made to a borrower with a
poor or "subprime" credit score, and the borrower defaults on his or
her loan, you may lose all of your original investment in the Note.
InvestP2P.com has positioned itself as a peer-to-peer lending
company that is open to borrowers across the credit-score spectrum. This
means that, while some of the borrower members on InvestP2P.com will
have high credit scores, many others may have very poor credit scores, or
no credit score at all. Borrowers with poor or no credit scores may be
using the InvestP2P.com platform because they have had difficulty taking
out loans from banks and other financial institutions due to the credit
risks they present, which may be based on a limited credit history, a
history of delinquency and default and/or a currently unfavorable
financial position. Although InvestP2P.com requires all borrowers with
a InvestP2P.com credit grade below F to have a co-borrower on their loan,
purchasing Notes that are dependent for payment on payments that
InvestP2P.com receives on corresponding borrower loans that have been
extended to such borrowers may present a higher-than-average risk of
delinquency and default.
Due to InvestP2P.com's limited operating history, the Company
does not have sufficient historical data on delinquency and default rates
for borrowers who have taken out loans on the platform.
Holders of Notes must rely on InvestP2P.com and/or a third-party
collection agency that we may designate in the future to pursue
collection against borrower and co-borrower members who have
defaulted on their loans.
Borrower loans are obligations of borrower and, if applicable, co-
borrower members to InvestP2P.com, not obligations to holders of Notes.
Holders of Notes have no recourse to borrower or co-borrower members
and no ability to pursue them to collect payments on their Notes. Instead,
holders of Notes must rely on InvestP2P.com or a third-party collection
agency that we may designate in the future to pursue collection on
delinquent loans. In the event that collection action must be taken on a
delinquent loan, the Company or the third-party collection agency will
charge a collection fee between 20.0% and 35.0% on any amounts that are
obtained. These fees will thereby reduce the amounts of any payments
lender members receive on their Notes. If there are any amounts under a
borrower loan still due and owing to InvestP2P.com after the final
maturity date, we will have no further obligation to make payments on the
Notes in the series corresponding to that loan, even if we receive
payments on the loan after the final maturity date. Holders of Notes will
not be able to pursue collection efforts against borrower or co-borrower
members themselves, and will not have access to their identities or contact
information.
InvestP2P.com has no obligation to repurchase Notes except in limited
circumstances. If the Company cannot meet its repurchase obligations,
you may lose your entire investment in the Notes.
InvestP2P.com will repurchase Notes only in certain limited
instances, such as in cases of loan defaults resulting from verifiable
identity theft. In addition, if there is a material breach of our
representations and warranties as described in our Lender Member
Registration and Note Purchase Agreement, we must repurchase the Note,
cure the defect or indemnify and hold the lender member harmless against
losses resulting from the defect in the Note. The Company is not obligated
to repurchase a Note in cases of fraud other than verifiable identity theft in
connection with a loan request posting. Even in cases where
InvestP2P.com is obligated to repurchase a Note, there can be no
guarantee that the Company will be able to meet its repurchase obligation,
and in such cases you may lose all of your investment in the Note. See
"About the Lending Platform How the Platform Operates Identity
Fraud Reimbursement" for more information.
If you purchase a Note and subsequently list the Note for resale on the
Internet-based Note trading platform, you may not realize the expected
return on your investment because of changes in the creditworthiness of
the borrower member on the corresponding borrower loan.
If InvestP2P.com establishes a Note trading platform operated by a
registered broker-dealer to be selected in the future, there are still no
guarantees that lender members will be able to find buyers for Notes that
they wish to sell on the trading platform. If a borrower or co-borrower
member becomes delinquent on a corresponding borrower loan, your
ability to resell Notes corresponding to that loan will be substantially
impaired. Specifically, you may have to sell the Notes at a substantial
discount to their original purchase price or current nominal value in order
to attract a buyer for the Notes. There is no guarantee that you will receive
the value you expected from the Notes, and you may not receive any value
at all. Moreover, lender members may be less willing to purchase Notes
on the trading platform if other investment activities have become more
attractive during the time you have held your Notes.
Even when a corresponding borrower loan is a co-borrower loan, you
may lose part or all of the value of your investment in the Notes.
A InvestP2P.com co-borrower is a co-signer who is individually
and jointly liable for a loan, alongside the primary borrower. Co-
borrowers are legally obligated to make payments on a loan if the primary
borrower becomes delinquent or goes into default, but there is no
guarantee that co-borrowers will be able to pay off a loan if the primary
borrower becomes unable to. Even though co-borrowers are required to
have a minimum credit grade of F, there remains a risk that the co-
borrower will also default on the loan. If both the primary borrower and
co-borrower default on a loan, you will not receive any further payments
on Notes corresponding to that loan.
The interest rate payable on the Notes is predetermined and may not
adequately compensate you for the risks associated with investing in a
particular Note.
Typically, higher interest rates are charged on loans to less
creditworthy borrowers because they present a greater risk of default. The
potential to earn a higher return on such loans compensates the lender or
investor for the higher risks involved. However, because the interest rate
payable on a Note is predetermined, it is not necessarily commensurate
with the creditworthiness of the borrower on the corresponding borrower
loan, and therefore it may not adequately compensate you for the risks
associated with investing in a particular Note.
A borrower or co-borrower member may request that his or her bank
"chargeback" a payment on a corresponding borrower loan and request
a refund on that payment, resulting in a delinquency on the payment
and the potential for a negative cash balance in your lender member
account.
A borrower "chargeback" may take place when a borrower or co-
borrower member who has made a payment on a borrower loan has his or
her bank cancel or request a refund on that payment. We withhold
payments to lender members for up to four business days after initiation of
the payment. If a chargeback occurs between four and sixty days after the
initiation of payment, you must rely on us to contest the chargeback if we
deem it appropriate. If a borrower successfully processes a chargeback
between the time that your lender member account is credited for a
repayment and 60 days after initiation of that payment, such payment will
be deducted from your account, and if you have withdrawn funds in the
interim, a negative cash balance may result. If a negative cash balance
does result, amounts subsequently received on borrower loans
corresponding to your Notes and deposited into your account are subject
to offset any negative balance resulting from such chargebacks or other
ACH returns of transfers or deposits of funds to your account.
We have a limited operating history. As an Internet company in the
early stages of development, we face increased risks, uncertainties,
expenses and difficulties.
Competition in the consumer and business credit market is intense.
Our objective is to increase the number of borrower and lender members
on the InvestP2P.com platform, and therefore the number of loan
originations and Note sales, but we may be unable to generate enough
new business to achieve and sustain profitable operations. Moreover, if we
are successful in growing our business, we will need to increase our
facilities, personnel and infrastructure to accommodate greater loan
servicing obligations and other demands related to our Internet-based
platform. We also intend to introduce an Internet-based Note trading
platform after the date of this prospectus in order to enable the resale of
Notes held by lender members. We cannot guarantee that the trading
platform will be established or that a market for Notes will develop, but if
successful, resale and trading on the trading platform will substantially
increase demands on our technological infrastructure and on our staff, and
may also further increase the number of loan request postings and loan
originations on the lending platform. We must consistently add to and
update our hardware and software, expand customer-support services and
hire new employees in order to maintain the operations of our platform,
including our servicing obligations on borrower loans and payment
obligations on the Notes. If we are unable to increase the capacity of the
lending platform and maintain necessary infrastructure, you may
experience delays in payments on your Notes and periodic downtime of
our systems in which you will not have access to your InvestP2P.com
account or to any other area of our website.
If we cannot increase our transaction volumes in a cost-effective way,
our business and operating results will be affected adversely.
In order to be successful, we must increase transaction volumes on
the InvestP2P.com platform by attracting large numbers of borrower and
lender members in a cost-effective way. It may be difficult to attract such
members because many of them will have no prior experience using a
peer-to-peer financial platform, and because peer-to-peer lending is a
relatively new concept. If we are unable to attract a large amount of
qualified new members to InvestP2P.com, we will not increase our
transaction volumes to the point of being able to sustain a profitable
enterprise. Specifically, other peer-to-peer lending companies have
experienced significant shortfalls regarding the number of lender members
they have been able to attract as compared to the number of borrowers.
While InvestP2P.com has not operated for any period of time to make a
judgment on its own susceptibility to such shortfalls, there are no
guarantees that enough lender members will be attracted to the platform to
fund all of the loan requests, and InvestP2P.com's ability to participate on
the platform as a lender member is limited. Moreover, the extent of the
current economic downturn and severe credit crisis may mean that many
more borrowers will turn to peer-to-peer lending companies for access to
credit, while lender members may be less likely to fund loans because of
investment and other losses that they may have sustained.
We also rely on a variety of advertising and marketing methods to
drive traffic to our website, but the future availability and viability of
these methods is uncertain, and the costs related to their use may rise. If
this were to occur, we may be unable to attract new members to our
website in a cost-effective manner and our revenue and operating results
would be affected adversely, possibly to a point that would impair our
ability to maintain the InvestP2P.com platform.
We will require substantial additional capital to fund our operations. If
we fail to obtain additional financing, we may be unable to continue
operations.
We have financed almost all of our development and operations to
date with funds provided by InvestP2P.com Founder and Chief Executive
Officer Mark Kanter and Co-founder and Chief Financial Officer Wayne
Kanter. In order to continue development of the InvestP2P.com platform,
we will require substantial additional capital. To meet future financing
requirements, we may raise funds through equity offerings, debt
financings or strategic alliances. These financing arrangements may
involve agreements or covenants that restrict our business activities and
options. Additional funding may not be available to InvestP2P.com on
favorable terms, or at all, and if we cannot raise additional funds we may
be forced to restrict, suspend or terminate our operations.
The market in which we participate is competitive and, if we do not
compete effectively, our operating results could be harmed.
The commercial and small business lending market is extremely
competitive and changing rapidly. With the introduction of new
technologies and the influx of new competitors, we expect competition to
persist and intensify in the future, which could harm our ability to increase
volume on the InvestP2P.com platform.
Our primary competitors include major banking institutions, credit
unions, credit card issuers and other consumer and small business finance
companies, in addition to other peer-to-peer lending platforms and
services such as Prosper Marketplace, Lending Club, Loanio, Pertuity
Direct and Virgin Money. Competition could result in reduced volumes,
reduced fees or the failure of our peer-to-peer lending platform to achieve
or maintain more widespread market acceptance, all of which could harm
our ability to generate revenue and earn a profit. In addition, we may
eventually experience new competition from more established Internet
and software companies, such as eBay, Google, Yahoo! or Microsoft, all
of which possess large customer bases, substantial financial resources and
established distribution channels. If any of these companies or any major
financial institution decides to enter the peer-to-peer lending business,
acquire one of our existing competitors or form a strategic alliance with
one of our competitors, our ability to compete effectively could be
significantly harmed and our operating results could suffer.
Most of our current or potential competitors have significantly
more financial, technical, marketing and other resources than we do and
may be able to devote greater resources to the development, promotion,
sale and support of their platforms and distribution channels. Our potential
competitors may also have longer operating histories, more extensive
customer bases, greater brand recognition and broader customer
relationships than we have. These competitors may be better able to
develop new products, to respond quickly to new technologies and to
undertake more extensive marketing campaigns. Our industry is driven by
constant innovation. If we are unable to compete with such companies and
meet the need for innovation, the demand for and use of our platform
could stagnate or substantially decline.
If we do not promote and maintain our brand in a cost-effective way, we
may lose market share and our revenue may decline.
We believe that developing and maintaining awareness of the
InvestP2P.com brand in a cost-effective way is critical to achieving
widespread acceptance of peer-to-peer lending through InvestP2P.com and
to attracting new borrower and lender members to our platform.
Furthermore, we believe that the importance of brand recognition will
increase as competition in the peer-to-peer lending industry increases.
Successful promotion of our brand will depend largely on the
effectiveness of our marketing efforts and the member experience on our
Internet-based platform. It is likely that our future efforts to build our
brand will require us to incur significant expenses. However, such brand
promotion activities may not produce increased revenue and, even if they
do, any revenue increases may not be sufficient to offset the expenses we
incur to promote our brand. If we do not successfully promote and
maintain our brand, or if we incur substantial expenses in an unsuccessful
attempt to promote and maintain our brand, we may lose our existing
users to our competitors or be unable to attract new users, which would
cause our revenue to decline and may impair our ability to maintain the
InvestP2P.com platform.
We expect to incur net losses in the future. If we become insolvent or
bankrupt, you may lose the entire value of your investment in the Notes.
We currently do not have arrangements in place for backup servicing,
and such arrangements may be limited in the future. If we fail to
maintain operations, you will experience a delay and increased costs
with regard to your expected principal and interest payments on your
Notes, and we may not be able to collect and process repayments from
borrower members.
We currently do not have any arrangements in place for backup
servicing of our borrower loans in the event that we fail to maintain
operation of the InvestP2P.com platform. If our platform becomes
disabled or we become insolvent, we would attempt to transfer our
outstanding loan servicing obligations to a third-party backup servicer.
There are no guarantees that a backup servicer will be able to service the
outstanding borrower loans adequately, and you may experience delays in
payment on your Notes, or no payments at all, if the servicer becomes
unable or unwilling to perform its duties under a backup servicing
agreement that we reach. Moreover, the backup servicer may impose
additional fees that could reduce the value of the payments you receive on
your Notes.
If we were to become subject to a bankruptcy or similar proceeding, the
rights of the holders of the Notes could be uncertain, and payments on
the Notes may be limited and suspended, or terminated. The Notes are
unsecured and holders of the Notes do not have a security interest in the
corresponding borrower loans or in the proceeds of those loans. The
recovery, if any, that a holder of a Note will receive may be substantially
delayed and be substantially less than the outstanding principal and
interest to be paid on the Note. Even funds held by InvestP2P.com in
trust for the holders of Notes may be at risk.
If we were to become subject to a bankruptcy or similar
proceeding, the recovery, if any, that a holder of a Note will receive may
be substantially delayed and be substantially less in value than the
principal and interest due and to become due on the Note. Specifically, the
following consequences may occur:
A bankruptcy or similar proceeding of InvestP2P.com may cause
delays in borrower or co-borrower member payments. Borrower or co-
borrower members may delay payments to InvestP2P.com on account of
borrower loans because of the uncertainties involved in a bankruptcy or
similar proceeding of InvestP2P.com, even if the borrowers have no legal
right to do so. Any such delay would reduce, at least temporarily, the
funds that might otherwise be available to InvestP2P.com to make
payments on the Notes corresponding to those borrower loans.
A bankruptcy or similar proceeding of InvestP2P.com may cause
delays in payments on Notes. The commencement of a bankruptcy or
similar proceeding may, as a matter of law, prevent InvestP2P.com from
making regular payments on the Notes, even if the funds to make such
payments are available. Because a bankruptcy or similar proceeding could
take months or years to complete, a suspension of payment on the Notes
may effectively reduce the value of any recovery that a holder of a Note
may receive by the time any recovery is available, and no such recovery
can be assured.
Interest accruing upon and following a bankruptcy or similar
proceeding of InvestP2P.com may not be paid. In a bankruptcy or similar
proceeding of InvestP2P.com, interest accruing on the Notes during the
proceeding may not be part of the allowed claim of a holder of a Note. If
the holder of a Note receives any recovery on that Note, any such
recovery may be based on, and limited to, the claim of the holder of the
Note for principal and interest accrued only up to the date of the
proceeding, and not thereafter, and no such recovery can be assured.
Because a bankruptcy or similar proceeding could take months or years to
complete, a claim based on principal and interest only up to the start of the
proceeding may be substantially less than a claim based on principal and
interest through the end of the proceeding.
In a bankruptcy or similar proceeding of InvestP2P.com, there
may be uncertainty about whether a holder of a Note has any priority
right to payment with regard to the corresponding borrower loan for that
Note. The Notes are unsecured and holders of Notes do not have a security
interest in the corresponding borrower loans or in the proceeds of those
corresponding borrower loans. Accordingly, the holder of a Note may be
required to share proceeds from the corresponding borrower loan with
other creditors of InvestP2P.com. If such sharing of proceeds is deemed
appropriate, the proceeds that are either held by InvestP2P.com in its
clearing account at the time of the bankruptcy or similar proceeding of
InvestP2P.com, or not yet received by the Company from borrower
members at the time of the commencement of the proceeding, may be at
greater risk than the proceeds that InvestP2P.com already holds in its
Pooled FBO account at the time of the proceeding. To the extent that
proceeds from the corresponding borrower loan would be shared with
other creditors of InvestP2P.com, any secured or priority rights of such
other creditors may cause the proceeds to be distributed to such other
creditors before any distribution is made to you on your Note. See "About
the Lending Platform How the Platform Operates Post-Loan Closing
Servicing and Collection" for more information about the clearing account
and the Pooled FBO account.
In a bankruptcy or similar proceeding of InvestP2P.com, there
may be uncertainty about whether a holder of a Note has any right of
payment from assets of InvestP2P.com other than the corresponding
borrower loan. In a bankruptcy or similar proceeding of InvestP2P.com, it
is possible that a Note could be deemed to have a right of payment only
from proceeds of the corresponding borrower loan and not from any other
assets of InvestP2P.com, in which case the holder of the Note may not be
entitled to share the proceeds of such other assets of InvestP2P.com with
other creditors of the Company, whether or not, as described above, such
other creditors would be entitled to share in the proceeds of the borrower
loan corresponding to the Note. Alternatively, it is possible that a Note
could be deemed to have a right of payment from both the borrower loan
corresponding to the Note and from some or all other assets of
InvestP2P.com, for example, based upon the automatic acceleration of the
principal obligations on the Note upon the commencement of a
bankruptcy or similar proceeding, in which case the holder of the Note
may be entitled to share the proceeds of such other assets of
InvestP2P.com with other creditors of the Company, whether or not, as
described above, such other creditors would be entitled to share in the
proceeds of the borrower loan corresponding to the Note. To the extent
that proceeds of such other assets would be shared with other creditors of
InvestP2P.com, any secured or priority rights of such other creditors may
cause the proceeds to be distributed to such other creditors before any
distribution is made to you on your Note.
In a bankruptcy or similar proceeding of InvestP2P.com, there
may be uncertainty about the rights of a holder of a Note, if any, to
receive payment from funds in the clearing account. If a borrower member
has paid InvestP2P.com on a borrower loan corresponding to a Note
before a bankruptcy or similar proceeding of InvestP2P.com is
commenced, and those funds are held in the clearing account and have not
been used by InvestP2P.com to make payments on the Note as of the date
the proceeding is commenced, there can be no assurance that the
Company will or will be able to use such funds to make payments on the
Note. Other creditors of InvestP2P.com may be deemed to have rights to
such funds that are equal to or greater than the rights of the holder of the
Note. See "About the Lending Platform How the Platform Operates
Post-Loan Closing Servicing and Collection" for more information about
the clearing account.
In a bankruptcy or similar proceeding of InvestP2P.com, there
may be uncertainty about the rights of a holder of a Note, if any, to access
funds in the Pooled FBO account. If a lender member has funds in the
Pooled FBO account at the time a bankruptcy or similar proceeding of
InvestP2P.com is commenced, there can be no assurance that the owner of
the funds will have immediate access to the funds or that the funds will
ultimately be released to the holder of the Note. For example, if a
borrower member has paid InvestP2P.com on a borrower loan
corresponding to a Note before a bankruptcy or similar proceeding of
InvestP2P.com is commenced, and those funds have been used by
InvestP2P.com to make payments on the Note prior to the date the
bankruptcy or similar proceeding is commenced, but the payments on the
Note continue to be held by the Company in the lender member's sub-
account under the Pooled FBO account, there can be no assurance that the
holder of the Note will have immediate access to the funds constituting
the payment or that the funds constituting the payment will ultimately be
released to the holder of the Note. While the Offering of Trust states that
funds held in the Pooled FBO account are trust property and are not
intended to be property of InvestP2P.com or subject to claims of
InvestP2P.com's creditors generally, there can be no assurance that any
future litigation on the matter would not delay or prevent the holder of a
Note from accessing the portion of those funds in which the holder has an
interest. Moreover, United States Bankruptcy Courts have broad powers
and, if we have failed to properly segregate or handle lender member
funds in the Pooled FBO account, a bankruptcy court could determine that
some or all of such funds were beneficially owned by InvestP2P.com and
therefore that they became available to the creditors of InvestP2P.com
generally. See "About the Lending Platform How the Platform Operates
Post-Loan Closing Servicing and Collection" for more information
about the Pooled FBO account.
In a bankruptcy or similar proceeding of InvestP2P.com, there
may be uncertainty about the rights of a holder of a Note, if any, to the
return of the purchase price of a Note even if the corresponding borrower
loan has not been originated. If a Note is purchased by a lender member
and InvestP2P.com has received the proceeds of the purchase at the time
of commencement of a bankruptcy or similar proceeding of
InvestP2P.com, the holder of the Note may be unable to receive a return of
the funds constituting the purchase price of the Note, even if the
corresponding borrower loan has not been funded and originated as of the
date that the proceeding is commenced and even if the funds are held by
InvestP2P.com in the Pooled FBO account. See "About the Lending
Platform How the Platform Operates Loan Funding and Sales of
Notes" for more information about how Notes are purchased and how
borrower loans are funded.
In a bankruptcy or similar proceeding of InvestP2P.com, the
holder of a Note may be delayed or prevented from enforcing
InvestP2P.com's repurchase obligations in cases of verifiable identity
fraud. In a bankruptcy or similar proceeding of InvestP2P.com, any right
of a holder of a Note to require InvestP2P.com to repurchase the Note as a
result of a case of confirmed identity fraud may not be specifically
enforced, and such holder's claim for such repurchase may be treated less
favorably than a general unsecured obligation of the Company. See
"About InvestP2P.com How the Platform Operates Identity Fraud
Reimbursement" for more information about our repurchase obligations in
cases of verifiable identity fraud.
In a bankruptcy or similar proceeding of InvestP2P.com, the
implementation of backup servicing arrangements may be delayed or
prevented. In a bankruptcy or similar proceeding of InvestP2P.com, our
ability to transfer servicing obligations to a backup servicer may be
limited and subject to the approval of a bankruptcy court or other
presiding authority. The bankruptcy process could delay or prevent the
implementation of backup servicing, which may impair the collection of
borrower loans to the detriment of the value of the Notes.
We may not report delinquincies to credit reporting agencies.
This could lead to greater loan defaults.
Part of our mission is to encourage entrepreneurs who may fore go
traditional income opportunities while pursuing a business venture which
could lead to greater job growth in America. We do not want
entrepreneurs to also put their personal credit rating at risk as part of
their noble efforts, especially if they contribute to the investment
themselves. We feel this will create greater appeal to use our platform for
business loans and spark more business ventures in general in America.
A trade-off to this approach is it could lead to greater loan defaults
by not having the added risk to personal credit if a business does not
succeed. While we do offer at a cost to the borrow, credit reporting as
an add on option in the event of a loan default or delinquency to help a
borrower achieve 100% funding on their loan request, such add-on does not
guarantee repayment of the loan.
We rely on third-party banks and other third-party services to disburse
borrower loan proceeds and process borrower repayments. We also rely
on third-party computer hardware and software. If InvestP2P.com is
unable to continue utilizing these services, the Company's business and
ability to service the borrower loans on which the Notes are dependent
for payment may be adversely impacted.
Because we are not a bank, we are prohibited from belonging to
and directly accessing the Automated Clearing House (ACH) payment
network. Therefore, we rely on FDIC-insured depository institutions to
process ACH transactions for us. We currently use J.P. Morgan Chase
ACH services to facilitate lender member deposits into their
InvestP2P.com sub-accounts under the Pooled FBO account, and we use
Intercept Corporation for all other transactions, including dispersing loan
funds to borrower members at origination or to borrowers vendors
according to borrowers lender member voter approved spend requests,
borrower loan repayments and remittances to lenders. ACH network rules
stipulate that, if we experience a high rate of "chargebacks," or reversed
transactions, we may be subject to sanctions and we could be disqualified
from using the network to process payments. If we are prohibited from
using the ACH network or if our relationship with any of our third-party
ACH processors were to be terminated, we may not be able to quickly
find new processors or new ways to transfer funds on behalf of
InvestP2P.com members. Our ability to process payments would therefore
be impaired, and your ability to receive payments on your Notes could be
delayed or permanently impaired. We may alternately use third party
financial service providers such as Paypal, Google Checkout or
Revolution Money Exchange and the like, for collection and/or
disbursements. We may be subject to periodic review or approval
processes and policies of such providers whose terms may change from
time to time. Any failure to comply with their terms or meet their
approval standards or any failure or interruption of such services could
limit our ability to process financial transactions in a timely manner or
at all in the future.
We also rely on computer hardware housed by third-parties and on
software licensed form third parties to operate the InvestP2P.com
platform. This hardware and software may become unavailable on
commercially reasonable terms in the future, if at all. If we cannot
continue to obtain these services, or if we cannot transition to another
service provider quickly, our ability to operate the InvestP2P.com platform
could suffer, and your ability to receive payments on your Notes could be
delayed or permanently impaired.
If the security of InvestP2P.com members' confidential information that
is stored in our systems is breached or otherwise subjected to
unauthorized access, your secure information may be stolen, our
reputation may be harmed and we may be exposed to liability.
The InvestP2P.com platform stores our borrower, co-borrower and
lender members' bank information and other personally-identifiable
sensitive data. Any accidental or willful security breaches or other
unauthorized access could cause your secure information to be stolen and
used for criminal purposes. Security breaches or unauthorized access to
secure information could also expose us to liability related to the loss of
the information, time-consuming and expensive litigation and negative
publicity. If security measures are breached because of third-party action,
InvestP2P.com personnel error, malfeasance or otherwise, or if design
flaws in our software are exposed and exploited, and, as a result, third
parties or disaffected personnel obtain unauthorized access to any of our
members' data, our relationships with our members will be severely
damaged, and we could incur significant liability. Because techniques
used to obtain unauthorized access or to sabotage systems change
frequently and generally are not recognized until they are launched against
a target, we and our third-party hosting facilities may be unable to
anticipate these techniques or to implement adequate preventative
measures. In addition, many states have enacted laws requiring companies
to notify individuals of data security breaches involving their personal
data. These mandatory disclosures regarding a security breach are costly
to implement and often lead to widespread negative publicity, which may
cause our users to lose confidence in the effectiveness of our data security
measures. Any security breach, whether actual or perceived, would harm
our reputation, and we could lose members.
Our ability to service the borrower loans and the Notes, and our ability
to maintain accurate records of transactions and accounts, may be
adversely affected by computer viruses, physical or electronic break-ins
and similar disruptions.
The InvestP2P.com platform is Internet-based and involves the
storing of sensitive information on hard drives housed in an external
hosting facility, which may make it vulnerable to many kinds of electronic
and physical break-ins, computer viruses and other similar disruptions. If
the platform becomes subject to any accidental or intentional security
breaches by a computer hacker, or becomes subject to other unauthorized
access, there would be an increased risk of fraud being perpetrated on the
platform. Such fraud could involve the theft of a borrower member's
identity. If you purchase a Note under such fraudulent circumstances, you
may not receive the principal or interest payments that you expected to
receive on the Note. Electronic or physical disruptions could also impair
our ability to accurately process payments to your InvestP2P.com account,
or could induce the destruction of data that would make it difficult or
impossible for us to uphold your rights to repayment on the Notes that you
have purchased. While we have taken steps to prevent malicious activity
and other electronic and physical disruptions on our platform, if we are
unable to prevent such activity, our ability to maintain our platform and to
properly service the borrower loans and the Notes may be impaired, and
you may not receive the principal and interest payments that you expected
to receive on your Notes.
Any significant disruption in service on our website or in our computer
systems could reduce the attractiveness of our platform and result in a
loss of users.
Events outside of our control such as a natural disaster or other
catastrophic event could result in a platform outage and loss of data that
would materially and adversely affect our ability to perform our loan and
Note servicing obligations. The satisfactory performance, reliability and
availability of our technology and our underlying network infrastructure
are critical to our operations, level of customer service, reputation and
ability to attract new users and retain existing users. Our system hardware
is hosted in a hosting facility located in Googleplex owned and operated
by Google. We maintain backups of our data using Iron Mountain. This
does not guarantee that our members' access to the InvestP2P.com website
will be uninterrupted, error-free or secure. Our operations depend on the
ability of Google to protect their and our systems in their facilities against
damage or interruption from natural disasters, power or
telecommunications failures, air quality, temperature, humidity and other
environmental concerns, computer viruses or other attempts to harm our
systems, criminal acts and similar events.
If our arrangement with Google is terminated, or if there is a lapse
in their service or damage to their facilities, we could experience
interruptions in our service in addition to delays and additional expense in
arranging new hosting facilities. Any interruptions or delays in our
service, whether as a result of Google or other third-party error, our own
error, natural disasters or security breaches, whether accidental or willful,
could harm our relationships with our members and our
reputation. Additionally, in the event of damage or interruption, our
insurance policies may not adequately compensate us for any losses that
we may incur. Our disaster recovery plan has not been tested under actual
disaster conditions, and we may not have sufficient capacity to recover all
data and services in the event of an outage at the Googleplex
facility. These factors could prevent us from processing or posting
payments on the borrower loans or the Notes, damage our brand and
reputation, divert our staffs' attention, reduce our revenue, subject us to
liability and cause users to abandon our platform, any of which could
adversely affect our business, financial condition and results of
operations.
Competition for personnel and employees is intense, and we may not be
able to attract and retain the highly skilled individuals whom we need to
support our business.
Competition for highly skilled technical and financial personnel is
extremely intense. We may not be able to hire and retain these personnel
at compensation levels consistent with our existing compensation and
salary structure. Many of the companies with which we compete for
experienced personnel and employees have greater resources than we
have and may be able to offer more attractive terms of employment.
In addition, we invest significant time and expense in training our
staff members, which increases their value to competitors who may seek
to recruit them. If we fail to retain our personnel, we could incur
significant expenses in hiring and training their replacements and the
quality of our services and our ability to serve InvestP2P.com borrower,
co-borrower and lender members could diminish, resulting in a material
adverse effect on our business.
Our growth could strain our personnel resources and infrastructure,
and if we are unable to implement appropriate controls and procedures
to manage our growth, we may not be able to successfully implement
our business plan.
As we continue to promote and develop our business, our growth
in headcount and operations will place significant strains on our
management and on our administrative, operational and financial
reporting infrastructure.
Our success will depend in part on the ability of our senior
management to manage effectively the growth that we achieve. In order to
do so, we must continue to hire, train and manage new employees and
other personnel as needed. If our new hires perform poorly, or if we are
unsuccessful in hiring, training, managing and integrating these new
employees, or if we are unsuccessful in retaining our existing personnel,
our business may be harmed. To manage the expected growth of our
operations and personnel, we will need to continue to improve our
operational and financial controls and update our reporting procedures and
systems. The addition of new employees and the system development that
we anticipate will be necessary to manage our growth will increase our
cost base, which will make it more difficult to offset any future revenue
shortfalls by reducing expenses in the short term. If we fail to successfully
manage our growth, we will be unable to execute our business plan.
If we fail to retain our key personnel, we may not be able to achieve our
anticipated level of growth and our business could suffer.
Our future depends, in part, on our ability to attract and retain key
personnel. Our future also depends on the continued contributions of our
executive officers and other key technical personnel, each of whom would
be difficult to replace. In particular, Mark Kanter, our Founder and Chief
Executive Officer, is critical to the management and development of our
business and operations and to the shaping of our strategic direction. The
loss of the services of Wayne Kanter or other executive officers or key
personnel and the process to replace any of our key personnel would
involve significant time and expense and may significantly delay or
prevent the achievement of our business objectives.
It may be difficult and costly to protect our intellectual property rights,
and we may be unable to ensure their protection.
Our ability to maintain the InvestP2P.com platform, originate
borrower loans and perform our servicing obligations on the loans and on
the Notes depends, in part, upon our proprietary technology. We have
prepared an application fora patent covering various aspects of our
platform, but there are no guarantees that a patent will be granted. Even if
a patent were issued, there is no guarantee that a third party will be
unsuccessful in challenging it. We may not protect our proprietary
technology effectively, which could allow competitors to duplicate our
products and adversely affect our ability to compete with them. In
addition, a third party may attempt to reverse engineer or otherwise obtain
and use our proprietary technology without our consent. In addition, our
platform may infringe upon claims of third-party patents and we may face
intellectual property challenges from such other parties. We may not be
successful in defending against any such challenges or in obtaining
licenses to avoid or resolve any intellectual property disputes. Our
technology may also become obsolete, and there is no guarantee that we
will be able to successfully develop, obtain or use new technologies to
adapt our platform to compete with other peer-to-peer financial platforms,
if they develop. If we cannot protect our proprietary technology from
intellectual property challenges, or if the InvestP2P.com platform becomes
obsolete, our ability to maintain the InvestP2P.com platform, originate
borrower loans and perform our servicing obligations on the loans and on
the Notes could be adversely affected.
Purchasers of Notes will have no control over InvestP2P.com and will
not be able to influence InvestP2P.com corporate matters.
We are not offering any equity in this offering. Lender members
who purchase Notes offered through the InvestP2P.com platform will have
no equity interest in InvestP2P.com and no ability to vote on or influence
the Company's corporate decisions. Therefore, our stockholders will
continue to exercise 100 percent voting control over all of our corporate
matters, including the election of directors and approval of significant
corporate transactions, such as a merger or other sale of our company or
its assets.
RISKS RELATED TO COMPLIANCE AND REGULATION
The InvestP2P.com platform may fail to comply with various borrower
protection laws such as state lending laws and regulations, including
licensing and disclosure requirements and applicable sections of the
federal Consumer Credit Protection Act, including, but not necessarily
limited to, the Fair Credit Reporting Act, Equal Credit Opportunity Act,
Fair Debt Collection Practices Act, and Truth-in-Lending Act. Borrower
members may make counterclaims regarding the enforceability of their
obligations under the loans they have been issued on the InvestP2P.com
platform after collection actions have commenced, or otherwise seek
damages under these laws. Compliance with such regulatory regimes is
also costly and burdensome.
The operation of the InvestP2P.com platform must comply with
regulatory regimes applicable to commercial and small business credit
transactions. Because our platform is a new and unique concept,
compliance with different aspects of these regimes remains untested. State
laws generally regulate interest rates and other charges, certain disclosures
that must be made and certain licenses for different activities. In addition,
other state laws, public policy and general principles of equity relating to
consumer protections, unfair and deceptive practices and debt collection
practices may be applicable to the origination, servicing and collection of
the borrower loans. Our platform is also subject to other federal and state
laws, including:
the federal Truth-in-Lending Act and Regulation Z promulgated
thereunder, and similar state laws, which require certain disclosures to be
made to borrower members regarding the terms of their borrower loans;
the federal Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit any discriminatory practices on the basis of age
(with certain limited exceptions), race, color, sex, religion, marital status,
national origin, receipt of public assistance or the exercise of any right
under the Consumer Credit Protection Act, in the extension of credit;
the federal Fair Credit Reporting Act, which regulates the use and
reporting of information related to each borrower member's credit history;
and
the federal Fair Debt Collection Practices Act and similar state debt
collection laws, which regulate debt collection practices by "debt
collectors" and prohibit such debt collectors from engaging in certain
practices when collecting, and attempting to collect, consumer and small
business loans that are outstanding.
We may have failed to comply with these laws in the past, and may
fail to comply with them in the future. Compliance with these laws is
costly and time-consuming, and limits our operational flexibility. See
"Government Regulation" for more information.
Noncompliance with laws and regulations may impair our ability to
originate and service borrower loans.
Generally, failure to comply with the laws and regulatory
requirements applicable to our business may, among other things, limit
our, or a collection agency's, ability to collect all or part of the principal
or interest on the borrower loans on which the Notes are dependent and, in
addition, could subject us to damages, revocation of required licenses or
other authorities, class action lawsuits, administrative enforcement
actions, and civil and criminal liability, which may harm our business and
ability to maintain our platform and may result in borrower members
rescinding their borrower loans. Where applicable, we seek to comply
with state lending, servicing and similar statutes.
In all U.S. jurisdictions with licensing or other requirements that
we believe may be applicable to the InvestP2P.com platform, we have
obtained any necessary licenses or comply with the relevant
requirements. Nevertheless, if we are found to be in noncompliance with
any applicable laws, we could lose one or more of our licenses or
authorizations or face other sanctions, which may have an adverse effect
on our ability to continue to originate borrower loans through our
platform, perform our servicing obligations or make our platform
available to borrowers in particular states, which may impair your ability
to receive the payments of principal and interest on your Notes that you
expected. See "Government Regulation" for more information.
If we establish a relationship with a national or state chartered lending
institution for the purpose of being able to lend to qualified borrower
members on a uniform basis throughout the United States, and that
relationship were to subsequently be terminated, we would need to rely
on individual state lending licenses or exemptions from licensing
requirements to originate borrower loans.
Several lawsuits have sought to recharacterize certain loan marketers
and other loan originators as lenders. If we establish a relationship with
a national lending institution for the purpose of being able to lend to
qualified borrower members on a uniform basis throughout the United
States, and if litigation on similar grounds were successful against us,
borrower loans originated through our platform could remain subject to
state consumer protection laws in a greater number of states.
Several lawsuits have brought under scrutiny the association
between high-interest "payday loan" marketers and banks that are
chartered in other states. These lawsuits assert that payday loan marketers
use out-of-state lenders in order to evade the consumer protection laws
imposed by the states where they conduct business. Such litigation has
sought to recharacterize the loan marketer as the lender for purposes of
state consumer protection law restrictions. Similar civil actions have been
brought in the context of gift cards. We believe that, if we establish a
relationship with a national lending institution, our activities would be
distinguishable from the activities involved in these cases. However, in
some instances, this litigation has been successful, and we cannot
guarantee that similar action taken against us will be unsuccessful.
Additional state consumer protection laws would be applicable to
the borrower loans originated through the InvestP2P.com platform if we
were recharacterized as a lender after establishing a relationship with a
national lending institution, and the borrower loans could then be voidable
or unenforceable. In addition, we could be subject to claims by borrower
members, as well as enforcement action by regulators. Even if we were
not required to cease doing business with residents of certain states or to
change our business practices to comply with applicable laws and
regulations, we could be required to register or obtain licenses or
regulatory approvals that could impose a substantial cost and regulatory
burden on us. To date, no actions have been taken or threatened against us
on the theory that we have engaged in unauthorized lending. However,
such actions, should they be taken in the future, could have a material
adverse impact on our business.
As Internet commerce develops, federal and state governments may
propose, draft and enact new laws to regulate Internet commerce, which
may negatively impact our business.
As Internet commerce continues to develop, increasing regulation
by federal and state governments becomes more likely. Our business
could be negatively impacted by the application of existing laws and
regulations or the enactment of new laws and regulations applicable to
peer-to-peer lending. The cost to comply with such laws or regulations
could be significant and would increase our operating expenses.
Furthermore, we may be unable to pass along those costs to our members
in the form of increased fees. In addition, federal and state governmental
or regulatory agencies may decide to impose taxes on services provided
over the Internet. These taxes could discourage the use of the Internet as a
means of, and forum for, commercial and business lending, which would
adversely affect the viability of our platform.
Our legal and regulatory compliance burdens and costs will
significantly increase as a result of operating as a public company
following the date of this prospectus. Specifically, our management will
be required to devote substantial time to compliance matters.
After the date of this prospectus, we will become a public, SEC-
reporting company and will incur significant legal, accounting and other
expenses that we did not incur when we were a private company. Our
management and other personnel will be required to devote a substantial
amount of time to SEC reporting and compliance requirements. Moreover,
public company rules and regulations will increase our legal and financial
compliance costs and will make some activities more time-consuming and
costly. For example, these rules and regulations may make it more
expensive for us to obtain director and officer liability insurance coverage
and more difficult for us to attract and retain qualified persons to serve as
directors or executive officers.
In addition, the Sarbanes-Oxley Act requires, among other things,
that we maintain effective internal control over financial reporting and
disclosure controls and procedures. In particular, for the year ending
December 31, 2009 we must perform system and process evaluation and
testing of our internal control over financial reporting to allow
management and our independent registered public accounting firm to
report on the effectiveness of our internal controls over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our
testing, or the subsequent testing by our independent registered public
accounting firm, may reveal deficiencies in our internal control over
financial reporting that are deemed to be material weaknesses. In order to
comply with Section 404, we may incur substantial accounting expense,
expend significant management time on compliance-related issues, and
hire additional accounting and financial staff with appropriate SEC-
reporting and compliance experience and technical accounting
knowledge. Moreover, if we are unable to comply with the requirements
of Section 404 in a timely manner, or if we or our independent registered
public accounting firm identify deficiencies in our internal control over
financial reporting that are deemed to be material weaknesses, we could
be subject to sanctions or investigations by the SEC or other regulatory
authorities, which would require additional financial and management
resources.
If we are required to register under the Investment Company Act of
1940, our ability to conduct business could be materially adversely
impacted.
The Investment Company Act of 1940 (the "Investment Company
Act"), contains substantive legal requirements that regulate how
"investment companies" are permitted to conduct their business
activities. We believe that we have conducted, and we intend to continue
to conduct, our business in a manner that does not result in our company
being characterized as an investment company. However, if we are
deemed to be an investment company under the Investment Company Act,
we may be required to institute burdensome compliance requirements and
our activities may be restricted, which would have a materially adverse
impact on our business, financial condition and operating results. If we
were deemed to be an investment company, we may also attempt to seek
exemptive relief from the SEC, which could impose significant costs and
delays on our business.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. All statements, other than statements of
historical facts, included in this prospectus regarding InvestP2P.com
lender, borrower or co-borrower members, credit scores and grading, our
strategy, future operations, future financial position, future revenue,
projected costs, prospects, plans, objectives of management and expected
market growth are forward-looking statements. The words "anticipate,"
"believe," "estimate," "expect," "intend," "may," "plan," "predict,"
"project," "will," "would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain these identifying words. These forward-looking statements
include, among other things, statements about:
the status of borrower and co-borrower members, their plans and their
ability to repay borrower loans;
expected rates of return and interest rates;
the attractiveness of our lending platform;
our financial performance;
the impact of our new structure on our financial condition and results of
operations;
the availability and functionality of the trading platform;
our ability to retain and hire necessary employees and appropriately staff
our operations;
regulatory developments;
our intellectual property; and
our estimates regarding expenses, future revenue, capital requirements and
needs for additional financing.
We may not actually achieve the plans, intentions or expectations
disclosed in forward-looking statements, and you should not place undue
reliance on forward-looking statements. Actual results or events could
differ materially from the plans, intentions and expectations disclosed in
forward-looking statements. We have included important factors in the
cautionary statements included in this prospectus, particularly in the "Risk
Factors" section, that could cause actual results or events to differ
materially from forward-looking statements contained in this
prospectus. Forward-looking statements do not reflect the potential impact
of any future acquisitions, mergers, dispositions, joint ventures or
investments we may make.
You should read this prospectus and the documents that we have
filed as exhibits to the registration statement, of which this prospectus is
a part, completely and with the understanding that actual future results may
be materially different from what we expect. We do not assume any
obligation to update any forward-looking statements, whether as a result
of new information, future events or otherwise, except as required by law.
USE OF PROCEEDS
We will use the proceeds from the sale of each series of Notes to
fund the corresponding borrower loan that was designated by the lender
members purchasing such series of Notes. See "About the Lending
Platform" for more information. In the event that InvestP2P.com
establishes a relationship with a national lending institution in the future,
the proceeds will be used by InvestP2P.com to purchase the corresponding
borrower loans from the lending institution, which will be the originator
of the loans.
PLAN OF DISTRIBUTION
We will offer the Notes to our lender members at 100 percent of
their principal amount. The Notes will be offered only by InvestP2P.com
through the InvestP2P.com website, and there will be no underwriters or
underwriting discounts. See "About the Lending Platform" for more
information.
ABOUT THE LENDING PLATFORM
Overview
InvestP2P.com operates an Internet-based, peer-to-peer lending
platform where individual and/or business borrower members can take out
borrower loans and individual or corporate lender members can purchase
Notes dependent for payment on payments that InvestP2P.com receives on
the corresponding borrower loans for those Notes. Because we operate
primarily over the Internet and have lower costs than most traditional
financial institutions, and we offer optional credit reporting requirements,
and provide for lender member voting control on the use of loan proceeds
on an ongoing spend-by-spend basis, while enforcing a maximum amount
per spend, we believe that start ups can get loans to fund their business
ideas more so than with other lending options. We also believe that we can
offer lender members attractive interest rates on the Notes that they
purchase.
The InvestP2P.com platform only operates online. Borrower, co-
borrower and lender member registration, loan requests, lender member
commitments, loan origination and loan servicing all occur electronically
through our lending platform. InvestP2P.com services the loans and
collects monthly payments from the borrower or co-borrower members
for the duration of a loan's term.
The platform allows borrower members to post requests for
unsecured personal and/or business loans by indicating the maximum
interest rate they are willing to pay and a desired term of either 12, 24, 36,
48, or 60 months, and a lender member voting approval percentage on
each use of proceeds, and a subject to credit reporting option, and a limit
to each spend amount option and a limit to pay only site certified vendors
option. Upon registration, borrower members may be issued a
InvestP2P.com credit grade based on a credit score obtained for them from
Experian, a credit reporting company. The loan request is then posted on
the InvestP2P.com website, and may include the borrower's credit grade
and other credit summary data, certain self-reported financial information
and whether or not the borrower has purchased our MVP Verification
service or has a co-borrower on their loan. Borrower members can also
select the duration of their loan request offering period (between 1 and 28
days), which is the amount of time that their loan will be open to lender
members for commitment on the platform.
To borrow on the InvestP2P.com platform, our borrower members
must have:
no prior default on a borrower loan taken out through our platform.
Borrower members who post a loan request on the InvestP2P.com
platform should describe their potential uses of the proceeds from their
loan. We will verify or monitor a borrower member's actual use of
proceeds when directed to "In-Network" vendors.
We will look to offer borrower loans in the following 4 states:
California, Florida, Illinois, New Jersey. Each U.S. state imposes different
restrictions on the values and maximum interest rates of the borrower
loans, which may change from time to time. On the InvestP2P.com
website, borrower members can view the minimum and maximum loan
values and the maximum interest rate that their state allows. The platform
will not permit borrower members to request loans that do not conform to
the lending laws of their state. However, if InvestP2P.com partners with a
national lending institution in the future, borrower members residing in
most U.S. states will then be able to request loans between $1,000 and
$50,000 in value, and with interest rates up to 36.0%.
Lender members are able to access the InvestP2P.com website to
deposit funds electronically into a InvestP2P.com account, and then
"declaring" an amount they are willing to commit to the purchase of a
Note that will correspond to a particular borrower loan. Lender members
will fund loans that they find attractive. Lender members can bid as little
as $100 or as much as the entire loan amount.
In the event that 100% percent of a loan is bid on by the end of the
offering period, the loan is originated by InvestP2P.com and a debt
security which we refer to as a Borrower Member Payment Dependent
Note (referred to in this prospectus as a "Note" or, collectively, as the
"Notes") is sold to each of the lender members who were first to commit
on the loan request posting. Each Note is directly associated with a
specific borrower loan; this is referred to as the "corresponding borrower
loan" for that Note. Borrowers can also choose to accept less than 100
percent of the total amount that they requested, as long as at least 35
percent of the loan value has been bid on by the end of the offering period.
We refer to this option as the "partial funding feature" or as a borrower
member's "revised request."
While we use the terms "lender" members and "peer-to-peer" in
this prospectus and on our website for the sake of simplicity, all borrower
loans are currently funded and originated by InvestP2P.com. In the event
that InvestP2P.com establishes a relationship with a national?? lending
institution in the future, the borrower loans will then be originated by the
national?? lending institution. In this case, the originated loans will be
sold and assigned to InvestP2P.com, without recourse to the lending
institution, at a price equal to the principal amount of the borrower loan.
On the InvestP2P.com platform, primary borrower members can
also purchase a service called MVP Verification, in which borrower and, if
applicable, co-borrower members provide InvestP2P.com with certain
documentation so that we can verify employment, financial and other
information. Lender members can see which information has been verified
for borrower or co-borrower members before committing on borrower
loan requests. However, even in instances where borrower or co-borrower
income, employment or other information is verified by InvestP2P.com,
there are no guarantees that a borrower loan will be fully repaid.
The platform also provides borrower members with the
opportunity to have a co-borrower on their loan. A co-borrower is a co-
signer, or guarantor, who is individually and jointly liable for the loan,
alongside the primary borrower. Borrower members with credit grades
below F may be required to have a co-borrower on their loan.
The platform also offers the lender member the opportunity to
follow the loan and have a say in how it will be used. This can offer the
lender member the feeling of running a business and having a stake in the
success of the business.
The use of the MVP Verification service,credit reporting opt-in,
borrower non-voting investment, max spend request amounts, higher
voting requirements on spend requests and co-borrowing are features that
borrower members can use to enhance a loan request.
However, despite these features, investing in the Notes remains
highly risky and speculative, and there are no guarantees that loans will be
repaid, even if borrower members have used our MVP Verification service
or have a co-borrower on their loan. If loans are not repaid that correspond
to your Notes, you will not receive any payments on those Notes. For
more information on the risks involved in committing on loans and
purchasing Notes, see the "Risk Factors" section of this prospectus.
We attract borrower and lender members to our website,
www.InvestP2P.com., through a variety of sources. We drive internet
traffic through member referrals, referrals from third parties such as
online social networks and marketers, through organic search engine
results and paid advertising both online and offline.
InvestP2P.com generates revenue by charging origination and
other fees to borrower members and loan servicing fees to lender
members. Vendor reg/maintenance fees, unregistered vendor payment fees
We also charge a flat fee when borrower members purchase our MVP
Verification service. InvestP2P.com did not act as a lender member on the
platform at any time during its initial period of live operations, but it may
do so in the future. In this case, the company will also derive revenue
from interest income on the loans it partially or fully funds, and will also
be subject to potential losses on those loans.
The Online Peer-to-Peer Lending Industry
Online peer-to-peer lending is a new approach to consumer and
business finance that uses the Internet to connect borrowers and lenders.
Online peer-to-peer lending entails significantly lower operating costs
compared to traditional financial institutions because there are no physical
branch offices and related infrastructure, no deposit-taking or interest
payment activities and limited loan underwriting activities. InvestP2P.com
views peer-to-peer lending as an attractive new market opportunity in the
consumer and business finance industry. Key drivers of peer-to-peer
lending include:
the possibility of lower interest rates for borrower members;
the possibility of attractive rates of return for lender members;
the possibility for borrower, co-borrower and lender members to help each
other by participating in our platform to their mutual benefit;
tightening consumer and business credit markets, particularly among
traditional banking institutions; and
growing acceptance of the Internet as an efficient and convenient forum
for consumer and business transactions.
How the Platform Operates
Registration of InvestP2P.com Members
All prospective borrower, co-borrower and lender members must
first sign up as new members on the InvestP2P.com website. Signing up
for a InvestP2P.com account is free for all members, regardless of any
subsequent borrowing or lending activity. During this initial sign up
process, members must provide their first and last names, their state of
residence, their date of birth and a valid e-mail address where they can be
contacted. Prospective members also choose a user name that will identify
them on the platform and select a password that will be required for
logging in to the password-protected portions of the InvestP2P.com
website. In order to complete the sign-up process, prospective members
must agree to our Terms of Use and Electronic Disclosure Agreement, and
are provided with InvestP2P.com's Privacy Policy.
Once an InvestP2P.com member's account is activated, he or she
may then register as a borrower, co-borrower and/or lender member. As
part of the borrower, co-borrower and lender member registration
processes, all new members must undergo a fraud solutions process to
verify their identities and check them against OFAC watchlists of known
terrorists and criminals. Prospective borrowers or co-borrowers must pay
a one-time verification fee of $100. If prospective borrower or co-
borrower members do not pass the fraud solutions stage, they are
prohibited from posting a loan request on the platform. If lender members
do not pass the fraud solutions stage, they are prohibited from making
bids and purchasing Notes on the platform.
Borrower Members
In order to post requests for unsecured personal and/or business on
the InvestP2P.com website, prospective borrowers must first register as
borrower members. Borrower registration is completed on the platform in
a series of steps in which prospective borrowers are asked to agree to
InvestP2P.com's Borrower/Co-Borrower Member Registration
Agreement, to provide authorization for InvestP2P.com to pull their credit
reports from Experian and to provide authorization that will enable ACH
transactions to and from their bank accounts.
Prospective borrower members must provide InvestP2P.com with
their bank account information, including the routing number and account
number for the account which will be used to transfer funds to and from
their InvestP2P.com accounts. Borrowers will also be asked to provide
self-reported information such as employment status and occupation,
annual income, monthly expenses and other financial data.
During the borrower registration process, members may choose to
request, and some will be required to have, a co-borrower on their loan. A
co-borrower is a co-signer who is individually and jointly liable for a loan,
and is obligated to make payments on the loan if the primary borrower
becomes delinquent. Borrower members also have the option of
purchasing InvestP2P.com's MVP Verification service, in which
InvestP2P.com will verify certain income, employment and other
information after obtaining relevant documentation from the borrower
and/or co-borrower members.
Borrower members must:
be at least 18 years of age;
be U.S. citizens or permanent residents;
reside in a U.S. state in which InvestP2P.com currently issues loans;
have a valid email address;
have a valid U.S. social security number;
have an account at a financial institution with a valid routing transit
number;
have no prior defaults on a borrower loan taken out on our platform.
Co-borrower Members
1. Since co-borrower members become responsible for the
repayment of a loan in the event of primary borrower delinquency or
default, the standards for becoming a co-borrower member on the
InvestP2P.com platform are the same as those for becoming a borrower
ember. As long as InvestP2P.com is issuing loans on a state-by-state
basis, the co-borrower must reside in a state where InvestP2P.com is
authorized to issue loans, or is exempt from any licensing requirements,
and that has a maximum interest rate cap equal to or greater than the
interest rate indicated in the primary borrower member's loan request. Co-
borrowers are required to sign the same Borrower/Co-Borrower Member
Registration Agreement as primary borrowers.
Lender Members
In order to bid on borrower loans, purchase Notes corresponding
to those loans and subsequently resell those Notes on the Note trading
platform when and if it is created, InvestP2P.com members must register
as lender members on the platform. Lender member registration is
completed on the platform in a series of steps in which prospective lender
members are asked to agree to InvestP2P.com's Lender Member
Registration and Note Purchase Agreement, to sign a Tax Withholding
Certification and to provide authorization that will enable ACH
transactions between their bank and InvestP2P.com accounts. Prospective
lender members must also agree to InvestP2P.com's credit profile
authorization so that their identities can be verified through our fraud
solutions process provided by Experian.
Lender members must:
be at least 18 years of age;
have a valid bank account; and
have a valid U.S. social security number; or
be a corporate entity with a taxpayer identification number.
Individual lender members may not have more than $1,000,000 in
committed bids plus the amount outstanding on their previously purchased
Notes. A corporate lender member may not have more than $1,000,000 in
committed bids plus the amount outstanding on its previously purchased
Notes. Additional financial suitability or other requirements for lender
members may be implemented in the future. See "Financial Suitability
Requirements" for more information.
Borrower Member Loan Requests
In order to take out an unsecured personal and/or business loan
from InvestP2P.com, a borrower member must create a loan request that
will be posted on the InvestP2P.com website. A loan request posting is a
description of the specific terms of a loan that has opened for declaration
on the lending platform. A posting may include self-reported information
from the borrower member requesting the loan and credit information
about the borrower provided by Experian, along with the borrower
member's InvestP2P.com credit grade. If applicable, co-borrower self-
reported information and credit information from Experian may also be
included in the posting. A posting states the principal amount of the loan
request, the term (12, 24, 36, 48, or 60 months) and the maximum interest
rate the borrower is willing to pay. Currently, loans will be offered for 60
months and 36% interest rate. A loan request posting may also include a
written description from the borrower of what the loan proceeds may be
used for. However, InvestP2P.com has no way of verifying that the
proceeds of any loan will actually be used for the purposes described in a
posting.
Each U.S. state imposes different restrictions on the values and
maximum interest rates of the borrower loans, which may change from
time to time. On the InvestP2P.com website, borrower members can view
the minimum and maximum loan values and the maximum interest rate
that their state allows. The platform will not permit borrower members to
request loans that do not conform to the lending laws of their state.
However, if InvestP2P.com partners with a national lending institution in
the future, borrower members residing in most U.S. states will then be
able to request loans between $1,000 and $50,000 in value, and with
interest rates up to 36.0%.
Borrower members who already have one outstanding loan issued
through the platform may post another loan request to attempt to take out
up to one additional loan, provided that:
the aggregate outstanding principal balance of both borrower loans does
not exceed the maximum allowable loan amount for each borrower
member, currently set at $100,000;
borrower members are current on their existing borrower loan, and have
not been more than 30 days past due in making their most recent monthly
loan payments for a period of at least six months; and
borrower members may not post a listing for a second borrower loan
within six months following the date of origination of their existing
borrower loan.
Borrower members who have been issued loans may also serve as
co-borrowers on one other loan, provided that the aggregate value of their
borrower loan and the loan for which they are serving as a co-borrower
does not exceed the greater of $100,000, or higher based on ip2p.com debt
to income ratio we set or a lesser value as permitted by applicable state
law. InvestP2P.com borrower member eligibility requirements for second
loans are subject to change from time to time.
Loan Request Postings and Borrower Member Information Available
on the InvestP2P.com Website
After a loan request is complete and has undergone our internal
review process, the request, if approved, is posted on our website and
becomes available for viewing and committing to by lender members. By
committing on a loan request, a lender member is committing to the
purchase of a Note that will be dependent for payment on payments
InvestP2P.com receives on that loan, if it is funded and originated. Lender
members may be able to view:
the borrower and, if applicable, the co-borrower member's user name,
state of residence, employment status, employer, occupation category,
educational affiliations and status and social affiliations;
the loan amount requested;
the term of the loan;
the maximum interest rate acceptable to the borrower member;
the current interest rate as determined by InvestP2P.com and/or the lender
members;
the number of committees on the loan and the amount of funds that have
been committed;
the time remaining for the funding period;
the borrowers credit reporting commitment status
the borrowers own commitment amount and non-voting status if elected
the borrowers commitment toward using only investp2p.com certified
vendors or not
the percentage of voting control on spends the borrow gives to committed
lender members
a description of the purpose of the loan;
information from the borrower and, if applicable, the co-borrower
member's credit report;
self-reported income information for the borrower and, if applicable, the
co-borrower member, including current annual salary, net monthly
income, other monthly income and adjusted gross income for the previous
year;
self-reported and estimated expense information for the borrower and, if
applicable, the co-borrower member, such as primary residence mortgage
payments or rent, transportation expenses (including automobile loans,
gasoline, and car insurance), credit card expenses, utilities, food,
secondary residence mortgage payments or rent, real estate taxes,
household repairs and maintenance expenses and clothing and child care
expenses;
the borrower and, if applicable, the co-borrower member's assets,
including home-ownership status, equity in their home, the value of their
investments such as stocks or bonds in brokerage or retirement accounts
and the value of other personal property;
whether the borrower has purchased our MVP Verification service and, if
so, the documentation that has been obtained and the information that has
been verified by InvestP2P.com;
any questions that have been posed to the borrower by lender members
and any answers that have been delivered; and
The following information based on borrower and, if applicable, co-
borrower member credit files held with Experian will also be displayed in
loan request postings:
the InvestP2P.com credit grade that we have assigned to the borrower and,
if applicable, to the co-borrower member;
their home ownership status;
their debt-to-income ratio, which is the ratio between the amount of a
borrower member's monthly non-mortgage debt servicing payments and
the amount of their self-reported monthly income;
their bankcard utilization ratio, which is the ratio of the total balance
used to the aggregate credit limit on all of a borrower member's open
bankcards;
the number of accounts on which they are currently listed as late on a
payment;
the total past-due amount that they owe on all delinquent and charged-off
accounts;
the number of delinquencies more than 90 days past due on their credit
report in the last seven (7) years;
the number of negative public records (such as, for example, bankruptcies,
liens and judgments) on their credit report over the last twelve (12)
months, and over the last ten (10) years;
the month and year they opened their first recorded credit line (e.g.,
revolving, installment or mortgage credit);
the total number of credit lines appearing on their credit report, and the
number that are open and current;
the total balance on all of their open revolving credit lines; and
the number of inquiries made in the last six (6) months by creditors on
their credit report.
Borrower Member Credit Criteria and Underwriting
Before a loan request is submitted on the platform, we evaluate
whether the prospective borrower member meets the required criteria for
borrowing on InvestP2P.com. This criteria includes:
a minimum InvestP2P.com credit grade of NC, or a co-borrower on the
loan with a credit score of at least NC; and
no prior defaults on a borrower loan taken out on our platform.
There are additional requirements for borrower members who already
have one outstanding loan through the InvestP2P.com platform, and are
seeking to take out a second loan. See "About the Lending Platform
Borrower Member Loan Requests" for more information.
We may assign a InvestP2P.com credit grade based on an
underlying credit score for each borrower and co-borrower member on the
platform as an indication of the relative level of credit risk that they
pose. In general, higher credit scores are reflective of lower estimated
default risk.
The InvestP2P.com credit grades that are assigned to each borrower
and co-borrower member are based on the VantageScore credit scoring
system provided by Experian. However, we may from time to time change
the type or source of credit score that we use to assign InvestP2P.com
credit grades to borrower and co-borrower members. We currently
establish InvestP2P.com credit grades by converting a borrower or co-
borrower member's numerical VantageScore into one of the
InvestP2P.com credit grade categories listed below:
VantageScore Credit Score Range InvestP2P.com Credit Grade
Assigned
784-990 A+
728-783 A
701-727 B+
692-700 B
668-691 C+
660-667 C
633-659 D+
624-632 D
604-623 D-
569-603 E
501-568 F
No Score NC
The VantageScore model that we may use to assign InvestP2P.com
credit grades to borrower and co-borrower members was developed
jointly by Experian, Equifax and TransUnion, the three major U.S. credit
reporting companies. VantageScore is a unique scoring model because it
was developed by standardizing definitions of credit characteristics that
have traditionally been different for each of the credit reporting
companies, which led to multiple scoring systems and different
assessments of borrower risk. The VantageScore was designed to provide
a more consistent risk measurement.
The following consumer characteristics, each with a different
weight as indicated, contribute to a borrower or co-borrower member's
VantageScore:
Debt Repayment History (32%)
Credit Utilization (23%)
Recently Reported Current and Delinquent Balances (15%)
Length of Credit History and Types of Credit Used (13%)
Recently Opened Credit Accounts and Credit Inquiries (10%)
Available Credit (7%)
More information about VantageScore can be found at
www.vantagescore.experian.com. InvestP2P.com member VantageScores
may be different from the scores assigned by other scoring systems, such
as Experian's Scorex PLUS or FICO. For this reason, a borrower or co-
borrower member's InvestP2P.com credit grade, because it is based on
their VantageScore, may not be an accurate reflection of their
creditworthiness. See "Risk Factors Risks Related to the Notes and the
Corresponding Borrower Loans" for more information.
When a borrower member wants to post a loan request on the
platform, we may retrieve his or her credit report from an Experian
database, unless the borrower has previously requested a loan and the
credit report we already have on file for the borrower is less than 30 days
old. If a credit report currently on file for a borrower or co-borrower
member with an active loan request is not less than 30 days old, we may
obtain a new credit report, which may change the InvestP2P.com credit
grade assigned to the borrower.
InvestP2P.com uses borrower and co-borrower member credit
reports to help verify their identities, to obtain their Experian
VantageScore credit scores and assign to them a InvestP2P.com credit
grade based on that score. The credit reports are also used to determine
their current amount of non-mortgage debt, so as to determine their debt-
to-income ratio, and to identify and display as part of the loan request
certain characteristics and information from their credit profiles,
including, but not limited to, the number, age, type and status of their
currently reported credit lines, public records (such as bankruptcies and
judgments) and mortgage loans, and the number of their recent requests
for credit.
Borrower and, if applicable, co-borrower member credit grades
may be displayed in all loan request postings and may be available for
viewing by all members. However, while VantageScore credit score
ranges are displayed for the lender members, exact numerical credit scores
are not displayed or disclosed to anyone.
Borrower Member Financial Information is Generally Unverified
Financial and other information presented by borrower and co-
borrower members is generally unverified, and InvestP2P.com does not
confirm in any way a borrower member's ability to afford a loan that they
take out on the platform. Unverified information presented in borrower
member loan requests includes their income, expenses and employment
status, in addition to their description of the purpose for the loan.
Certain financial statistics that InvestP2P.com calculates on behalf of
borrower and co-borrower members, and that are subsequently displayed as
part of their profiles, is also unverified. For example, the debt-to-
income ratio, a measurement of a borrower's ability to take on additional
debt, is calculated by dividing self-reported and unverified pre-tax
monthly income into monthly non-mortgage related debt servicing payments
as indicated on the borrower member's credit report.
Moreover, InvestP2P.com does not review or verify any
information in a borrower or co-borrower member's credit report. For
example, if a borrower member's credit report reflects an outstanding
mortgage loan, the borrower is presumed to be a homeowner and is
labeled as such on the platform. But this information is not verified by
InvestP2P.com. We also do not verify how loan proceeds are actually used
by borrower members, which may ultimately be for different purposes
than those stated in their loan request postings. Lender members should
not rely solely on self-reported and unverified information provided in
borrower loan request postings to make their Note purchase decisions.
The Company reserves the right in its Borrower/Co-Borrower
Member Registration Agreement to verify, at any time, all statements and
information provided by borrower and co-borrower members during their
registration process and/or in their final loan request posting, and we have
the right to delay or cancel listings or to refuse to fund a borrower loan if
material misstatements or inaccuracies are found, or cannot be verified for
any reason. In the limited instances where we do verify income,
employment status or other information provided by borrower members,
the verification is performed before the loan is originated. However,
lender members will be unaware that this information is being verified for
a borrower, unless the borrower has purchased our MVP Verification
service.
In limited instances, we conduct random or targeted verifications
on borrower members who have posted loan requests on the platform. We
believe that the random verification process provides a disincentive for
borrower and co-borrower members to misrepresent themselves and their
financial situation in their loan request postings and member profiles. We
also believe that these verification procedures will be useful in terms of
testing our policies and for statistical analysis of the financial conditions
and behaviors of our borrower members. When a borrower or co-borrower
member is selected for random or targeted verification, we contact the
member by telephone or email and ask them to submit documentation that
can confirm certain self-reported information in their loan request.
We only conduct random verifications in between the time of a
loan request posting and the funding of that loan. However, lender
members reviewing these borrower member loan requests will be unaware
that the information has been verified. Only borrower members that have
purchased our MVP Verification service will have icons added to their
postings to indicate that documents have been reviewed, and information
verified, by InvestP2P.com.
We may conduct targeted, unsolicited verification in the following
situations:
if there is uncertainty regarding a borrower or co-borrower member's
employment or income, such as in cases where a borrower fails to disclose
current employment or a source of income, if a borrower's future income
or employment status appears to be at risk based on information disclosed
by the borrower, or if a borrower has control over the accuracy of
information being disclosed, such as if the borrower is a principal of the
company providing his or her employment or income information;
if there is contradictory or unusual information in a loan request;
if the loan amount requested is high;
if the borrower member has a large amount of outstanding debt
obligations;
if we suspect that a borrower member has outstanding debt obligations
that were not included in the pre-loan or post-loan closing reported debt
level, such as in cases of wage garnishment collection accounts; or
if we suspect any kind of fraud.
We perform income and employment verification in our discretion
as an additional credit and fraud screening mechanism. If a borrower
member fails to provide adequate information in response to an income or
employment verification inquiry, we may remove their loan request
posting from the website, or request additional information. We believe
that our ability to verify borrower income may be useful in certain
circumstances in screening our platform against exaggerated income and
employment representations from borrower members. Lender members,
however, should not rely on a borrower's stated employment or income,
or on our ability to accurately verify such information. We cannot assure
lender members that we will continue to perform income and employment
verification, and we expect that the percentage of loan requests for which
we verify such information will decline as our volumes increase.
Although we attempt to verify the identities of all borrower, co-
borrower and lender members, our fraud detection systems could fail, and
the platform could become subject to identity theft, fraud and material
misstatements. See "Risk Factors Risks Related to the Notes and the
Corresponding Borrower Loans" for more information.
MVP Verification
InvestP2P.com provides primary borrower members the option to
purchase a service called MVP Verification, in which borrower and, if
applicable, co-borrower members submit certain documentation to us so
that we can verify their income, employment and other self-reported
information included in their loan request postings. In these instances,
InvestP2P.com will examine and review the documentation, and take
reasonable steps and use its best efforts to verify the validity of the
information. We may contact third parties to assist in the verification
process. We will indicate in the loan request posting whether or not the
documentation submitted to us provides the same information as that
provided by the borrower and, if applicable, the co-borrower member in
the loan request.
MVP Verification documents can include all or some of the
following, at the members' request:
a notarized statement reaffirming their legal commitment to repay the
loan;
photo identification such as a driver's license or passport;
recent employment pay-stubs;
an authorization form that permits us to confirm income tax return data
with the IRS;
a utility bill with the member's name and address; and/or
recent monthly bank statements.
When our MVP Verification service has been purchased, lender
members can see which information has been verified for borrower or co-
borrower members before bidding on borrower loan requests. However,
even in instances where borrower or co-borrower income, employment or
other information is verified by InvestP2P.com, there are no guarantees
that a borrower loan will be fully repaid.
Currently, MVP Verification costs $100 for any borrower member.
When a borrower is using a co-borrower and has purchased our MVP
Verification service, different documentation may be submitted for the
primary borrower and the co-borrower member. In this circumstance, the
co-borrower may decide not to send any documentation for MVP
Verification. Moreover, primary borrower members may purchase the
MVP Verification service during their loan request process, and then fail
to send in any documentation for review. In this circumstance, no items
will be shown as verified for the borrower member, and the member will
be deprived of the special "MVP" label that is displayed on the website
for loan request postings that have had at least one form of documentation
verified by InvestP2P.com under the terms of our MVP Verification
service.
Co-borrower Members
A co-borrower is a co-signer, or guarantor, who is individually and
jointly liable for a loan, alongside the primary borrower member.
Since they are legally obligated to make payments on a loan if the
primary borrower becomes delinquent, co-borrowers will normally be
trusted friends or family members of the primary borrower. In order to be
a co-borrower on a loan, an individual must:
be at least 18 years of age;
be a resident of the United States;
have a valid social security number; and
In addition, for as long as InvestP2P.com is issuing loans on a state-by-
state basis, the co-borrower member must reside in a state that has a
maximum interest rate cap equal to or greater than the interest rate
indicated in the primary borrower member's loan request.
InvestP2P.com will not attempt to debit a co-borrower member's
bank account until the Company is unsuccessful in collecting money from
a primary borrower's bank account on three separate occasions. If we are
unable to debit a primary borrower account on the due date and two
subsequent days (the 9th and 19th late days), InvestP2P.com will then
attempt to debit the amount, and all unpaid late and failed payment fees,
from the co-borrower's bank account on the 26th late day, unless the
account is brought current by that time. In subsequent months, we will
once again continue to debit the primary borrower's account at least three
times before attempting to debit the co-borrower's account. If the primary
borrower becomes unable to make payments for an extended period of
time, we may begin to debit only the co-borrower's bank account on the
monthly due dates for the borrower loan until such time as the primary
borrower member is able to resume making payments.
To the extent that primary borrower members become late on their
payments, InvestP2P.com will not make payments on the corresponding
Notes until such time as the Company has received payment on the
corresponding borrower loans. In the event that InvestP2P.com is unable
to debit a payment amount on the due date and two subsequent dates, as
described above, payments on the Notes will then depend on payments
made on the corresponding borrower loan by the co-borrower on that loan,
if there is one.
If both the primary borrower and the co-borrower default on a
loan, holders of Notes will not receive any further payments on their
Notes. Having a co-borrower on a loan is not a guarantee that the
borrower loan, or the corresponding Notes, will be paid. There remains a
substantial risk that co-borrower loans will go into default.
Co-borrowers will not play an active role in the loan request
posting process, except for filling out their own member profiles and their
own income, expense, employment and other relevant information.
Co-borrower members may serve as a co-borrower on a maximum
of two loans, but the aggregate value of those loans must not exceed
$100,000, or a lesser value as permitted by applicable state law. Borrower
members who have been issued loans may also serve as co-borrowers on
one other loan, provided that the aggregate value of their borrower loan
and the loan for which they are serving as a co-borrower does not exceed
$100,000, or a lesser value as permitted by applicable state law.
Standard Terms of the Borrower Loans
All InvestP2P.com borrower loans are unsecured obligations of
individual and/or business borrower and, in some cases, co-borrower
members. The loans are issued with a fixed interest rate that is determined
by InvestP2P.com and/or the lender members. The loans can have
maturities of 12, 24, 36, 48, or 60 months, are fully amortizing and are
payable monthly. There may be a deferment of principal and interest for
up to a period of two years from origination. There may also be an interest
only payment option. The loans may be repaid early in whole or in part
without penalty. If a borrower or co-borrower member partially prepays a
loan, the amortization schedule for that loan will be automatically
recalculated for the remainder of the loan's term, and the borrower
member's monthly installment will thereafter be reduced accordingly.
Origination and other Fees Charged to Borrower and Co-Borrower
Members
InvestP2P.com charges borrower members a one-time origination
fee which is deducted from the principal amount of their loan, before the
loan proceeds are disbursed to their trust accounts. The origination fee is
5.0% for loans. The minimum borrower origination fee is $95, which will
be assessed if the fee calculated on a percentage-of-value basis is below
$95. Although the origination fee for co-borrower loans is 1.0% higher
than that for normal loans, the co-borrower members themselves are not
charged an origination fee.
Borrower and co-borrower members are also subject to failed
payment fees, which InvestP2P.com retains, and late payment fees, which
are passed along to lender members net of a servicing fee equal to 1.0% of
the late fee amount. The late payment fee will be equal to the greater of
5.0% of the amount of the unpaid installment, or $15, or a lesser amount
as permitted by applicable law. The failed payment fee will be equal to
$15 per failed payment, or a lesser amount as permitted by applicable law.
There is an additional flat fee of $100 for normal loans or $75 for co-
borrower loans if a borrower member purchases our MVP Verification
service.
The Commitment Process
After a loan request is posted on the InvestP2P.com platform,
lender members can examine the loan and compare it to other loan
requests that are posted and available for commitment at that time. If a
lender member wants to commit to the purchase of a Note, the proceeds of
which will fund a portion or all of the corresponding borrower loan, he or
she submits a "declaration" for the loan. The commitment must have a
minimum value of $100, but can be as high as the total amount of the loan
request. Along with the dollar value of the commitment, the lender
member must accept the rate offered on the Note that will correspond to
the loan, if the loan is originated. Lender members are committing on loan
request postings during the offering, but they are not committing to
purchase the loans directly. Instead, they will be purchasing Notes
dependent for payment on payments that InvestP2P.com receives on the
corresponding borrower loans.
Borrower members are asked to accept the rate they are willing to
pay on their loan during the loan request application process. This rate
will be displayed on the InvestP2P.com website in the posting for each
loan request. Lender members can make a declaration on the loan offered.
If by the end of the 1 to 28 day offering period a borrower loan
does not receive offers totaling at least 35 percent of the amount
requested, or if the loan receives more than 35 percent of the amount
requested and the borrower declines the loan, or if InvestP2P.com cancels
the loan for any reason, the posting expires and no loan is funded to the
borrower member. InvestP2P.com borrower members whose loan request
postings expire with an insufficient aggregate bid value may post a new
loan request on our platform.
How to Commit on Loans and Purchase Notes
In order to Commit on loans and purchase Notes, lender members
first have to deposit money into their online InvestP2P.com account.
When funds become available for committing in their account, typically 3
to 4 days after the transfer request, they can then review borrower profiles
and loan requests and offer on postings that they find attractive. Once the
offering period for a loan expires, the dollar value of the offer will
automatically be debited from the lender member's account and credited
to InvestP2P.com as payment for the Note that is being sold to the lender
member.
A declaration is a commitment made by a lender member to
purchase a Note from InvestP2P.com equal in principal amount to the
dollar value of that bid. Lender members may bid on more than one
borrower loan at the same time, but lender members must have funds in
their InvestP2P.com account equal to or greater than the value of any new
bid or bids that will be made, plus all outstanding bids. Once an offer is
made it is irrevocable. The value of bids can range from $100 up to the
full amount of a loan request. InvestP2P.com may change the minimum
bid amount or implement maximum bid amounts in the future.
Currently, the only way for lender members to commit on loan
requests is to browse through the various postings on the site. This can be
done manually or by using our search function, which can sort live loan
postings by loan amount, maturity, InvestP2P.com credit grade, interest
rate, percentage of funds committed, number of days left in the offering
period and other criteria. The offerings will enable lender members to
diversify their risks across different loans with varying credit, financial
and other characteristics. Premium listings may be offered to prospective
borrowers for a fee whereby such postings may be highlighted on our site
or positioned outside of the normal search results or browse order
Lender members are not directly lending money to borrower or co-
borrower members on the InvestP2P.com platform. While we use the term
"lender" members and "peer-to-peer" in this prospectus and on the
InvestP2P.com website for the sake of simplicity, all borrower loans will
be funded and originated by InvestP2P.com, or by a national lending
institution to be selected in the future. We use the proceeds we receive
from issuance of the Notes to fund the corresponding borrower loans for
those Notes. But while lender members do not directly lend money to
borrower or co-borrower members, they will nevertheless be wholly
dependent on those borrower or co-borrower members for payment on the
Notes they have purchased from InvestP2P.com. If a borrower or co-
borrower member defaults on a borrower loan, InvestP2P.com will have
no obligation to make any payments on the Notes corresponding to that
loan.
Servicing Fees Charged to Lender Members and Impact on Annual
Returns
Lender members are charged an annual servicing fee of 1.0% of
the outstanding principal balance on the corresponding borrower loan for
each Note they hold. The fee accrues daily the same way in which
borrower member interest payments are calculated, and is deducted from
each monthly borrower member payment before lender members receive
their pro rata share of the payment amount. The servicing fee will lower
the effective yield on the Notes below their stated interest rate, and
reduces both the principal and interest payments on Notes. InvestP2P.com
will also pay to lender members late payment fees, when charged and
received on delinquent loans, on a pro rata basis, subject to a 1.0%
servicing fee assessed against the value of the late payment.
In the event that collection action must be taken on a delinquent
loan, the Company or its designated third-party collection agency will also
charge a collection fee between 20.0% and 35.0% on any amounts that are
obtained. These fees will thereby reduce the amounts of any payments
lender members receive on their Notes. We may adjust the amount of
these servicing and collection fees from time to time.
Treatment of Lender Member Balances
In order to bid on loan requests, lender members must have
sufficient funds in their sub-account under the InvestP2P.com Pooled FBO
account. This is accomplished by having each lender member authorize an
electronic transfer using the Automated Clearing House, or ACH, network
from the lender member's designated and verified bank account to the
account we currently maintain at J.P. Morgan Chase "for the benefit of"
our lender members. This "FBO account" is a pooled account titled in our
name "for the benefit of" our lender members. The FBO account is a non-
interest bearing demand deposit account. Funds in the FBO account will
always be maintained at an FDIC member financial institution. Our
individual and/or business members have no direct relationship with J.P.
Morgan Chase. We maintain and administer the FBO account.
We are the trustee for the FBO account. In addition to outlining the
rights of lender members, the Offering of Trust provides that we disclaim
any economic interest in the assets in the FBO account and also provides
that each lender member disclaims any right, title or interest in the assets
of any other lender member in the FBO account. No InvestP2P.com
monies are ever commingled with the assets of lender members in the
FBO account.
Under the FBO account, we maintain sub-accounts for each of our
lender members to track and report funds committed by lender members
to purchase Notes, as well as payments received from borrower
members. These record-keeping sub-accounts are purely administrative
and reflect balances and transactions concerning the funds in the FBO
account.
The FBO account is FDIC-insured on a "pass through" basis to the
individual lender members, subject to applicable limits. This means that
each individual lender member's balance is protected by FDIC insurance,
up to the aggregate amounts established by the FDIC. Other funds the
lender member has on deposit with J.P. Morgan Chase, for example, may
count toward the FDIC insurance limits.
Funds of a lender member may stay in the FBO account
indefinitely. Such funds may include funds in the lender member's sub-
account never committed to the purchase of Notes or committed to the
purchase of Notes for which the corresponding borrower loan did not
close, and may also include payments received from InvestP2P.com
related to Notes previously purchased. Upon request by the lender
member, we will transfer lender member funds in the FBO account to the
lender member's designated and verified bank account by ACH transfer,
provided such funds are not already committed to the future purchase of
Notes.
Loan Funding and Sales of Notes
Once the offering period for a loan request ends, if the loan has
received bids in an aggregate amount equal to the total value of the loan
request, or if the borrower member utilizes the partial funding feature, we
proceed with the funding of the borrower loan and with the sale of the
Notes corresponding to that loan to the lender members who are winning
bidders on the loan. When we sell a Note to a lender member and register
the Note on our books and records, we transfer the principal amount of the
Note from the lender member's sub-account under the Pooled FBO
account to a funding account that we maintain. This transfer represents
payment for the Note by the lender member. The proceeds from this Note
sale are designated for the funding of the corresponding borrower loan
selected by the lender member.
Currently, InvestP2P.com is the originator for all borrower loans
issued to borrower members. In the event that InvestP2P.com establishes a
relationship with a national lending institution in the future, the borrower
loans will then be originated by the lending institution. In this case, the
originated loans will be sold and assigned to InvestP2P.com by the lending
institution, without recourse to the lending institution, at a price equal to
the principal amount of the borrower loan.
A borrower loan will normally close during the first business day
after an offering period has ended and we have received Note purchase
commitments in an aggregate amount equal to the total amount of the loan
request, or on the first business day after an offering period has ended and
a borrower is eligible for, and utilizes, the partial funding feature.
Borrower and co-borrower members execute an electronic
Borrower/Co-Borrower Member Registration Agreement at the time they
register on the platform. The Agreement gives InvestP2P.com power of
attorney to sign a promissory note on behalf of the borrower and, if
applicable, the co-borrower member that will represent their legal
obligation to repay a borrower loan. After expiration of a loan request
posting and satisfactory completion of our pre-funding review process, we
execute an electronic promissory note on behalf of the borrower and, if
applicable, the co-borrower member, under power of attorney, in the
amount of the requested borrower loan. In the event that InvestP2P.com
establishes a relationship with a national lending institution in the future,
we will then execute an electronic promissory note in favor of the lending
institution on behalf of the borrower and co-borrower members. The
lending institution will originate the loan to the borrower member, and
will then sell and assign the promissory note to InvestP2P.com, without
recourse to the lending institution.
The promissory note and the Borrower/Co-Borrower Member
Registration Agreement contain customary agreements and covenants
requiring the borrower members and, if applicable, the co-borrower
members to repay their borrower loans and recognizing InvestP2P.com's
role as the owner and servicer of the borrower loans.
Actual names and mailing addresses of all members are known
only to InvestP2P.com. Members can disclose the information and are
encouraged to do so. We maintain custody of the electronically-executed
promissory notes and the electronically executed Notes in electronic form
on our platform.
Identity Fraud Reimbursement
We may repurchase Notes from lender members in cases where the
corresponding borrower loan was obtained through identity fraud. We
generally recognize the occurrence of identity fraud upon receipt of a
police report concerning the identity fraud. This remedy for identity fraud
only provides an assurance that our borrower and co-borrower member
identity verification is accurate; in no way is it a guarantee of a borrower
or co-borrower member's self-reported information (beyond their
identities) or a borrower or co-borrower member's creditworthiness. We
expect the incidence of identity fraud on our platform to be low because
of our identity verification process. As of the date of this prospectus, we
have had no confirmed cases of identity fraud. However, this may be due
in part to our very limited operating history, and there may be cases of
identity fraud on the platform in the future. In cases of confirmed identity
fraud in the future, we will repurchase from lender members the Notes
corresponding to the affected borrower loans for the outstanding principal
amount of those Notes.
Post-Loan Closing Servicing and Collection
After the corresponding borrower loans are funded and the Notes
are sold to lender members and allocated to the FBO account for the
borrower, we begin servicing the borrower loans.
We charge lender members a servicing fee in respect of their Notes
that is equal to a 1.0% annualized rate applied to the outstanding principal
balance of the corresponding borrower loan. We may change the amount
of this servicing fee from time to time.
Our procedures for collecting monthly borrower loan payments as
they come due generally involve the automatic debiting of borrower bank
accounts by ACH transfer, with manual payment by check, or bank draft,
offered in exchange for a 1.0% increase in the borrower member's loan
origination fee.
Borrower loan repayment funds are transferred into a clearing
account in our name, where they remain for 4 days, or until the funds
clear, whichever is shorter. We then make payments on Notes by
transferring the appropriate funds from the clearing account to the Pooled
FBO account and allocating amounts received on specific borrower loans
to the appropriate lender members' sub-accounts. We transfer amounts due
to InvestP2P.com for lender member servicing fees from the clearing
account to an operating account of ours. Lender members may transfer
uncommitted funds out of their sub-accounts under the Pooled FBO
account by ACH transfer to their designated bank account at any time,
subject to normal execution times for such transfers (generally 2 to 3
days).
We disclose the payment performance of the borrower loans to
lender members on our website and report to credit reporting companies.
We have also made arrangements for collections procedures in the event
of borrower member delinquency and default. When a borrower loan is
past due and payment has not been received, we contact the borrower to
request payment. After a 15-day grace period we will, in most cases,
assess a late payment fee. The late payment fee will be equal to the greater
of 5.0% of the amount of the unpaid installment, or $15, or a lesser
amount as permitted by applicable law. This fee may be charged only once
per late payment cycle. Amounts equal to any late payment fees we
receive on borrower loans are paid to holders of the corresponding Notes,
net of a 1.0% servicing fee assessed against the value of the late payment.
We reserve the right to relieve borrower members from late fee charges if
they make a good faith commitment to pay an overdue installment within
a reasonable period of time, and they fulfill this commitment. We may
also work with the borrower or co-borrower member to structure a new
payment schedule for the borrower loan without the consent of any holder
of Notes corresponding to the borrower loan.
In cases of failed payments due to insufficient funds in a borrower
member's account or any other reason, we may charge a failed payment
fee to the borrower member of $15, or a lesser amount as permitted by
applicable law. We retain 100 percent of this failed payment fee.
If a borrower loan becomes more than 30 days overdue, we
identify the loan on our website as "Late 30+," and we either refer the
borrower loan to our in-house collections department or to a third-party
collections agency. Referring an overdue borrower loan to a third-party
collections agency or to our in-house collections department will be
considered reasonable collections efforts. Amounts equal to any
recoveries we receive on late loans are paid to lender members on a pro
rata basis, subject to our 1.0% servicing fee. The recovery amounts may
be subject to collections fees between 20.0% and 35.0% that we or a third-
party collections agency charge. This will reduce payment on the Notes to
below the amounts expected by holders of the Notes.
Lender members can track the status of late borrower loans on our
website. We list such loans as "Late 30+," "Late 60+," "Late 90+," and
"Defaulted." A loan is considered to have defaulted when it is more than
120 days late. Loans that are up-to-date in payments are identified as
"Current." Lender members cannot participate in the collections process
in any way.
If a borrower member dies while a borrower loan is in repayment,
we require the executor or administrator of the estate to send a death
certificate to us, and we file a claim against the borrower member's estate
to attempt to recover the outstanding loan balance. Depending on the size
of the estate, we may not be able to recover the outstanding amount of the
borrower loan. If the estate does not include sufficient assets to repay the
outstanding borrower loan in full, we will treat the unsatisfied portion of
that loan as charged off with zero value. In addition, if a borrower member
dies near the end of the term of a borrower loan, it is unlikely that any
further payments will be made on the Notes corresponding to such
borrower loan, because the time required for the probate of the estate may
extend beyond the initial maturity date and the final maturity date of the
Notes.
Our normal collection process for borrower loans changes in the
event of a borrower member filing bankruptcy. When we receive notice of
a bankruptcy filing, as required by law, we cease all automatic monthly
payments on the borrower loan and defer any other collection activity. The
status of the borrower loan, which the relevant lender members may view
through their InvestP2P.com accounts on the website, switches to
"Bankruptcy." We then determine an appropriate approach to the borrower
member's bankruptcy. If the proceeding is a Chapter 7 bankruptcy filing
seeking liquidation, we attempt to determine if the proceeding is a "no
asset" proceeding, based on instructions we receive from the bankruptcy
court. If the proceeding is a "no asset" proceeding, we take no further
action and assume that no recovery will be made on the borrower loan.
In all other cases, InvestP2P.com will file a proof of claim
involving the borrower member. Any decision to pursue additional relief
beyond the proof of claim in any specific matter involving a borrower
member will be entirely within our discretion and will depend on factors
such as:
if the borrower member used the proceeds of a borrower loan in a way
other than that which was described in the borrower member's loan
request;
if the bankruptcy is a Chapter 13 proceeding, whether the proceeding was
filed in good faith and if the proposed plan reflects a "best effort" on the
borrower member's behalf; and
our view of the costs and benefits to InvestP2P.com of any proposed
action.
Participation in the Funding of Loans by InvestP2P.com and its
Affiliates
We may experience situations where qualified loan requests are
not fully funded by our lender members. In such cases, the Company may
act as a lender member on the platform and directly fund portions of
certain borrower loan requests using credit facilities or other financing
sources. In order to avoid any conflicts of interest that may arise due to
the fact that the Company has access to information not available to the
general population of lender members, InvestP2P.com will not participate
in the declaration process in any way. Instead, after a lender member
funding period for a loan request expires, InvestP2P.com may at its
discretion fund part or all of the difference between the funding
commitments made by lender members and the total value of the loan
request.
In addition, our affiliates, including our executive officers,
directors and shareholders may participate as individual lender members
on the platform. In order to avoid conflicts of interest that may arise due
to the fact that our affiliates may have access to information not available
to the general population of lender members, we have adopted the
following procedures to prevent and/or detect any improper use of such
non-public information:
InvestP2P.com's corporate policies, which are distributed to all directors,
employees and contractors, prohibit any such person's use of non-public
information in their capacity as a lender member on the platform. Any
violation of this policy is grounds for immediate termination.
Security features of our platform limit access to information to only that
required for an employee or contractor to perform his or her job function.
Our internal control procedures include audit trails and audits to identify
and investigate any suspicious bidding activities.
Trading Platform
Lender members may not transfer their Notes except through the
Note trading platform operated by a registered broker-dealer to be selected
in the future. See "About the Lending Platform Description of the
Notes" for more information. This trading platform will be an Internet-
based trading platform on which lender members can offer their Notes for
sale and purchase Notes being sold by other lender members. Transactions
on the trading platform will only be for Notes previously issued to lender
members by InvestP2P.com, and will not consist of any aspect of the
initial offer and sale of Notes to lender members. On the trading platform,
lender members will be able to offer their Notes for sale at a price of their
choosing, and other lender members will have an opportunity to review
these offers, as well as the characteristics of the corresponding borrower
loan for the Notes.
All Notes traded on the trading platform will continue to be
subject to our 1.0% annual servicing fee and all other fees charged to
holders of Notes. Lender members who sell Notes on the trading platform
may also be subject to fees charged by the registered broker-dealer. This
fee will likely be equal to a specified percentage of the resale price of the
Note being sold.
InvestP2P.com is not a registered national securities exchange,
securities information processor, clearing agency, broker, dealer or
investment adviser. All securities services relating to the trading platform
will be provided by a registered broker-dealer to be selected in the future.
Neither InvestP2P.com nor the registered broker-dealer will make any
recommendations with respect to transactions on the trading platform.
There is no assurance that lender members will be able to establish a
brokerage relationship with the registered broker-dealer. Furthermore, we
cannot assure lender members that they will be able to sell Notes that they
offer for resale through the trading platform at the offered price or at any
other price, nor can we offer any assurance that the trading platform will
continue to be available to lender members.
Customer Support
We provide customer support to our borrower, co-borrower and
lender members. The experience of most of our members is entirely web-
based. Detailed information about how our platform works, as well as
information
about the fees associated with using the platform as a borrower, co-
borrower or lender member and the full text of our legal agreements are
posted on our website.
We make additional customer support available to members by
email, telephone, a live chat system and a web-based ticketing system.
Our customer support team is located at our headquarters in W. Dundee,
IL.
Historical Information about Borrower Members and Outstanding
Borrower Loans
Because of the lack of business that was conducted prior to the
date of this prospectus, there is no historical data on our loan volumes,
values, delinquencies and defaults. Therefore this is no indication of the
statistics that may obtain in the future as our volumes increase.
Financial Suitability Requirements
The Notes are highly risky and speculative. Investing in the Notes
should be considered only by persons who can afford the loss of their
entire investment.
Individual lender members may not have more than $1,000,000 in
committed bids plus the amount outstanding on their previously purchased
Notes. A corporate lender member may not have more than $1,000,000 in
committed bids plus the amount outstanding on its previously purchased
Notes.
We will seek to register the offer and sale of our Notes in all 50
U.S. states and Washington, DC. We expect that certain states will impose
minimum financial suitability standards and maximum investment limits
for lender members who are residents of those states. If this occurs, we
will set forth these requirements in a supplement to this prospectus. Under
the Lender Member Registration and Note Purchase Agreement, lender
members are required to represent and warrant that they satisfy the
applicable minimum financial suitability standards and maximum
investment limits of the state in which they reside. Lender members who
fail to satisfy any such requirements will not be permitted to purchase
Notes.
Description of the Notes, Indenture and other Material Agreements
General
The Notes will be issued in series under an indenture to be entered
into between InvestP2P.com and a qualified trustee to be selected in the
future. Each series of Notes will correspond to one borrower loan and
payments on that series will depend on payments that InvestP2P.com
receives on the corresponding borrower loan. All Notes will be U.S. dollar
denominated, fully amortizing and have a fixed rate of interest. The Notes
of each series will have a stated interest rate that is the same as the
interest rate on the corresponding borrower loan and an aggregate stated
principal amount equal to the sum of all lender member purchase commitments
for the Notes, the proceeds of which have been designated by the lender
members to facilitate the funding of the corresponding borrower loan.
Notwithstanding the foregoing, InvestP2P.com has no obligation to
make any payments on the Notes unless, and then only to the extent that,
we have received payments on the corresponding borrower loan. The
Notes will also be subject to full or partial prepayment without penalty. If
a borrower or co-borrower member fails to repay a loan, this will not be
considered a default under the terms of the Notes.
The indenture will not limit the aggregate principal amount of
Notes that InvestP2P.com can issue under the indenture, but each series of
Notes will be effectively limited to a maximum principal amount of
$50,000, which is the maximum allowable principal for a borrower loan at
this time. If in the future we change the maximum allowable principal for
borrower loans, then the maximum aggregate principal amount of Notes
per series will also increase. The aggregate principal amount of Notes of
each series will equal the aggregate amount of funds designated by lender
members to fund the corresponding borrower loan for that series. When
InvestP2P.com acts as a lender member on the platform and funds some or
all of a borrower loan, no Notes will be issued to the Company.
We will use all proceeds we receive from purchases of the Notes to
fund borrower loans, or to purchase such loans from a national lending
institution to be selected in the future, which will, if such a relationship
is established, be the originator for all borrower loans.
Maturity
Notes of each series will have an initial maturity of 12, 24, 36, 48,
or 60 months, plus 4 business days, which is four business days longer
than the term of the corresponding borrower loan. The four business days
allow us to assure the finality of the transfer of funds under the ACH rules
after we receive payments from borrower members. If there are amounts
owing to InvestP2P.com in respect of the corresponding borrower loan at
the initial maturity of a Note, the term of the Note will be automatically
extended by one year, which we refer to as the "final maturity," to allow
the holder to receive any payments that InvestP2P.com receives on the
corresponding borrower loan after the maturity of the corresponding
borrower loan. Following the final maturity of a Note, the holder of that
Note will have no rights to receive any further payments from
InvestP2P.com with respect to that Note.
Ranking
The Notes will be unsecured special, limited obligations of
InvestP2P.com, and will not be contractually senior or contractually
subordinated to any other indebtedness of the Company. InvestP2P.com
will be obligated to make payments on each Note in a series only if, and to
the extent that, the Company receives principal, interest or late payment
fees from the borrower or, if applicable, the co-borrower member on the
corresponding borrower loan. Such borrower loan payments will be
shared ratably among all holders of Notes in the series after deduction of
InvestP2P.com's servicing fees and any payments due to the Company on
portions of the borrower loan funded by the Company in its capacity as a
lender member on the platform. In the event of a bankruptcy or similar
proceeding of InvestP2P.com, the relative rights of the holder of a Note as
compared to the holders of other unsecured indebtedness of the Company
with respect to payment from the proceeds of the borrower loan
corresponding to that Note or other assets of InvestP2P.com is
uncertain. If InvestP2P.com were to become subject to a bankruptcy or
similar proceeding, the holder of a Note will have an unsecured claim
against InvestP2P.com that may or may not be limited in recovery to the
corresponding borrower loan payments.
The indenture will not contain any provisions that would limit
InvestP2P.com's ability to incur indebtedness in addition to the Notes.
Payments and Paying Agents
Subject to the limitations described below under "Limitations on
Payments," InvestP2P.com will make payments of principal and interest
on the Notes upon receiving Borrower Loan Payments (as defined below)
in respect of the corresponding borrower loan, in accordance with the
payment schedule for each Note. Each Note will have a payment schedule
providing for monthly payments over the term of the corresponding
borrower loan. Payment dates for the Notes will fall four business days
after the due date of each installment of principal and interest on the
corresponding borrower loan. The extra four business days will allow us
to ensure that there will be enough time for the transfer of funds under the
ACH rules to receive payments from borrower members.
We request an ACH payment from borrower members on the day
prior to the payment date on their borrower loan, and normally receive
payment within four business days. Borrower loan payments arriving by
ACH transaction are first deposited into our clearing account, and are not
distributed to the Pooled FBO account until the fourth day after the ACH
payment was requested and the short return window for ACH funds has
expired. Lender members can view all transactions into and out of their
sub-accounts under the Pooled FBO account by looking at their lender
member account statement on the InvestP2P.com website.
The stated interest rate on each Note will be the same as the
interest rate on the corresponding borrower loan. Interest will be
computed and will accrue on the Note in the same way as on the
corresponding borrower loan. The servicing fee described below will
reduce the effective yield on the Notes below their stated interest rate.
InvestP2P.com will be the initial paying agent for the Notes, and
will make all required payments on each Note to the lender member
account of the holder in whose name the Note is registered on the record
date for the relevant payment date. The record date for each payment date
shall be the second business day prior to the actual payment date. If a
payment date falls on a date that is not a business day, then such payment
will be made on the next succeeding business day.
"Business day" means each Monday, Tuesday, Wednesday,
Thursday and Friday that is (1) not a day on which the Automated
Clearing House system operated by the U.S. Federal Reserve Bank (the
"ACH System") is closed and (2) not a day on which banking institutions
in New York, New York are authorized or obligated to close.
Limitations on Payments
Each holder of a Note's right to receive principal and interest
payments and other amounts in respect of that Note is limited in all cases
to the holder's pro rata share of the Borrower Loan Net Payments, if any.
For each series of Notes, the corresponding "Borrower Loan"
means a loan to an individual and/or business borrower member
originated through the Company's platform on its website
www.InvestP2P.com.com or any successor website, but only to the extent
such Borrower Loan has been financed with the proceeds of the Notes.
For the purposes of clarification, a Borrower Loan shall not include any
portion of an individual and/or business borrower member loan originated
through the Company's platform that has been financed by the Company
from other sources of funding.
For each series of Notes, " Borrower Loan Net Payments" means
the amounts, if any, equal to the Borrower Loan Payments that
InvestP2P.com receives on the corresponding borrower loan net of Other
Payments and Charges.
"Borrower Loan Payments" for each series of Notes means all
amounts received by InvestP2P.com, and not reversed through the ACH
System or by virtue of checks returned unpaid due to insufficient funds or
for other reasons, in connection with the repayment of the corresponding
borrower loan, including without limitation, all payments or prepayments
of principal and interest, any late fees on borrower loans and any amounts
received by InvestP2P.com upon collection efforts with respect to the
corresponding borrower loan.
For each series of Notes, "Other Payments and Charges" means
(i) any Failed Payments Fees or fees charged to the borrower for making
payments in a manner other than as provided in the Borrower Loan, which
are received by the Company, a third-party servicer or collection agency
in respect of such Borrower Loan, and (2) attorneys' fees or any collection
fees imposed in connection with collection efforts on a delinquent
Borrower Loan by the Company, a third-party servicer or collection
agency, other than late payment fees specifically included in Borrower
Loan Payments.
The "Servicing Fee" charged by InvestP2P.com to holders of
Notes for managing borrower member repayments on the corresponding
borrower loans is an amount equal to an annualized rate, accruing daily, of
1.0% of the outstanding principal balance of the borrower loan.
The "Failed Payment Fee" is a $15 fee, or a lesser amount as
permitted by law, that is charged by InvestP2P.com when our payment
request is denied for any reason, including but not limited to, insufficient
funds in the borrower member's bank account or the closing of that bank
account.
To the extent that we do not receive the Borrower Loan Payments
that are expected on a borrower loan, no payments will be made on the
Notes corresponding to that loan, and a holder of a Note will not have any
rights against InvestP2P.com or the borrower member in respect of the
Note or the borrower loan corresponding to the Note.
Prepayments
To the extent that a borrower or co-borrower member prepays a
borrower loan, such prepayment amount will be a Borrower Loan
Payment and holders of corresponding Notes will be entitled to receive
pro rata shares of the prepayment, net of our Servicing Fee. If borrower
loans are partially prepaid, InvestP2P.com will recalculate the anticipated
amortization schedules for the Notes corresponding to those borrower
loans over the remainder of their term, and revised estimates of monthly
payments that are expected to be received over such term will be made
available to holders of those Notes.
Mandatory Redemption
Upon the occurrence of a confirmed identity fraud incident with
respect to a borrower loan, InvestP2P.com will redeem all of the Notes of
the series corresponding to such borrower loan for 100 percent of the
outstanding principal amount of such Notes. An "identity fraud incident"
means that the corresponding borrower loan was obtained as a result of
verifiable identity theft or fraud on the part of the purported borrower or
co-borrower member. We may, in our discretion, require proof of the
identity theft or fraud, such as a copy of the police report filed by the
person whose identity was wrongfully used to obtain the borrower loan.
Servicing Covenant
InvestP2P.com is obligated to use commercially reasonable efforts
to service and collect the borrower loans, in good faith, accurately and in
accordance with industry standards customary for servicing loans such as
the borrower loans. If we refer a delinquent borrower loan to a collection
agency or to our in-house collections department on the 31st day of its
delinquency, that referral shall be deemed to constitute commercially
reasonable servicing and collection efforts. Furthermore, InvestP2P.com
may, at any time, and subject to our servicing covenant, amend or waive
any term of a borrower loan, and may transfer, sell or cancel any borrower
loan that is more than 120 days delinquent without the consent of any
holder of any Notes of the series corresponding to such borrower loan. In
the event that InvestP2P.com undertakes such a modification, waiver,
transfer, sale or cancellation, the Company will notify the relevant lender
members by email, and the impact of such action will be reflected in the
lender member's account.
In servicing borrower loans we may, in our discretion, utilize
affiliated or unaffiliated third party loan servicers, collection agencies or
other agents or contractors. InvestP2P.com is obligated to use
commercially reasonable efforts to service and collect the borrower loans
in accordance with prudent industry standards for loans of the same
general type and character. Any modification or restructuring of borrower
payment terms must be done in compliance with this servicing standard,
which means that the servicer must make a reasonable and prudent
determination that any such modification is not materially adverse to the
interests of the Note holders. The modifications contemplated by this
servicing provision would be in situations, common to loan servicing
industry practices, where a reasonable forbearance or extension of time
for payment to be received would prevent a borrower from defaulting
entirely on the loan or filing for bankruptcy. From the lender member's
perspective, such modifications would only be employed in situations
where a greater loss would be avoided.
InvestP2P.com will also be obligated to use commercially
reasonable efforts to maintain backup servicing arrangements providing
for the servicing of the borrower loans.
The indenture contains no financial covenants or other covenants
limiting our operations or activities, including the incurrence of
indebtedness.
Notification Requirements
We agree in our Lender Member Registration and Note Purchase
Agreement to notify lender members within 90 days after becoming aware
that we have breached our representations and warranties under the
agreement, and to notify them that we have elected to cure the breach or
repurchase the applicable Note. Lender members are kept apprised of the
delinquency status of borrower loans by identifying delinquent loans on
the InvestP2P.com website as "Late 30+," "Late 60+," "Late 90+," and
"Defaulted." A loan is considered to have defaulted when it is more than
120 days late. Loans that are up-to-date in payments are identified as
"Current." Lender members are able to monitor the borrower loans
corresponding to their Notes, but cannot participate in or otherwise
intervene in the collection process.
In the event of default with respect to the Notes of any series, if
known to the trustee, the trustee is required to notify each Note holder
who is the subject of a default within 90 days after it occurs. The trustee
may withhold the notice if and so long as a committee of its trust officers
in good faith determines that withholding the notice is in the interest of
the holders of the Notes of such series, except for defaults caused by
InvestP2P.com's failure to make principal and interest payments when
required.
In addition, as required by Section 313(a) of the TIA, within 60
days after each May 15, beginning with the May 15 following the date of
this indenture, the trustee shall mail or transmit electronically to each
Holder of Securities a brief report dated as of such May 15 that complies
with TIA Section 313(a).
Consolidation, Merger, Sale of Assets
The indenture prohibits us from consolidating with or merging into
another business entity or conveying, transferring or leasing our properties
and assets substantially as an entirety to any business entity, unless:
the surviving or acquiring entity is a U.S. corporation, limited liability
company, partnership or trust and it expressly assumes our obligations
with respect to the outstanding Notes by executing a supplemental
indenture;
immediately after giving effect to the transaction, no default shall have
occurred or be continuing; and
we have delivered to the trustee an officers' certificate and an opinion of
counsel, each stating that the transaction, and if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, comply with the indenture and that all conditions precedent
relating to such transaction have been complied with.
Denominations, Form and Registration
Notes may be issued in denominations between $0.01 and
$50,000, at increments of $0.01. The Notes will be issued only in
registered form and only in electronic form. This means that each Note
will be stored on our Internet-based platform. Note purchasers can view a
record of their Notes and the form of the Notes online and can print copies
for their records by visiting their secure, password-protected webpage in
the "My InvestP2P.com" section of our website. We will not issue
certificates for the Notes. Lender member will be required to hold their
Notes through our electronic Note register.
The laws of some states in the United States require that certain
persons take physical delivery in definitive, certificated form, of securities
that they own. This may limit or curtail the ability of such persons to
purchase Notes. We reserve the right to issue certificated Notes only if we
determine not to have the Notes held solely in electronic form.
We and the trustee will treat the lender members in whose names
the Notes are registered as the owners thereof for the purpose of receiving
payments and for any and all other purposes whatsoever with respect to
the Notes.
Restrictions on Transfer
The Notes will not be listed on any securities exchange. All Notes
must be held by InvestP2P.com lender members. The Notes will not be
transferable except through the Note trading platform operated by a
registered broker-dealer to be selected in the future. Under the terms of
the Notes, any transfer of a Note will be wrongful unless (1) the transfer is
effected on a trading system that we approve as a resale trading system,
and (2) the Note has been presented by the registered holder to us or our
agent for registration of transfer. The registrar for the Notes, which
initially will be us, will not be obligated to recognize any purported
transfer of a Note, except a transfer through the trading platform or except
as required by applicable law or court order. There can be no assurance,
however, that a market for Notes will develop on the trading system, or
that the system will continue to operate. Therefore, lender members must
be prepared to hold their Notes to maturity. See "About the Lending
Platform" for more information.
No Sinking Fund
The Notes are fully amortizing and will not have the benefit of a
sinking fund.
Events of Default
Under the terms of the indenture, any of the following events will
constitute an event of default for a series of Notes:
failure by InvestP2P.com to make required payments on the Notes for 30
days after the applicable due date;
failure by InvestP2P.com to perform, or the breach of, any other covenant
for the benefit of the holders of the Notes of such series which continues
for 90 days after written notice from the Trustee or holders of 25 percent
of the outstanding principal amount of the debt securities of all series for
which such default exists as provided in the indenture, subject to an
additional 90 day cure period; or
specified events relating to InvestP2P.com's bankruptcy, insolvency or
reorganization.
It is not a default or event of default under the terms of the
indenture if we do not make payments when a borrower member does not
make payments on a borrower loan corresponding to a series of Notes. In
that case, we are not required to make payments on the Notes, so no
default occurs. See "Risk Factors Payments on the Notes depend
entirely on payments that InvestP2P.com receives on corresponding
borrower loans," for more information. An event of default with respect to
one series of Notes is not automatically an event of default for any other
series.
If an event of default occurs due to bankruptcy, insolvency or
reorganization as provided in the indenture then the stated principal
amount of the Notes shall become due and payable immediately without
any act by the trustee or any holder of Notes.
The holders of a majority in aggregate principal amount of the
outstanding Notes of any series, by notice to the trustee (and without
notice to any other holder of Notes), may on behalf of the holders of all
such Notes waive an existing default with respect to such Notes and its
consequences except (1) a default in the payment of amounts due in
respect of such Notes or (2) a default in respect of a provision of the
indenture that cannot be amended without the consent of each holder
affected by such waiver. When a default is waived it is deemed cured, but
no such waiver shall extend to any subsequent or other default or impair
any consequent right.
A holder of any Note of any series may not institute a suit against
us for enforcement of such holder's rights under the indenture or pursue
any other remedy with respect to the indenture or the Notes unless:
the holder gives to the trustee written notice stating that an event of
default with respect to the Notes is continuing;
the holders of at least 25 percent in aggregate principal amount of the
outstanding Notes of that series make a written request to the trustee to
pursue the remedy;
such holder or holders offer to the trustee security or indemnity
satisfactory to it against any loss, liability or expense satisfactory to the
trustee;
the trustee does not comply with the request within 60 days after receipt
of the notice, the request and the offer of security or indemnity; and
the holders of a majority in aggregate principal amount of the outstanding
Notes of that series do not give the trustee a direction inconsistent with
such request during such 60-day period.
The indenture will require us every year to deliver to the trustee a
statement as to performance of our obligations under the indenture and as
to any defaults.
Satisfaction and Discharge of the Indenture
The indenture will generally cease to be of any further effect with
respect to a series of Notes if:
all of the Notes of that series (with certain limited exceptions) have been
delivered for cancellation; or
all Notes of that series not previously delivered for cancellation have
become due and payable or will become due and payable within one year
and we have deposited with the trustee as trust funds the entire amount
sufficient to pay at maturity all of the amounts due with respect to those
Notes;
if in either case, we also pay or cause to be paid all other sums payable
under the indenture by us and deliver to the trustee an officers' certificate
and opinion of counsel stating that all conditions precedent to the
satisfaction and discharge of the indenture have been complied with.
The indenture does not contain any provisions for legal or covenant
defeasance of the Notes.
Governing Law
The indenture and the Notes will be governed by the laws of the
State of Delaware without regard to any principle of conflict of laws that
would require or permit the application of the laws of any other
jurisdiction.
Information Concerning the Trustee
InvestP2P.com will select a qualified trustee to serve as the trustee
under the indenture. If and when the trustee becomes a creditor of ours,
the trustee will be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against us. The trustee and its affiliates
will be permitted to engage in other transactions; however, if they acquire
any conflicting interest, the conflict must be eliminated or the trustee must
resign.
Lender Member Registration and Note Purchase Agreement
When a lender member registers on the platform, he or she enters
into a Lender Member Registration and Note Purchase Agreement with us
that governs the lender member's activities on the platform and purchases
of Notes from InvestP2P.com. Under the Agreement, we provide the
lender member the opportunity to review borrower loan requests posted
on the platform, to purchase Notes and to instruct us to use the proceeds
from the sale of each Note to fund a specific borrower loan that the lender
member has designated.
In order to purchase Notes under the Agreement, the lender
member must commit to purchase a Note prior to the origination of the
corresponding borrower loan. The commitment to purchase a Note is
evidenced by the lender member submitting an offer on a borrower loan
request posting. At the time the lender member commits to purchase a
Note, the lender member must have sufficient funds in his or her
InvestP2P.com account to complete the purchase, and the lender member
will not have access to those funds after making the purchase commitment
until such time as the loan request expires or is canceled. Once the lender
member makes a purchase commitment on a borrower loan, it is
irrevocable. If the borrower loan is not originated, we will inform the
lender member and release him or her from the purchase commitment.
When lender members are released from their previous purchase
commitments, their funds will again be available for commitment on other
borrower loans, or for withdrawal from their InvestP2P.com accounts.
The agreement describes our limited obligation to redeem Notes in
cases of verifiable identity fraud, which is described above. The lender
member agrees that in such circumstances, the lender member will have
no rights with respect to any such Notes except the crediting of the unpaid
principal amount of the Notes to the lender member's account.
The lender member agrees that he or she has no right to make any
attempt, directly or through any third party, to take any action to collect
from the borrower or co-borrower members on their Notes or on the
corresponding borrower loans.
The lender member acknowledges that the Notes are intended to
be debt securities issued by InvestP2P.com with original issue discount
(OID) for U.S. federal income tax purposes and agrees not to take any
position inconsistent with that treatment of the Notes for tax, accounting,
or other purposes, unless required by law. The lender member also
acknowledges that the Notes will be subject to the OID rules of the
Internal Revenue Code of 1986, as amended, as described under "Material
U.S. Federal Income Tax Considerations Taxation of Payments on the
Notes."
Representations and Warranties
The Agreement describes the limitations on payments on the
Notes, and the lender member acknowledges that:
payment on the Notes, if any, depends entirely on the receipt of payments
by InvestP2P.com in respect of the corresponding borrower loan;
InvestP2P.com does not warrant or guarantee in any manner that the
lender member will receive all or any portion of the principal or interest
he or she expects to receive on any Note or realize any particular or
expected rate of return;
the amount received on a lender member's Note, if any, is specifically
restricted to payments made by InvestP2P.com equal to the lender
member's pro rata share of the payments made by the borrower or co-
borrower member under the corresponding borrower loan, net of servicing
fees;
we do not make any representations as to a borrower or co-borrower
member's ability to pay and do not act as a guarantor of any
corresponding borrower loan payment or payments by any borrower
member;
InvestP2P.com is not acting as their agent, fiduciary, or in any other
capacity that would create such a relationship and that InvestP2P.com
does not assume an advisory or fiduciary responsibility in their favor in
connection with the purchase and sale of Notes.
Under the Agreement, the lender member represents and warrants to
InvestP2P.com that:
the lender member has not made a decision in connection with any loan
requests on our platform on any prohibited basis set forth in the Equal
Credit Opportunity Act and Regulation B or any applicable state or local
laws, regulations, rules or ordinances concerning credit discrimination;
the lender member meets minimum financial suitability standards and
maximum investment limits established for the lending platform and for
the Note trading platform (if one is established), as then in effect, or as
set forth in a supplement to this prospectus for residents of the state in
which the lender member resides and agrees to provide us with any additional
documentation as we may require to verify such compliance;
the lender member has received the prospectus and the indenture,
including the form Note;
the lender member has the legal competence and capacity, or corporate
power and authority, to execute and perform the Lender Member
Registration and Note Purchase Agreement and that it has been duly
authorized, executed and delivered;
the lender member has complied in all material respects with applicable
federal, state and local laws in connection with the lender member's
execution and performance of his or her obligations under the Lender
Member Registration and Note Purchase Agreement;
if a legal entity, that the execution and performance of the Lender Member
Registration and Note Purchase Agreement does not violate any provision
of its charter documents; and if a legal entity, that the execution and
performance of the Lender Member Registration and Note Purchase
Agreement will not constitute or result in a breach or default under, or
conflict with, any legal requirement or any agreement to which the lender
member is bound.
Under the agreement, InvestP2P.com represents and warrants to the lender
member that:
we have complied in all material respects with applicable federal, state
and local laws in connection with the offer and sale of the Note;
the Note has been duly authorized and, following payment of the purchase
price by the lender member and electronic execution, authentication and
delivery, the Note will constitute a valid and binding obligation of
InvestP2P.com enforceable against InvestP2P.com in accordance with its
terms, except as the enforcement of the Note may be limited by applicable
bankruptcy, insolvency or similar laws;
InvestP2P.com has made commercially reasonable efforts to authenticate
and verify the identity of the borrower and, if applicable, the co-borrower
member obligated on the borrower loan that corresponds to the Note.
We also represent and warrant to the lender member that in the
event of a material default under a Note that is the result of verifiable
identity theft of the named borrower or co-borrower member's identity,
determined in our sole discretion, that we will repurchase the Note by
crediting the lender member's InvestP2P.com account with the remaining
unpaid principal balance of the Note. The lender member agrees that in
such circumstances the lender member will have no rights with respect to
any such Notes except the crediting of the remaining principal balance of
the Note to the lender member's account.
In addition, we represent and warrant to the lender member, as of the
date of the Agreement and the date a commitment to purchase a Note is
made, that:
we are a duly organized and validly existing corporation in good standing
under the laws of Delaware and have corporate power to enter into and
perform our obligations under the agreement;
the agreement has been duly authorized, executed and delivered by
InvestP2P.com;
the Indenture has been duly authorized by InvestP2P.com and qualified
under the Trust Indenture Act of 1939 and constitutes a valid and binding
agreement of InvestP2P.com, enforceable against InvestP2P.com in
accordance with its terms, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency or similar laws.
Remedies
If we breach any of our representations and warranties and such a
breach materially and adversely affects a lender member's interest in a
Note, we agree to:
cure the breach, if the breach is susceptible to cure,
repurchase the Note, or
indemnify and hold the lender member harmless against all losses
(including losses resulting from the nonpayment of the Note), damages,
expenses, legal fees, costs and judgments resulting from any claim,
demand or defense arising as a result of the breach.
We will determine, in our sole discretion, if a breach is susceptible
to cure, whether we will cure such breach, repurchase the Note or
indemnify the lender member with respect to the Note. If we elect to
repurchase a Note, we
will pay the lender member an amount equal to the remaining outstanding
principal balance of the Note as of the date of repurchase. Upon any
repurchase, the Note is transferred and assigned to InvestP2P.com, without
recourse, and we are authorized to execute any endorsements or
assignments necessary to effectuate the transfer and assignment of the
Note on behalf of the lender member.
We will notify a lender member within 90 days after we become
aware that we have breached our representations and warranties under the
Agreement, at which time we will notify the lender member if we have
elected to cure the breach or repurchase the Note.
We are not obligated to repurchase a Note from a lender member if
his or her investment is not realized in whole or in part due to fraud (other
than verifiable identity theft) in connection with a loan request posting or
due to false or inaccurate statements or omissions of fact in a borrower
member's posting, whether in credit data, personal or professional
affiliations, borrower and co-borrower representations, user
recommendations or similar indicia of borrower member intent and ability
to repay the corresponding borrower loans.
Servicing
The Agreement provides that we will use commercially reasonable
efforts to service and collect the borrower loans in accordance with
industry standards customary for loans of the same general type and
character as the InvestP2P.com borrower loans. Referral of a delinquent
borrower loan to a collection agency, or the Company's in-house
collections department, on the 31st day of its delinquency shall be deemed
to constitute commercially reasonable servicing and collection efforts. The
Company and any third-party servicer of a borrower loan shall have the
right, at any time and from time to time and subject to our servicing
standard, to change the stated maturity of the principal of, or any
installment of principal or interest on, any borrower loan, or reduce the
principal amount thereof or the rate of interest thereon or change the place
and manner of making payments on a borrower loan, or amend or waive
any term of such borrower loan, or write off and cancel any borrower loan
that is more than 120 days delinquent without the consent of any holder of
Notes corresponding to such borrower loan.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the material U.S. federal
income tax considerations generally applicable to our lender members
who purchase Notes. This discussion is based on the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder ("Treasury Regulations"), administrative
pronouncements of the U.S. Internal Revenue Service ("IRS") and judicial
decisions, all as currently in effect and all of which are subject to change
and to different interpretations. Changes to any of the foregoing
authorities could apply on a retroactive basis, and could affect the U.S.
federal income tax consequences described below.
This discussion does not address all of the U.S. federal income tax
considerations that may be relevant to a particular lender member's
circumstances, and does not discuss any aspect of U.S. federal tax law
other than income taxation or any state, local or non-U.S. tax
consequences of the purchase, ownership and disposition of the
Notes. This discussion applies only to lender members who hold the Notes
as capital assets within the meaning of the Code (generally, property held
for investment). This discussion does not address U.S. federal income tax
considerations applicable to lender members that may be subject to special
tax rules, such as:
securities dealers or brokers, or traders in securities electing mark-to-
market treatment;
banks, thrifts, or other financial institutions;
insurance companies;
regulated investment companies or real estate investment trusts;
tax-exempt organizations;
persons holding Notes as part of a "straddle," "hedge," "synthetic
security" or "conversion transaction" for U.S. federal income tax
purposes, or as part of some other integrated investment;
partnerships or other pass-through entities;
persons subject to the alternative minimum tax;
certain former citizens or residents of the United States;
non-U.S. Holders (as defined below); or
"U.S. Holders" (as defined below) whose functional currency is not the
U.S. dollar.
As used herein, a "U.S. Holder" is a beneficial owner of Notes that
is, for U.S. federal income tax purposes, (i) an individual citizen or
resident of the United States, (ii) a corporation (or any other entity
treated as a corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or
the District of Columbia, (iii) an estate whose income is subject to U.S.
federal income tax regardless of its source, or (iv) a trust if (A) a United
States court has the authority to exercise primary supervision over the
administration of the trust and one or more U.S. persons (as defined under
the Code) are authorized to control all substantial decisions of the trust or
(B) it has a valid election in place to be treated as a U.S. person. A "Non-
U.S. Holder" is any beneficial owner of a Note that, for U.S. federal
income tax purposes, is not a U.S. Holder and that is not a partnership (or
other entity treated as a partnership for U.S. federal income tax purposes).
If a partnership (or other entity treated as a partnership for U.S.
federal income tax purposes) holds Notes, the U.S. federal income tax
treatment of a partner will generally depend on the status of the partner
and the activities of the partnership. A partnership holding Notes, and
partners in such a partnership, should consult their own tax advisors with
regard to the U.S. federal income tax consequences of the purchase,
ownership and disposition of the Notes by the partnership.
THIS DISCUSSION OF THE MATERIAL U.S. FEDERAL
INCOME TAX CONSIDERATIONS OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES IS NOT
INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE,
LEGAL OR TAX ADVICE TO ANY PARTICULAR
PERSON. ACCORDINGLY, ALL PROSPECTIVE LENDER
MEMBERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE,
LOCAL AND NON-U.S. TAX CONSEQUENCES RELATING TO THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE
NOTES BASED ON THEIR PARTICULAR CIRCUMSTANCES.
Tax Classification of the Notes
No statutory provisions, regulations, published rulings, or judicial
decisions directly address the question of how the Notes, or instruments
similar to the Notes, should be characterized for U.S. federal income tax
purposes. While the matter is not free from doubt, InvestP2P.com intends
to treat the Notes as debt securities of InvestP2P.com that have original
issue discount, or OID, for U.S. federal income tax purposes. Where
required, InvestP2P.com intends to file information returns with the IRS in
accordance with such treatment, unless there is any change or clarification
in the law, by regulation or otherwise, that requires a differing
characterization of the Notes. The IRS is not bound by InvestP2P.com's
characterization of the Notes, and the IRS or a court could take differing
positions on the proper characterization of the Notes. For example, the
IRS could determine that, in substance, each holder of a Note owns a
proportionate interest in the corresponding borrower loan for U.S. federal
income tax purposes, or the IRS could treat the Notes as financial
instruments other than debt securities, such as, for example, equity
interests or derivative financial instruments.
Any differing characterization could significantly affect the
amount, timing, and character of income, gain, or loss recognized in
respect of a Note. For example, if the Notes are treated as equity of
InvestP2P.com, (i) the Company would be subject to U.S. federal income
tax on income, including interest, accrued on the borrower loans but
would not be entitled to deduct interest or OID on the Notes, and
(ii) payments on the Notes would be treated by the holder for U.S. federal
income tax purposes as dividends (that may be ineligible for reduced rates
of U.S. federal income taxation or the dividends-received deduction) to
the extent of InvestP2P.com's earnings and profits as computed for U.S.
federal income tax purposes. Such a characterization may significantly
reduce the amount available to pay interest on the Notes.
Accordingly, prospective purchasers of Notes should consult their
own tax advisors regarding the U.S. federal, state, local and non-U.S. tax
consequences of the purchase, ownership, and disposition of the Notes,
including any potential differing treatments of such Notes.
The following discussion is based on the assumption that each
Note will be treated as a debt security of InvestP2P.com that will have
OID for U.S. federal income tax purposes.
Taxation of Payments on the Notes
Holders of Notes will be required to include the OID in income as
ordinary interest income for U.S. federal income tax purposes as it accrues
(which may be in advance of interest payments being made on the Notes),
regardless of the holder's regular tax accounting method.
A U.S. Holder of a Note will be required to include the OID in
income as ordinary interest income for U.S. federal income tax purposes
as it accrues under a constant yield method, regardless of such U.S.
Holder's regular method of tax accounting. If a Note is paid in accordance
with its payment schedule, the amount of the OID includible in income by
a U.S. Holder is anticipated to be based on the yield of the Note
determined net of the 1.0% servicing fee, as described below, which yield
will be lower than the stated interest rate on the Note. As a result, the
holder will generally be required to include an amount of OID in income
that is less than the amount of stated interest paid on the Note. On the
other hand, if a payment on a Note is not made in accordance with such
payment schedule, for example because the borrower member did not
make timely payment in respect of the corresponding borrower loan, a
U.S. Holder will be required to include such amount of OID in taxable
income as interest even though such interest has not been paid.
The Treasury Regulations governing OID provide special rules for
determining the amount and accrual of OID for debt instruments that
provide for one or more alternative payment schedules applicable upon
the occurrence of contingencies. If the timing and amounts of the
payments that comprise each payment schedule are known as of the issue
date, and based on all the facts and circumstances as of the issue date, a
single payment schedule for a debt instrument, including the stated
payment schedule, is significantly more likely than not to occur, the
amount and accrual of OID is determined based on that payment
schedule. In addition, under the applicable Treasury Regulations, remote
and/or incidental contingencies generally may be ignored. A contingency
relating to the amount of a payment is incidental if, under all reasonably
expected market conditions, the potential amount of the payment is
insignificant relative to the total expected amount of the remaining
payments on the debt instrument. A contingency relating to the timing of a
payment is incidental if, under all reasonably expected market conditions,
the potential difference in the timing of the payment is insignificant.
The Notes provide for one or more alternative payment schedules
because InvestP2P.com is obligated to make payments on a Note only to
the extent that InvestP2P.com receives payments on the corresponding
borrower loan. The payment schedule for each Note provides for
payments of principal and interest (net of the 1.0% servicing fee) on the
Note in accordance with the payment schedule for the corresponding
borrower loan. In addition to scheduled payments, InvestP2P.com will
prepay a Note to the extent that a borrower member prepays the borrower
loan corresponding to the Note, and late fees collected on the borrower
loan corresponding to a Note will be paid to the holders of the
Note. Notwithstanding such contingencies, InvestP2P.com has determined
to use the payment schedule of a Note to determine the amount and
accrual of OID on the Note because InvestP2P.com believes that a Note is
significantly more likely than not to be paid in accordance with such
payment schedule and/or the likelihood of nonpayment, prepayment, or
late payment by the borrower member on the borrower loan corresponding
to such Note will be remote or incidental. If in the future InvestP2P.com
determines that the previous sentence does not apply to a Note,
InvestP2P.com anticipates that it will be required to determine the amount
and accrual of OID for such Note pursuant to the rules applicable to
contingent payment debt instruments, which are described below, and
shall so notify U.S. Holders of the Note.
InvestP2P.com's determination is not binding on the IRS. If the
IRS determines that the Notes are "contingent payment debt instruments"
due to the contingencies described above (or in the future, if
InvestP2P.com so concludes with respect to a series of Notes), the Notes
will be subject to special rules applicable to contingent payment debt
instruments. Such rules generally require a holder (i) to accrue interest
income based on a projected payment schedule and comparable yield,
which may be higher or lower than the stated interest rate on the Notes,
and (ii) treat as ordinary income, rather than capital gain, any gain
recognized on the sale, exchange, or retirement of the debt
instrument. This discussion assumes that the Notes are not subject to the
contingent payment debt instrument rules.
The OID on a Note will equal the excess of the Note's "stated
redemption price at maturity" over its "issue price." The stated
redemption price at maturity of a Note includes all payments of principal
and stated interest on the Note (net of the 1.0% servicing fee) under the
payment schedule of the Note. The issue price of the Notes will equal the
principal amount of the Notes.
The amount of OID includible in a U.S. Holder's income for a
taxable year is the sum of the "daily portions" of OID with respect to the
Note for each day during the taxable year in which the holder held the
Note. The daily portion of OID is determined by allocating to each day of
any accrual period within a taxable year a pro rata portion of an amount
equal to the product of such Note's adjusted issue price at the beginning of
the accrual period and its yield to maturity (properly adjusted for the
length of the period). InvestP2P.com intends to use 30-day accrual
periods. The adjusted issue price of a Note at the beginning of any accrual
period should be its issue price, increased by the aggregate amount of OID
previously accrued with respect to the Note, and decreased by any
payments of principal and interest previously made on the Note (net of the
1.0% servicing fee). A Note's yield to maturity should be the discount rate
that, when used to compute the present value of all payments of principal
and interest to be made on the Note (net of the 1.0% servicing fee) under
the payment schedule of the Note, produces an amount equal to the issue
price of such note.
Cash payments of interest and principal (net of the 1.0% servicing
fee) under the payment schedule on the Notes will not be separately
included in income, but rather will be treated first as payments of
previously accrued but unpaid OID and then as payments of principal.
Sale, Retirement or Other Taxable Disposition of Notes
Upon the sale, retirement or other taxable disposition of a Note, a
U.S. Holder generally will recognize gain or loss equal to the difference,
if any, between the amount realized upon the sale, retirement or other
taxable disposition and the U.S. Holder's adjusted tax basis in the Note. In
general, the U.S. Holder's adjusted tax basis of the Note will equal the
U.S. Holder's cost for the Note, increased by the OID and market discount
previously included in gross income by the holder, as discussed below,
and reduced by any payments previously received by the holder in respect
of the Note.
Except as described below with respect to any Note acquired at a
market discount or, as discussed above, treated as a contingent payment
debt instrument, such gain or loss generally will be capital gain or loss and
will be long-term capital gain or loss if at the time of sale, retirement or
other taxable disposition, such Note has been held for more than one
year. Under current U.S. federal income tax law (presently effective for
taxable years beginning before January 1, 2011), certain non-corporate
U.S. Holders, including individuals, are eligible for preferential rates of
U.S. federal income taxation in respect of long-term capital gains. The
deduct-ability of capital losses is subject to limitations under the Code.
Prepayments
As discussed above, InvestP2P.com will prepay a Note to the
extent that a borrower member prepays the borrower loan corresponding
to the Note. If InvestP2P.com prepays a Note in full, the Note will be
treated as retired, and, as described above, a U.S. Holder generally will
have gain or loss equal to the difference, if any, between the amount
realized upon the retirement and the U.S. Holder's adjusted tax basis in
the Note. If InvestP2P.com prepays a Note in part, a portion of the Note
will be treated as retired. Generally, for purposes of determining (i) the
gain or loss attributable to the portion of the Note retired and (ii) the OID
accruals on the portion of the Note remaining outstanding, the adjusted
issue price, holder's adjusted tax basis, and the accrued but unpaid OID of
the Note, determined immediately before the prepayment, will be
allocated between the two portions of the Note based on the portion of the
Note that is treated as retired. The yield to maturity of a Note is not
affected by a partial prepayment.
Market Discount
If a U.S. Holder purchases a Note on the trading platform for an
amount that is less than the adjusted issue price of the Note at the time of
purchase, the amount of the difference will be treated as "market
discount" for U.S. federal income tax purposes, unless that difference is
less than a specified de minimis amount. Under the market discount rules,
a U.S. Holder generally will be required to treat any principal payments
received in respect of the Note, and any gain derived from the sale,
retirement or other disposition of the Note, as ordinary income to the
extent of the market discount that has accrued on the Note but that has not
previously been included in gross income by the U.S. Holder. Such
market discount will accrue on the Note on a ratable basis over the
remaining term of the Note unless the U.S. Holder elects to accrue market
discount on a constant yield basis. In addition, a U.S. Holder may be
required to defer until the maturity of the Note, or its earlier disposition
in a taxable transaction, the deduction of all or a portion of any interest
expense incurred on indebtedness incurred or continued to purchase or
carry such Note.
A U.S. Holder may elect to currently include market discount in
gross income as it accrues, under either a ratable or constant yield method,
in which case the rules described in the prior paragraph regarding
characterization of payments and gain as ordinary income and the deferral
of interest deductions will not apply. An election to currently include
market discount in gross income, once made, applies to all market
discount obligations acquired by the U.S. Holder on or after the first
taxable year to which the election applies and may not be revoked without
the consent of the IRS. Lender members should consult their own tax
advisors before making this election.
Acquisition Premium
If a U.S. Holder purchases a Note on the trading platform for an
amount greater than the Note's adjusted issue price but less than the sum
of all amounts payable on the Note after the purchase date, the Note will
be treated as acquired at an acquisition premium. For a Note acquired with
an acquisition premium, the amount of OID that the U.S. Holder must
include in gross income with respect to the Note for any taxable year will
be reduced by the portion of the acquisition premium properly allocable to
such taxable year.
If a U.S. Holder purchases a Note on the trading platform for an
amount in excess of the sum of all amounts payable on the Note after the
purchase date, the U.S. Holder will not be required to include OID in
income with respect to the Note.
Late Payments
As discussed above, late fees collected on InvestP2P.com borrower
loans corresponding to the Notes will be paid to the holders of the
Notes. InvestP2P.com anticipates that any late fees paid will be
insignificant relative to the total expected amount of the remaining
payments on the Note. In such case, any late fees paid to a U.S. Holder of
Notes should be taxable as ordinary income at the time such fees are paid
or accrued in accordance with the U.S. Holder's regular method of
accounting for U.S. federal income tax purposes.
Nonpayment of Borrower Loans Corresponding to the Notes
Automatic Extension
In the event that InvestP2P.com does not make scheduled
payments on a Note as a result of nonpayment by a borrower member on
the borrower loan corresponding to the Note, a U.S. Holder must continue
to accrue and include OID on a Note in taxable income until the initial
maturity date or, in the case of an automatic extension, the final maturity
date, except as described below. Solely for purposes of the OID rules, the
Note may be treated as retired and reissued on the scheduled payment date
for an amount equal to the Note's adjusted issue price on that date. As a
result of such reissuance, the amount and accrual of OID on the Note may
change. At the time of the deemed reissuance, due to nonpayment by the
borrower member, InvestP2P.com may not be able to conclude that it is
significantly more likely than not that the Note will be paid in accordance
with one payment schedule and/or that the likelihood of future
nonpayment, prepayment, or late payment by the borrower member on the
borrower loan corresponding to such Note will be remote or
incidental. Accordingly, the Note may become subject to the contingent
payment debt instrument rules. In addition, in the event that a Note's
maturity date is automatically extended because amounts remain due and
payable on the initial maturity date by the borrower member on the
borrower loan corresponding to the Note, the Note likely will be treated as
reissued and become subject to the contingent payment debt instrument
rules. As discussed above, contingent payment debt instruments are
subject to special rules. If InvestP2P.com determines that a Note is subject
to the contingent payment debt instrument rules as a result of such a
reissuance, it will notify the U.S. Holders and provide the projected
payment schedule and comparable yield.
If collection on a Note becomes doubtful, a U.S. Holder may be
able to stop accruing OID on the Note. Under current IRS guidance, it is
not clear whether a U.S. Holder may stop accruing OID if scheduled
payments on a Note are not made. U.S. Holders should consult their own
tax advisors regarding the accrual and inclusion of OID in income when
collection on a Note becomes doubtful.
Losses as a Result of Worthlessness
In the event that a Note becomes wholly worthless, a non-
corporate U.S. Holder who did not acquire the Note as part of the holder's
trade or business generally should be entitled to deduct the holder's
adjusted tax basis in the Note as a short-term capital loss in the taxable
year the Note becomes wholly worthless. The portion of the U.S. Holder's
adjusted tax basis attributable to accrued but unpaid OID may be
deductible as an ordinary loss, although such treatment is not entirely free
from doubt. Under Section 166 of the Code, corporate U.S. Holders and
other U.S. Holders that acquired Notes as part of a trade or business
generally are entitled to deduct as an ordinary loss any loss sustained
during the taxable year on account of a Note becoming wholly or partially
worthless. U.S. Holders should consult their own tax advisors regarding
the character and timing of losses attributable to Notes that become
worthless in whole or in part.
Backup Withholding and Information Reporting
In general, InvestP2P.com will have to report to non-corporate
holders of the Notes and the IRS, under applicable information reporting
requirements, payments of principal and interest, the accrual of OID, and
payments with respect to proceeds from a sale, retirement or other taxable
disposition of a Note. In addition, a non-corporate U.S. Holder may be
subject to backup withholding (currently set at a 28% rate) on such
payments if the U.S. Holder (i) fails to provide an accurate taxpayer
identification number; (ii) has been notified by the IRS of a failure to
report all interest or dividends required to be shown on its U.S. federal
income tax returns; or (iii) in certain circumstances, fails to comply with
applicable certification requirements or otherwise establish an exemption
from backup withholding.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against a U.S. holder's U.S. federal income
tax liability, provided that certain required information is furnished to the
IRS. U.S. Holders should consult their tax advisors regarding the
application of information reporting and backup withholding rules in their
particular situations, the availability of relevant exemptions, and the
procedure for obtaining such exemptions, if applicable.
BUSINESS
Overview
InvestP2P.com, Inc. is the operator of an Internet-based peer-to-
peer lending platform. The platform is described in more detail in this
prospectus under the section titled "About the Lending Platform." Our
platform provides a number of benefits to our borrower members. We
believe the key features of the InvestP2P.com experience are the
following:
More loans available to start-ups than those available from traditional
banks;
24-hour online availability to initiate requests for loans;
Convenient, electronic payment processing; and
Amortizing, fixed rate loans, which represent a more responsible way for
consumer and businesses to borrow than revolving credit facilities.
Business Strengths
We believe that the following business strengths differentiate us
from competitors and are key to our success:
New business means growth. We believe that our platform will attract
borrowers with high credit scores, but it was also developed for use by
those with poor or no credit scores. We provide these borrowers with a
new credit channel and we equip them with tools, such as the co-borrower
feature, to enhance their loan requests.
Information verification options. Our MVP Verification service allows
borrower members, if they so choose, to undergo a verification process
regarding their employment, financial and other information that is not
currently available on other peer-to-peer lending platforms. Such
additional verification is another way for borrower members to draw
interest to their loan requests from our lender members.
More opportunity and greater confidence. Because we allow borrowers
from across the credit spectrum to post loan requests on the platform, we
are providing our lender members with an opportunity to diversify their
investment by purchasing Notes with varying risk and return
characteristics. Co-borrower and MVP Verification loans should also
provide these lender members with greater confidence (though no
guarantee) that loans will be repaid, and may help reduce delinquency and
default rates in comparison to some of our competitors.
Corporate History
United Power and Media, Inc. was incorporated in Delaware on
September 11, 2009. Our headquarters is located at 510 Market Loop,
Suite 102, W. Dundee, IL 60118, and our telephone number is (847) 586-
3880.
Marketing
Our marketing efforts are designed to attract members to our
website, to have them register as borrower or lender members and to have
them utilize the platform for borrowing money and investing in Notes. We
believe that
there are significant opportunities to increase the number of members who
use our platform through additional marketing initiatives. We employ a
combination of paid and unpaid marketing and public relations sources to
build the InvestP2P.com brand and the visibility of our platform. We are
constantly seeking new methods to reach more potential InvestP2P.com
members.
We attract members in a variety of ways, including offline and
online advertising, search engine optimization, online social media tools
and word-of-mouth referrals. We have been featured in a variety of media
outlets, including online and print media. We have also participated in
interviews and trade events to promote InvestP2P.com.
We continuously measure the conversion rate at which visitors to
our website become InvestP2P.com members. We test graphics, layout and
other design alternatives in order to improve this conversion rate. We
carefully analyze visitor website usage to understand and overcome
barriers to conversion. We also seek to respond to member needs
whenever possible, and adjust the website accordingly to ensure
maximum ease of use.
Technology
The proprietary application software that makes up
InvestP2P.com's web platform was designed by and is wholly owned by
InvestP2P.com, Inc. We will lease all of the hardware deployed in support
of our platform. We will continuously monitor the performance and
availability of our platform.
We will in the future enter into a back-up servicing agreement with
a loan servicing company who is willing and able to transition servicing
responsibilities in the event we can no longer do so. The third party will
be a financial services company that has extensive experience and
knowledge entering into successor loan servicing agreements. The third
party will provide monthly investor reports on our loan servicing activity
that will be available to all registered members.
Engineering
We have made substantial investment in software and website
development and we expect to increase the level of this investment as part
of our strategy to continually improve the InvestP2P.com platform. In
addition to developing new products and features and maintaining active
online deployment of our platform, our engineering team also performs
technical competitive analysis as well as systematic product usability
testing.
Competition
The market for online peer-to-peer lending is competitive and
rapidly evolving. We believe the following are the principal competitive
factors in the peer-to-peer lending market:
costs to users;
website attractiveness;
user experience, including borrower loan funding rates and lender member
returns;
branding; and
ease of use.
Our direct competitors in the peer-to-peer lending sector include
Lending Club, Loanio, and Prosper. There are also a number of other peer-
to-peer finance companies that utilize different business models that have
entered the market, including Virgin Money and Pertuity Direct. We also
face competition from more traditional banking and financial institutions,
such as Citibank, Wells Fargo, JP Morgan Chase, and Bank of America, as
well as smaller independent lending operators. In addition, pay-day
lending, merchant cash advances and other similar products are viewed as
other forms of competition.
There is also the possibility that a major web property or
technology company such as eBay, Google, Yahoo! or Microsoft could
enter the peer-to-peer lending space by building its own platform or
acquiring an existing competitor. These companies may have significantly
greater financial, technical, marketing and other resources than we do and
may be able to devote greater resources to the development, promotion,
sale and support of their Internet-based platforms. These potential
competitors may be in a stronger position to respond quickly to new
technologies and may be able to undertake more extensive marketing
campaigns. These potential competitors may have more extensive
potential borrower bases than we do. In addition, these potential
competitors may have longer operating histories and greater name
recognition than we do. Moreover, if one or more of our competitors were
to merge or partner with another of our competitors or a new market
entrant, the change in the competitive landscape could adversely affect
our ability to compete effectively.
Intellectual Property
Our intellectual property rights are important to our business. We
rely on a combination of copyright, trade secret, trademark, patent and
other rights, as well as confidentiality procedures and contractual
provisions to protect our proprietary technology, processes and other
intellectual property. We have filed a patent application in respect of our
system.
Although the protection afforded by copyright, trade secret,
trademark and patent law, written agreements and common law may
provide some advantages, we believe that the following factors help us to
maintain a competitive advantage:
the technological skills of our software and website development
personnel;
frequent enhancements to our platform;
high levels of member satisfaction; and
our unique features and services available to our members, such as co-
borrower loans and MVP Verification.
Our competitors may develop products that are similar to our
technology, and our legal agreements may be copied directly from our
website by others. We enter into confidentiality and other written
agreements with our employees, consultants and other third-party partners
and service providers, and through these and other written agreements, we
attempt to control access to and distribution of our software,
documentation and other proprietary technology and information. Despite
our efforts to protect our proprietary rights, third parties may, in an
authorized or unauthorized manner, attempt to use, copy or otherwise
obtain and market or distribute our intellectual property rights or
technology or otherwise develop a product with the same functionality as
our own. Policing all unauthorized use of our intellectual property rights is
nearly impossible. Therefore, we cannot be certain that the steps we have
taken or will take in the future will prevent misappropriations of our
technology or intellectual property rights.
We have built our own software, and also rely on the software of
certain third parties, to process electronic cash movements, record book
entries and calculate cash balances in our members' accounts. If we were
to lose the right to use any of this third-party software or if their or our
software malfunctions, our ability to process and record payments could
be impaired until we can find another service provider or repair the
software then in use.
Personnel
As of October 1, 2009, we had no staff members. All business
functions are handled by the founders Wayne and Mark Kanter
Facilities
Our corporate headquarters, including our principal administrative,
marketing, and customer service functions, is located in W. Dundee, IL,
where we occupy an office suite. We believe that our existing facilities
are adequate for our current needs, but expect that as we grow and add
employees to our team and new infrastructure to our company that we will
be able to acquire additional office space on commercially reasonable
terms.
Legal Proceedings
We are not currently subject to any material legal proceedings.
However, one of our competitors, Prosper Marketplace, is currently facing
a class-action lawsuit for its alleged violation of federal and state
securities laws, and in November 2008 reached settlements with the SEC
and the North American Securities Administrators Association (NASAA)
regarding its sales of unregistered securities between January 2006 and
October 2008. We believe the possibility is remote that we will become
subject to similar actions in the future, including with regard to the SEC,
NASAA or potential class action lawsuits brought by our lender members.
If any action is taken against us or if suits are brought, we may be subject
to fines in amounts that cannot be determined at this time, and/or we may
have to rescind our sales of promissory notes to lender members in full or
compensate them for losses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our
financial statements and the related notes elsewhere in this
prospectus. This discussion contains forward-looking statements that
involve risks and uncertainties. Actual results and the timing of events
may differ materially from those contained in these forward-looking
statements due to a number of factors, including but not limited to those
discussed in the section entitled "Risk Factors" and elsewhere in this
prospectus.
Overview
InvestP2P.com operates a peer-to-peer lending platform where
individual and/or business borrower members can borrow money and
individual or corporate lender members can purchase Notes, the proceeds
of which enable the funding of designated loans to our borrower members.
When borrower members register on the platform and post a loan request,
they may be issued a InvestP2P.com credit grade based on a credit score
obtained for them from Experian, a credit reporting company. Loan
requests, if approved by InvestP2P.com, are posted on the website, and
may contain the borrower's credit grade and other credit summary data,
certain self-reported financial information and an indication of whether or
not the borrower has purchased our MVP Verification service or has a co-
borrower on their loan. Borrower loans are currently originated by
InvestP2P.com through the platform. In the event that we establish a
relationship with a national lending institution in the future, the borrower
loans will then be originated by the lending institution, and subsequently
sold and assigned to InvestP2P.com, without recourse to the lending
institution.
Lender members are able to access the InvestP2P.com website to
deposit funds electronically into a InvestP2P.com account, and then make
a "declaration" on loan postings by indicating the dollar amount they are
willing to commit to the loan and the minimum interest rate they are
willing to receive. By offering on loan postings, lender members are
committing to purchase a Note from InvestP2P.com that is equal in
principal amount to the dollar value of their bid.
Once funded, the borrower must request funds as needed from the
lender members of the Note. The lender members will vote on the
requisition and must have the necessary, previously disclosed, percentage
of affirmative votes in order for the requisition to be allowed. Once
approved, said funds will be sent to end user.
United Power and Media, Inc. was incorporated in Delaware in
September 2009. As of the date of this prospectus, the company has been
financed primarily with working capital provided by its Co-Founders
Mark Kanter and Wayne Kanter.
We have no operating history and will incur net losses. We will
earn revenue primarily from origination fees charged to borrower
members and loan servicing fees charged to lender members, as well as
from fees charged to borrower members for our MVP Verification service,
vendor registration, reporting opt-in fee, external vendor payment fees.
Over time, we expect that the number of borrower and lender
members using the platform, as well as the number of loan originations,
will increase. When we are able to accept new commitments from lender
members on the platform, we will generate increased revenue from the
fees charged to borrower and lender members.
Our operating plan calls for a strategy of raising debt and/or equity
financing to finance our operations and increase transaction volumes until
we reach profitability and become cash-flow positive, which we do not
expect to occur before 2012.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results
of operations is based on our financial statements, which we have
prepared in accordance with generally accepted accounting principles. The
preparation of our financial statements requires that we make
assumptions, estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses and related disclosures.
InvestP2P.com management bases its estimates on historical experience
and on various other factors we believe to be reasonable under the
circumstances. Actual results may differ from these estimates. Our
significant accounting policies are more fully described in Note 1 to our
consolidated financial statements included elsewhere in this prospectus.
Revenue Recognition
Revenues are derived primarily from borrower origination fees,
lender servicing fees and MVP Verification fees. Origination fees charged
to borrower members are calculated as a percentage of the gross value of a
borrower loan, and are 5.0%, or 1.5% for Family and Friend loans. The
loan origination fee is included in the Annual Percentage Rate ("APR")
calculation provided to borrower members and is subtracted from the
gross loan proceeds prior to disbursement of loan funds to borrower
member trust accounts. A loan is considered funded when the Automated
Clearing House ("ACH") transaction has been initiated to a borrower
member's trust account or our ip2pvitual account on behalf of the
borrower.
Revenues related to borrower origination fees are recognized in
accordance with Statement of Financial Accounting Standards No. 91,
"Accounting for Non-refundable Fees and Costs" ("SFAS 91").
Lender member servicing fees accrue daily at a 1.0% annual rate
based on the outstanding principal balance of the borrower loan
corresponding to the Notes. Lender member servicing fee revenue is
recognized in accordance with Statement of Financial Accounting
Standards No. 156 , "Accounting for Servicing of Financial Assets, an
amendment of FASB Statement No. 140" ("SFAS 156"). These fees are
calculated and recognized when the monthly payment is received from the
borrower member. The servicing fee is charged on each repayment until
the loan is either paid in full or becomes delinquent, goes on non-accrual
status or is charged-off.
MVP Verification fees are $100. The fees are charged when a
borrower member selects the MVP Verification option and submits a loan
request for posting on the lending platform, and are generally debited
from borrower member bank accounts by ACH transfer at that time. These
fees are recognized as they are earned.
Servicing Rights
InvestP2P.com accounts for its servicing rights under the fair value
measurement method of reporting in accordance with Statement of
Financial Accounting Standards No. 156 , "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140"
("SFAS 156"). Under the fair value method, InvestP2P.com measures
servicing assets at fair value at each reporting date and reports changes in
fair value in earnings in the period in which the changes occur.
InvestP2P.com estimates the fair value of servicing rights using a
discounted cash flow analysis of projected future expected cash flows that
are based upon a set of valuation assumptions InvestP2P.com believes
market participants would use for similar rights. The primary assumptions
InvestP2P.com uses for valuing its servicing rights include prepayment
speeds, default rates, cost to service, profit margin, and discount
rate. InvestP2P.com reviews these assumptions quarterly to ensure that
they remain consistent with market conditions. Inaccurate assumptions in
valuing the servicing rights could affect InvestP2P.com's results of
operations.
Results of Operations
Revenues
Our business model is based on charging transaction fees to our
borrower and lender members. Borrower members are charged an
origination fee for the services we provide in arranging their loan and
lender members pay a servicing fee for managing repayments on the loans
and maintaining account portfolios. Borrower members are also charged
for our MVP Verification services. We also charge failed payment fees to
borrower members when, at the time of a scheduled payment on a loan,
they have insufficient funds in their bank account to initiate a transfer of
funds. We also generate revenue from interest earned on cash and cash
equivalents, vendor registration, reporting opt in, and external vendor
payment.
Borrower Member Origination Fees
For the services we provide in arranging borrower loans, our
borrower members pay a one-time transaction fee when their loans are
originated. The fee is equal to the greater of $95 or a designated
percentage of the gross value of the loan, which is 5.0%, or for F&F loans
which are 1.5%.
The fee is deducted from the gross value of the loan, and the net
loan proceeds are sent to the borrower member's trust account. The fee is
included in the APR calculation provided to the borrower member. We do
not receive a borrower origination fee if a borrower member loan request
does not close.
MVP Verification Fees
We charge borrower members a $100 fee if they purchase our
MVP Verification service. An additional $25 is added to the base fee for a
co-borrower loan. The fees are charged when a borrower member
purchases the MVP Verification service and submits a loan request for
posting on the InvestP2P.com platform, and are generally debited from
borrower bank accounts by ACH transfer.
Borrower Member Failed Payment Fees
Our procedures generally require the automatic debiting of
borrower member bank accounts by ACH transfer, though we also allow
payment by bank draft, subject to a 1.0% increase in the borrower
member's loan origination fee. We charge a failed payment fee if, when a
borrower's monthly repayment comes due, there are insufficient funds in
the borrower's bank account, or if the account has been closed or
otherwise suspended. We retain the entire amount of the failed payment
fee, which is currently $15 per failed payment or a lesser amount as
permitted by applicable law.
Lender Member Servicing Fees
Lender member servicing fees accrue daily at a 1.0% annual rate
based on the outstanding principal balance of the borrower loan
corresponding to the Notes. These fees are calculated and recognized
when the monthly payment is received from the borrower member. A
servicing fee is also charged before we pass borrower member late
payment fees along to lender members. This fee is calculated as 1.0% of
the late fee amount, which is the greater of 5.0% of the late payment
amount, or $15, or a lesser amount as permitted by applicable law.
Interest Income
We will primarily hold our cash in checking and interest-bearing
accounts.
Operating Expenses
Sales, Marketing and Customer Service Expense
Sales, marketing and customer service expense consists primarily
of marketing campaigns and trade shows, in addition to compensation
related to customer service personnel.
Engineering Expense
Engineering expense consists primarily of costs related to the
development and maintenance of the Company's Internet-based platform
and costs related to web hosting services, hardware and software.
General and Administrative Expense
General and administrative expense consists primarily of costs
related to professional services such as legal and accounting fees, fees
paid to third-party service providers who support the operation of the
Company's web platform and compensation expense.
We expect that general and administrative expenses will increase
in absolute terms due to the planned investment in infrastructure to
support our growth and the additional costs related to operating as an
SEC-reporting company, including the increased cost of compliance and
audit fees resulting from required SEC filings. However, as a percentage
of revenue, we expect general and administrative expenses to decline as
we grow.
Liquidity and Capital Resources
The financial statements included in this registration statement
have been prepared assuming that the Company will continue as a going
concern. However, the conditions discussed below raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts
and classifications of liabilities that may result should the Company be
unable to continue as a going concern.
Since its inception, the Company has financed its operations through
debt and equity financing from various sources. The Company is
dependent upon raising additional capital or debt financing to fund its
current operating plan. Failure to obtain sufficient debt and equity
financing and, ultimately, to achieve profitable operations and positive
cash flows from operations could adversely affect the Company's ability
to achieve its business objectives and continue as a going concern.
Further, there can be no assurance as to the availability or terms of the
required financing and capital.
Cash provided by financing activities consisted primarily of funds
advanced by Mark and Wayne Kanter.
We have no committed external sources of funding. To the extent
our capital resources are insufficient to meet our future capital
requirements, we will need to finance our cash needs through public or
private equity offerings or debt financing. Additional equity or debt
financing may not be available on reasonable terms, if at all.
Since our inception, inflation and changing prices have not had a
material effect on our business and we do not expect that inflation or
changing prices will materially affect our business in the foreseeable
future.
Income Taxes
InvestP2P.com has adopted the provisions of the Financial
Accounting Standards Board (FASB) issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial
statements in accordance with SFAS No. 109, Accounting for Income
Taxes and prescribes a recognition threshold of more-likely-than-not to be
sustained upon examination.
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109") provides for the
recognition of deferred tax assets if realization of such assets is more
likely than not. We will continue to evaluate the realizability of the
deferred tax assets on a quarterly basis.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financing activities. We
do not have any interest in entities referred to as variable interest
entities, which include special purpose entities and other structured
finance entities.
Impact of New Lending Platform Structure
The historical information and accounting policies described in
this "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as in our financial statements included
elsewhere in this prospectus, reflect the operations and structure of our
platform prior to the date of this prospectus. Following the date of this
prospectus we will implement the new structure described in "About the
Lending Platform" and begin issuing the Notes. The change in operation
of our platform, as well as our adoption of certain new accounting
pronouncements, will have a significant impact on our financial
statements and results of operations for periods following the date of this
prospectus. As a result of these changes, InvestP2P.com expects that
borrower loans and the Notes will be carried on our balance sheet as
assets and liabilities, respectively, under the new operating structure.
Summarized below are the material changes we presently expect from the
changes to our operations on the platform. Because the Notes are an
atypical financing structure, we will continue to evaluate the impact of the
changes that this shift in our operations will have on our financial
condition, results of operations and cash flow.
In conjunction with our operating structure effective as of the date
of this prospectus, we plan to adopt the provisions of Statement of
Financial Accounting Standards No. 159, " The Fair Value Option for
Financial Assets and Financial Measurements " ("SFAS 159"). SFAS 159
permits companies to choose to measure certain financial instruments and
certain other items at fair value. The standard requires that unrealized
gains and losses on items for which the fair value option has been elected
be reported in earnings. We intend to apply the provisions of SFAS 159 to
the Notes and borrower loans issued subsequent to the date of this
prospectus. We do not anticipate applying the provisions of SFAS 159 to
loans issued prior to the date of this prospectus. In accordance with
SFAS 159, we will disclose for each period for which an interim or annual
income statement is presented the estimated amount of gains or losses
included in earnings during the period attributable to changes in
instrument-specific credit risk and how the gains or losses attributed to
changes in instrument-specific credit risk were determined. We will not
record an allowance account related to borrower loans in which we have
elected the fair value option. The fair value of borrower loans is expected
to be estimated using discounted cash flow methodologies adjusted for our
expectation of both the rate of default of the loans and the amount of loss
in the event of default.
As the provisions of SFAS 159 will not be applied to eligible items
existing at the date of this prospectus, adoption of SFAS 159 will not
result in a cumulative-effect adjustment to our opening balance
accumulated deficit. In applying the provisions of SFAS 159, we will
record assets and liabilities measured using the fair value option in a way
that separates these reported fair values from the carrying values of
similar assets and liabilities measured with a different measurement
attribute. We will report the aggregate fair value of the Notes and
borrower loans as separate line items in the assets and liabilities sections
of the balance sheet using the methods described in Statement of Financial
Accounting Standards No. 157, " Fair Value Measurements"
("SFAS 157").
SFAS 157 defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date.
Changes in fair value of the Notes and borrower loans subject to the
provisions of SFAS 159 will be recognized in earnings, and fees and costs
associated with the origination or acquisition of borrower loans will be
recognized as incurred rather than deferred.
We will determine the fair value of the Notes and borrower loans
in accordance with the fair value hierarchy established in SFAS 157 which
requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. As observable
market prices are not available for similar assets and liabilities, we
believe the Notes and borrower loans should be considered Level 3 financial
instruments under SFAS 157. For borrower loans, the fair value is
expected to be estimated using discounted cash flow methodologies
adjusted for our expectation of both the rate of default of the loans and the
amount of loss in the event of default. Our obligation to pay principal and
interest on any Note is equal to the loan payments, if any, we receive on
the corresponding borrower loan, net of our 1.0% servicing fee. As such,
the fair value of the Note is approximately equal to the fair value of the
borrower loans, adjusted for the 1.0% servicing fee. Any unrealized gains
or losses on the borrower loans and Notes for which the fair value option
has been elected will be reported separately in earnings. The effective
interest rate associated with the Notes will be less than the interest rate
earned on the borrower loans due to the 1.0% servicing fee. Accordingly,
as market interest rates fluctuate, the resulting change in fair value of the
fixed rate borrower loans and fixed rate Notes will not be the same.
We will also disclose the difference between the aggregate fair
value and the aggregate unpaid principal balance of borrower loans for
which the fair value option has been adopted. In addition, we will disclose
the aggregate fair value of borrower loans past due by 121 days or more
and the fair value of borrower loans in nonaccrual status as well as the
difference between the aggregate fair value and aggregate unpaid principal
balance for loans that are 121 days or more past due and/or in nonaccrual
status. For borrower loans, we will disclose the estimated amount of gains
or losses included in earnings during the period attributable to changes in
instrument-specific credit risk and how the gains or losses attributable to
changes in instrument-specific credit risk were determined. For Notes
with fair values that have been significantly affected during the reporting
period by changes in the instrument-specific credit risk, we will disclose
the estimated amount of gains and losses from fair value changes included
in earnings that are attributable to changes in the instrument-specific
credit risk, the qualitative information about the reasons for those changes
and how the gains and losses attributable to changes in instrument-specific
credit risk were determined.
To the extent payments are received subsequent to the maturity of
a borrower loan, they will first be used to reduce the borrower loan
balance reported at fair value, if any. To the extent the reported fair value
of the borrower loan is zero, any payments received subsequent to
maturity will be recognized in earnings as a gain in the period received.
In accordance with the fair value option of SFAS 159, a borrower
loan for which there is an unpaid portion at maturity and for which
collection is in doubt would presumably have a zero or minimal fair value.
Any change in fair value of that particular borrower loan since the last
reporting period would be included in earnings in the current period with
any remaining fair value balance recorded as an asset on the balance
sheet.
In the footnotes to our financial statements, we will reflect all
significant terms of the Notes including their lack of recourse to
InvestP2P.com. As we receive scheduled payments of principal and
interest on the borrower loans we will in turn make principal and interest
payments on the Notes. These principal payments will reduce the carrying
value of the borrower loans and Notes. If we do not receive payments on
the borrower loans, we are not obligated to and will not make payments
on the Notes. The fair value of the Note is approximately equal to the fair
value of the borrower loan, less the 1.0% servicing fee. If the fair value of
the borrower loan decreases due to our expectation of both the rate of
default of the loan and the amount of loss in the event of default, there
will also be a corresponding decrease in the fair value of the Note (an
unrealized gain related to the Note and an unrealized loss related to the
borrower loan).
In circumstances where we do not act in the capacity of a lender
member on the platform, borrower loan originations and scheduled
principal payments will be shown as an investing activity on the statement
of cash flow.
The origination of Notes and scheduled principal payments will be
shown as financing activities on the statement of cash flow. Consistent
with the guidance of Emerging Issues Task Force ("EITF") No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent , we will
record interest income on the borrower loans and interest expense on the
Notes on the accrual method.
In applying the provisions of SFAS 159, we will record assets and
liabilities measured using the fair value option in a way that separates
these reported fair values from the carrying values of similar assets and
liabilities measured with a different measurement attribute. We will report
the aggregate fair value of the Notes and borrower loans as separate line
items in the assets and liabilities sections of the balance sheet.
GOVERNMENT REGULATION
Overview
The consumer and business loan industry is highly
regulated. InvestP2P.com, and the borrower loans issued through the
InvestP2P.com platform, are subject to extensive and complex rules and
regulations, licensing and examination by various federal, state and local
government authorities. These authorities impose obligations and
restrictions on our activities and the borrower loans made or sold through
our platform. In particular, these rules limit the fees that may be assessed
on the borrower loans, require extensive disclosure to, and consents from,
our borrower members, prohibit discrimination and impose multiple
qualification and licensing obligations on InvestP2P.com. Failure to
comply with these requirements may result in, among other things,
revocation of required licenses or registrations, loss of approved status,
voiding of the loan contracts, indemnification liability to contract
counterparties, class action lawsuits, administrative enforcement actions
and civil and criminal liability. While compliance with such requirements
is at times complicated by our business model, we believe we are in
substantial compliance with these rules and regulations. These rules and
regulations are subject to continuous change, however, and a material
change could have an adverse effect on our compliance efforts and ability
to operate.
Because we do not possess lending licenses in every U.S. state, we
may be unable to conduct, or we may have to discontinue, any lending
activities or limit the rates of interest charged on borrower loans in certain
states. We may also face increased costs and state-by-state compliance
burdens if we fail to reach an agreement with a national lending
institution, or if such an agreement is reached and subsequently
terminated.
State and Federal Regulations and Consumer Protection Laws
As a consumer and business lender, InvestP2P.com must adhere to
applicable state laws and regulations, including licensing and disclosure
requirements. InvestP2P.com must also comply with applicable sections of
the federal Consumer Credit Protection Act, including, but not necessarily
limited to, the Fair Credit Reporting Act, Equal Credit Opportunity Act,
Fair Debt Collection Practices Act, Electronic Fund Transfer Act, and the
Truth-in-Lending Act, in addition to the federal Electronic Signatures in
Global and National Commerce Act (ESIGN) and other laws and
regulations regarding privacy, fair business practices and data security .
InvestP2P.com is subject to examination, supervision, and potential
regulatory investigations and enforcement actions by state and federal
agencies, such as the Federal Trade Commission, that administer the
federal consumer protection laws. The company lends money only in
states where it either has a valid lending license or is exempt under certain
state codes of law.
State Licensing Requirements
InvestP2P.com will hold consumer lending licenses, similar
authorizations, or is otherwise exempt from licensing requirements in 4
state and is currently subject to supervision and examination by the
regulatory authorities that administer the state lending laws in each of
these states. State lending laws and regulations vary from state to state,
and impose a number of rules and regulations including with regard to:
record keeping requirements;
restrictions on loan origination and servicing practices, including limits on
finance charges and the fees that can be assessed;
disclosure requirements;
periodic examinations;
surety bond and minimum net worth requirements;
financial reporting requirements;
notification requirements for changes in principal officers, stock
ownership or corporate control;
advertising restrictions; and
loan form review requirements.
State Usury Regulations
If we establish an agreement with an FDIC-insured national
lending institution in the future, applicable federal law will preempt state
usury limitations because FDIC-insured depository institutions are able to
"export" the interest rates permitted under the laws of the state where the
lending institution is located when making loans to borrowers who reside
in other states, regardless of the usury limitations imposed by the state law
of the borrower's residence. However, a few jurisdictions have elected to
opt out of the federal usury preemption available to such lending
institutions, so to the extent that a borrower loan is deemed to be "made"
in such a jurisdiction by the lending institution, the loan would be subject
to the maximum interest rate limit of that jurisdiction.
Disclosure Requirements and other Lending Laws and Regulations
We are also subject to state and federal consumer lending laws and
regulations that relate to matters such as:
loan disclosures;
credit discrimination;
credit reporting; and
debt collection and unfair or deceptive business practices.
Through our compliance and other efforts, we seek to comply with
these requirements. These laws and regulations may be enforced by state
consumer credit regulatory agencies, state attorneys general, the Federal
Trade Commission and private litigants, among others. Given the business
model of the InvestP2P.com platform and the subjective nature of some of
these laws and regulations, particularly laws regulating unfair or deceptive
business practices, we may become subject to regulatory scrutiny or legal
challenge with respect to our compliance with these requirements.
Truth-in-Lending Act
The Truth-in-Lending Act (TILA), and Regulation Z issued by the
Federal Reserve Board that implements it, requires lenders to provide
certain uniform disclosures to borrowers concerning the terms of
consumer and business loans they will issue. These disclosures include the
annual percentage rate (APR), the finance charge, the amount financed,
the number of payments and the amount of the monthly payment. As
required by TILA, we provide these disclosures before loans are closed by
providing borrower members with TILA disclosure at the time they post a
loan request on the platform. If the borrower member's request is not fully
funded by the end of the offering period and the borrower opts to utilize
the partial funding feature, we provide an updated TILA disclosure before
loan closing. We aim to comply with TILA requirements related to
advertising of credit and the treatment of borrower credit balances.
Equal Credit Opportunity Act
The federal Equal Credit Opportunity Act (ECOA), and
Regulation B issued by the Federal Reserve that implements it, prohibit
lenders from discrimination of credit applicants on the basis of race,
color, religion, sex, age (with certain limited exceptions), national origin,
marital status, or because all or part of an applicant's income is derived
from any public assistance program or because the applicant has in good faith
exercised any right under the federal Consumer Credit Protection Act or
any relevant state law. Regulation B also prohibits lenders from requesting
certain types of information from credit applicants and from making
statements that could discourage a reasonable person from making or
pursuing an application. All of these requirements apply to InvestP2P.com
and to any banking partner or national lending institution that may issue
loans on the Company's behalf in the future. Moreover, because these
requirements may also apply to lender members who utilize the
InvestP2P.com platform by making bids and purchasing Notes, our Lender
Member Registration and Note Purchase Agreement also requires lender
members to comply with ECOA in their bidding and Note purchase
decisions. We seek to comply with ECOA's prohibitions against
discrimination and discouragement of loan applications, and borrower
members are instructed to withhold from their loan request postings the
type of information that lenders are not permitted to request from credit
applicants under ECOA.
ECOA also requires lenders to provide consumers with timely
notice of adverse action taken on credit applications, and to give the
consumer and business the principal reasons why adverse action was
taken. We provide prospective borrowers who apply for, but fail to obtain,
a borrower loan through our platform with an adverse action notice in
compliance with ECOA's requirements. See "Government Regulation
Fair Credit Reporting Act" for more information on adverse action
disclosures.
Fair Credit Reporting Act
The federal Fair Credit Reporting Act (FCRA) promotes the
accuracy, fairness and privacy of information in the files of credit
reporting companies. Specifically, the FCRA requires that there be a
permissible purpose to obtain a consumer credit report, and that persons
who report loan payment information to credit reporting companies do so
accurately. There are also disclosure requirements under the FCRA when
lenders take adverse action on a credit application based on information
contained in a credit report. We provide an ECOA/FCRA adverse action
notice with the required disclosures to prospective borrowers who apply
for, but fail to obtain, a borrower loan through our platform. Effective
November 1, 2008, creditors must also develop and implement an identity
theft prevention program for combating identity theft in connection with
new and existing accounts. InvestP2P.com has a permissible purpose for
obtaining credit reports on prospective borrowers, and explicitly receives
their consent to do so when they agree to the credit profile authorization
during the borrower member registration process. We also report loan
payment and delinquency information to the credit reporting companies in
compliance with the FCRA.
Fair Debt Collection Practices Act
The federal Fair Debt Collection Practices Act (FDCPA) provides
guidelines and limitations on the conduct of third-party debt collectors in
connection with the collection of consumer debts. The FDCPA limits
certain communications with third parties, imposes notice and debt
validation requirements, and prohibits threatening, harassing or abusive
conduct in the course of debt collection. While the FDCPA applies to
third-party debt collectors, debt collection laws of certain states impose
similar requirements on lenders who collect their own debts. Our Lender
Member Registration and Note Purchase Agreement prohibits lender
members from any attempts to collect on late or defaulted borrower loans
themselves. As of the date of this prospectus, InvestP2P.com has not
contracted with any third-party debt collectors, but it may do so in the
future. In the event that InvestP2P.com does contract with one or more
third-party debt collectors for the purpose of collecting on late or
defaulted loans, these debt collectors will be required to comply with the
FDCPA and all other applicable laws concerning the collection of
delinquent accounts of InvestP2P.com borrower members.
Servicemembers Civil Relief Act
The federal Servicemembers Civil Relief Act (SCRA) allows
military members to suspend or postpone certain civil obligations so that
the military member can devote his or her full attention to military duties.
Under SCRA rules, InvestP2P.com must adjust the interest rates for
borrower members serving in the military who qualify for and request
relief. If a borrower member with an outstanding borrower loan goes on
active military duty and can show that such military service has materially
impacted his or her ability to make payments on the loan, InvestP2P.com
will reduce the interest rate on the loan to 6.0% for the duration of the
borrower member's active service. During this period, the lender members
who are holders of Notes corresponding to the borrower loan will not
receive the difference between 6.0% and the interest rate on the loan at
origination. For borrower members to obtain interest rate reductions due
to military service, borrower members must send to us a written request
and a copy of their mobilization orders.
We do not take military service into account when assigning
InvestP2P.com credit grades to borrower members requesting loans on the
platform.
Privacy and Data Security Laws
The federal Gramm-Leach-Bliley Act (GLBA) limits the
disclosure of nonpublic personal information about a consumer to
nonaffiliated third parties and requires financial institutions to disclose
certain privacy policies and practices with respect to its information
sharing with affiliated and nonaffiliated third parties, as well as to
safeguard personal customer information. A number of states have enacted
similar privacy and data security laws requiring safeguards for the privacy
and security of personally identifiable information. These laws also
require that consumers be notified in the event of a breach of such privacy
or security. InvestP2P.com's privacy policy, available to all visitors to our
website, conforms to the requirements of the GLBA. We have policies and
procedures in place that are intended to maintain securely the personal
information of all of our members. We do not sell, rent or share such
information with any third parties for marketing purposes.
Electronic Funds Transfer Act and NACHA Rules
The federal Electronic Fund Transfer Act (EFTA) and Regulation
E issued by the Federal Reserve that implements it, provide guidelines and
place restrictions on the electronic transfer of funds from consumers' bank
accounts. This includes preauthorized electronic fund transfers from such
accounts to make loan payments, such as those that take place on the
InvestP2P.com platform. Most of the transfers of funds through the
InvestP2P.com platform, such as those that occur when a borrower loan is
originated and when the loans are repaid by borrower members, are
conducted through Automated Clearinghouse (ACH) electronic transfers,
which are subject to detailed timing and notification rules and guidelines
administered by the National Automated Clearinghouse Association
(NACHA). We obtain the necessary electronic authorizations from
borrower and lender members for such transfers, which are conducted in
accordance with the EFTA and its regulations, and with the NACHA
guidelines.
Electronic Signatures in Global and National Commerce Act/Uniform
Electronic Transactions Act
The federal Electronic Signatures in Global and National
Commerce Act (ESIGN) and similar state laws, especially the Uniform
Electronic Transactions Act (UETA), authorize the creation of legally
binding and enforceable agreements utilizing electronic records and
signatures, including electronic promissory notes such as those
representing loan agreements arranged on the InvestP2P.com platform.
ESIGN and UETA require that businesses using electronic records or
signatures in consumer transactions must obtain a consumer's consent to
receive information electronically. Borrower and lender members are
asked to provide such consent to transact business electronically when
they register on the InvestP2P.com platform. We maintain electronic
records in compliance with ESIGN and UETA requirements.
Bank Secrecy Act
InvestP2P.com implements various anti-money laundering and
customer screening requirements of applicable federal law. When
prospective borrower, co-borrower and lender members sign up to use the
platform, InvestP2P.com applies the customer verification program rules
and screens names against the list of Specially Designated Nationals
maintained by the Office of Foreign Assets Control (OFAC) pursuant to
the USA PATRIOT Act amendments to the Bank Secrecy Act (BSA) and
its implementing regulation. InvestP2P.com also has anti-money
laundering policies and procedures in place to comply with the relevant
requirements of the USA PATRIOT Act and the BSA.
Foreign Laws and Regulations
InvestP2P.com does not allow non-U.S. residents to register as
members on its platform and has no operations outside of the United
States. Therefore, we are not subject to foreign laws or regulations.
New Laws and Regulations
From time to time, new federal and state legislation is proposed
and new regulations are introduced that could result in additional
regulation of, and restrictions on, the business of consumer lending. We
cannot predict how any such legislation or regulations, if adopted, will
impact our business. In addition, the interpretation of existing legislation
may change or may apply to our business model in a different way than
originally anticipated. Compliance with such new requirements could
involve additional costs, which could have a material adverse impact on
our business. As a consequence of the extensive regulation of commercial
lending in the United States, our business is particularly susceptible to
being affected by federal and state legislation and regulations that may
increase our cost of doing business.
MANAGEMENT
Executive Officers and Directors
The following table sets forth information about our executive
officers and directors as of the date of this prospectus:
Name Ag Position(s)
e
Mark W. Kanter 41 Chairman of the Board; Director
Wayne R. Kanter 44 President; Chief Executive Officer; Director
Mark W. Kanter is Co-Founder and Chairman of United Power and Media, Inc.
Prior to United Power and Media, he Co-Founded Bang Out Games, a company
that provides independent video game developers with financial, technical
and marketing resources. At Bang Out, Mr. Kanter was instrumental in raising
seed capital from angel investors, developing an online game submission
system, filing patents and building relationships with Game Portals.
Mr. Kanter resides as Chairman of Bang Out, overseeing its game investments.
He is also a 15 year veteran software developer having consulted for
startups, fortune 500 companies and government agencies, such as UPS,
Intuit, Bechtel, Osceola County, Omnemail, CBS Storerunner, and RFP Express.
Mr. Kanter was also the driving force behind several other internet ventures,
including PodcastSPOTS and 5StarCards. In 2008, Mr Kanter joined Union
Bank of California in the Business Intelligence & Data Warehousing
Department as a Marketing Technology Manager.
Wayne R. Kanter is Co-Founder and acting President and Chief Financial
Officer at United Power and Media, Inc. Prior to joining United Power
and Media, he spent 7 years as Vice President of Cardinal Savings Bank.
He is the founder and current owner of Kanter Financial. Mr. Kanter
currently holds the Financial Industry Regulatory Authority (FINRA)
Series 7, 63, and 24 licenses as well as having his insurance producer
license for the past twelve years. Mr. Kanter has been securities licensed
for 17 years.
Board Composition and Election of Directors
We have elected Mark Kanter as chairman of the board and Wayne
Kanter a board member.
Mark Kanter and Wayne Kanter are brothers.
Director Independence
Because our common stock is not listed on a national securities
exchange, we are not required to maintain a board consisting of a majority
of independent directors or to maintain an audit committee, nominating
committee or compensation committee consisting solely of independent
directors. Our board of directors has not analyzed the independence of our
directors under any applicable stock exchange listing standards. Holders
of the Notes have no ability to elect or influence our directors.
Board Committees
Nominating Committee and Compensation Committee
We are not a "listed issuer" as defined under Section 10A-3 of the
Exchange Act. We are, therefore, not required to have a nominating or
compensation committee comprised of independent directors. We
currently do not have a standing nominating or compensation committee
and accordingly, there are no charters for such committees. We believe
that standing committees are not necessary and the directors collectively
have the requisite background, experience and knowledge to fulfill any
limited duties and obligations that a nominating committee and a
compensation committee may have.
Audit Committee and Audit Committee Financial Expert
We are not a "listed issuer" as defined under Section 10A-3 of the
Exchange Act. We are, therefore, not required to have an audit committee
comprised of independent directors. We currently do not have an audit
committee and accordingly, there is no charter for such a committee. We
also do not currently have an audit committee financial expert. The board
of directors performs the functions of an audit committee. We believe that
our directors collectively have the requisite financial background,
experience and knowledge to fulfill the duties and obligations that an
audit committee would have, including overseeing our accounting and
financial reporting practices.
Director Compensation
Limitations on Officers' and Directors' Liability and Indemnification
Agreements
As permitted by Delaware law, our certificate of incorporation and
bylaws contain provisions that limit or eliminate the personal liability of
our directors for breaches of duty to the corporation. Our certificate of
incorporation and bylaws limit the liability of directors to the fullest
extent permitted under applicable law. Delaware law provides that
directors of a corporation will not be personally liable for monetary
damages for breaches of their fiduciary duties as directors, except
liability for:
any breach of the director's duty of loyalty to us or our stockholders;
any act or omission not in good faith, believed to be contrary to the
interests of the corporation or its shareholders, involving reckless
disregard for the director's duty, for acts that involve an unexcused pattern
of inattention that amounts to an abdication of duty, or that involves
intentional misconduct or knowing or culpable violation of law;
any unlawful payments related to dividends, unlawful stock repurchases,
redemption, loans, guarantees or other distributions; or
any transaction from which the director derived an improper personal
benefit.
The limitations do not apply to liabilities arising under federal
securities laws (because such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable) and do not
affect the availability of equitable remedies, including injunctive relief or
rescission.
As permitted by Delaware law, our certificate of incorporation and
bylaws also provide that:
we will indemnify our directors and officers to the fullest extent permitted
by law;
we may indemnify our other employees and other agents to the same
extent that we indemnify our officers and directors; and
we will advance expenses to our directors and officers in connection with
a legal proceeding, and may advance expenses to any employee or agent;
provided, however, that such advancement of expenses shall be made only
upon receipt of an undertaking by the person to repay all amounts
advanced if it should be ultimately determined that the person was not
entitled to be indemnified.
The indemnification provisions contained in our certificate of
incorporation and bylaws are not exclusive.
In addition to the indemnification provided for in our certificate of
incorporation and bylaws, we have entered into indemnification
agreements with each of our directors. These indemnification agreements
require us, among other things, to indemnify such persons for all
expenses, including attorney fees, judgments, fines and amounts paid in
settlement (if such settlement is approved in advance by InvestP2P.com)
actually and reasonably incurred by such person in connection with the
investigation, defense or appeal of:
any proceeding to which such person may be made a party, a potential
party, a non-party witness, or otherwise by reason of (i) such person's
service as a director or officer of InvestP2P.com, (ii) any action or
inaction taken by such person or on such person's part while acting as
director, officer, employee or agent of InvestP2P.com, or (iii) such person's
actions while serving at the request of InvestP2P.com as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, and in any such case described
above, whether or not serving in any such capacity at the time any liability
or expense is or was incurred; or
establishing or enforcing a right to indemnification under the agreement or
advancement of expenses from InvestP2P.com under the agreement or
under any directors' and officers' liability insurance policies maintained
by InvestP2P.com to the extent that such person is successful in such
action.
Under the indemnification agreements, we are not obligated to
provide indemnification on account of any proceeding unless such person
acted in good faith and in a manner reasonably believed to be in the best
interests of InvestP2P.com, and with respect to criminal proceedings, such
person had no reasonable cause to believe his conduct was unlawful. The
termination of a proceeding by judgment, settlement, conviction or upon a
plea of nolo contendere or its equivalent does not, by itself, create the
presumption that such person did not satisfy the above standards. In
addition, under the indemnification agreements, we are not obligated to
provide indemnification:
for any proceedings or claims initiated or brought voluntarily by such
person and not by way of defense, unless such indemnification is
authorized by the Company, other than a proceeding to establish such
person's right to indemnification;
for any expenses incurred by such person with respect to any proceeding
instituted by such person to enforce and interpret the terms of his
indemnification agreement, unless such person is successful in such
action;
for which payment has actually been made to or on behalf of such person
under any statute, insurance policy, indemnity provision, vote or
otherwise, except with respect to any excess beyond the amount paid;
for an accounting or disgorgement of profits pursuant to Section 16(b) of
the Exchange Act, as amended, or similar provisions of federal, state or
local statutory law or common law, if such person is held liable therefor
(including pursuant to any settlement arrangements); and
for any reimbursement of InvestP2P.com by such person of any bonus or
other incentive-based or equity-based compensation or of any profits
realized by such person from the sale of securities of InvestP2P.com, as
required in each case under the Exchange Act, as amended (including any
such reimbursements that arise from an accounting restatement of
InvestP2P.com pursuant to Section 304 of the Sarbanes-Oxley Act of 2002
(the "Sarbanes-Oxley Act"), or the payment to InvestP2P.com of profits
arising from the purchase and sale by such person of securities in violation
of Section 306 of the Sarbanes-Oxley Act), if such person is held liable
therefor (including pursuant to any settlement arrangements).
The indemnification agreements also provide that we agree to
indemnify such persons to the fullest extent permitted by law, even if such
indemnification is not specifically authorized by the other provisions of
the agreement or our certificate of incorporation or bylaws. Moreover, the
indemnification agreements provide that any future changes under
Delaware law that expand the ability of a Delaware corporation to
indemnify its officers and directors are automatically incorporated into the
agreements.
We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and officers.
We do not currently maintain a general liability insurance policy
that covers certain liabilities of directors and officers of our corporation
arising out of claims based on acts or omissions in their capacities as
directors or officers.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information regarding the
compensation earned during the year 2009 by each person serving during
the fiscal year of 2009 as our principal executive officer or other executive
officer, who we collectively refer to as our "named executive officers."
Stock
Ye Salar Bonu Awards Total
Name and Principal Position ar y ($) s ($) ($)(1) s ($)
Wayne R. Kanter, Chief Executive 20
0 0 0 0
Officer 09
Mark W. Kanter, Chairman 20
0 0 0 0
09
TRANSACTIONS WITH RELATED PERSONS
Financing Arrangements with Directors, Executive Officers and
Significant Shareholders
Wayne Kanter and Mark Kanter have committed $500 each.
Indemnification Agreements
Our certificate of incorporation and bylaws provides that we will
indemnify our directors and officers to the fullest extent permitted by
Delaware law. For more information regarding these agreements, see
"Management Limitations on Officers' and Directors' Liability and
Indemnification Agreements."
PRINCIPAL SECURITYHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of September 1, 2009, by:
each of our named executive officers;
Beneficial ownership is determined in accordance with the rules of
the SEC. These rules generally attribute beneficial ownership of securities
to persons who possess sole or shared voting power or investment power
with respect to those securities and include shares of common stock
issuable upon the exercise of stock options that are immediately
exercisable or exercisable within 60 days after September 11,
2009. Except as otherwise indicated in the footnotes to the table below, all
of the shares reflected in the table are shares of common stock and all
persons listed below have sole voting and investment power with respect
to the shares beneficially owned by them, subject to applicable
community property laws. The information is not necessarily indicative of
beneficial ownership for any other purpose.
Percentage ownership calculations are based on 1000 shares of
common stock outstanding as of September 11, 2009.
Addresses of named beneficial owners are in care of
InvestP2P.com, 510 Market Loop, Suite 102, W. Dundee, IL 60118.
Number of Percentage of
Name of Beneficial Owner Shares Shares
Officers and Directors
Mark W. Kanter
500 50.00.%
Wayne R. Kanter
500 50.00%
All officers and directors as a
1000 100.00%
group
EXPERTS
InvestP2P.com.
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
F
-2
BALANCE SHEETS
F
-3
STATEMENTS OF OPERATIONS
F
-4
STATEMENTS OF EQUITY AND STOCKHOLDERS' DEFICIT
F
-5
STATEMENTS OF CASH FLOWS
F
-6
NOTES TO FINANCIAL STATEMENTS
F
-7
United Power and Media, Inc.
InvestP2P.com, INC.
Notes to Financial Statements
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in W. Dundee, IL, on
the 22nd day of February, 2010.
InvestP2P.com.
By: /s/Wayne R. Kanter
Wayne R. Kanter
President and co-founder
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Mark W. Kanter and
Wayne R. Kanter, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and any subsequent registration statements pursuant to
Rule 462 of the Securities Act and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he/she might or could
do in person, hereby ratifying and confirming all that each of said
attorney-in-fact or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
Chairman of the Board (Principal
/s/ Mark W. Kanter 02/22/10
Executive Officer); Director
Mark W. Kanter
02/22/10
/s/ Wayne R. Kanter Chief Executive Officer; President;
Director
Wayne R. Kanter
EXHIBIT INDEX
Exhibit
Number Description
3.1 Certificate of Incorporation of the Registrant
3.2* Bylaws of the Registrant
4.1* Form of Borrower Member Payment Dependent Note
(included as Exhibit A in
4.2)
4.2* Form of Indenture between InvestP2P.com and to be
named trustee
5.1* Opinion of law firm passing on the validity of the Notes
8.1* Opinion regarding tax matters
10.1* Form of Lender Member Registration and Note Purchase
Agreement
10.2* Form of Borrower/Co-Borrower Member Registration Agreement
10.3* Form of Borrower Loan Agreement
(included in Exhibits 10.1 and 10.2)
23.1 Consent of Detterbeck, Johnson, and Monson
23.2* Consent of law firm passing on the validity of the Notes
(included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
25.1* Form T-1 Statement of Eligibility under Trust Indenture
Act of 1939
* To be filed by amendment
Financial Statement Schedules -- No financial statement schedules have
been submitted because they are not required or applicable or because the
information required is included in the financial statements or the notes
thereto.
