Peerform is back with an exciting new investment partner Random Forest Capital

I did it first wrote about Peerform in 2010, when they started life under the name Lendfolio. Although they are not widely known beyond loan enthusiasts in the market, they are in fact the third oldest platform still in operation in the United States – behind Prosper and Loan Club.

I do not have covered Peerform for almost three years, so when their founder Mikael Rapaport contacted me recently, I was curious what they had done. It turns out that a lot has happened at Peerform since 2014.

At the end of last year Strategic financial solutions (SFS), a leading debt settlement company, acquired Peerform and developed new product offerings. Speaking of which, today they have three separate products:

1. Market Loans – Unsecured consumer loans, typically from senior or near-senior borrowers, up to $ 25,000 with rates ranging from 5.99% to 29.99%.
2. Direct Payment Consolidation Loans – unsecured debt consolidation loans, primarily from prime consumers, where debts are paid directly to the credit card company.
3. Debt Negotiation Loans – Debt settlement clients who qualify to expedite their settlements with a loan.

SFS reviewed numerous lending platforms in the market before deciding to acquire Peerform. They were impressed with their sophistication in underwriting and regulation, their strong brand presence online, their low customer acquisition costs, and how thrifty they had been with the capital they had raised.

Peerform has been online since 2010 and therefore has an established web presence. Because of this, they get a lot of free traffic from Google – showing up on the first page of results for many popular search terms. This alone makes it a very attractive acquisition target for a company like SFS.

A new investment partnership

Enter Random forest capital. This is a new investment management company established last year with a focus on data science and machine learning. They love to take masses of unstructured data and not only make sense of that data, but find new predictive power in that data.

Kevin Farrelly and Austin Trombley (formerly of Prosper) are the co-founders and both are data-obsessed. This is what led them to Peerform. They wanted to partner with a platform that could give them far more than the hundreds of standard data points from major offices. Peerform has redesigned its APIs to be able to extract thousands of data attributes and millions of data points for analysis.

The Random Forest team was able to create proprietary credit models using this new data which they believed was more data than available on any other lending platform in the market. today. As Kevin pointed out, “the money will go where the data is”.

What they also liked about Peerform is that they allow active loan selection. Most platforms today do not allow active selection of institutional investors, but Peerform encourages it. They also buy some of their own loans in the market and hold the assets on their balance sheet.

Although Random Forest has invested in regular unsecured consumer loans, they like the access they can get to a unique product, debt negotiation loans. Random Forest is the first outside investor to purchase these loans and because it is not a standard product there was a unique data challenge in building models for these loans. But this is their core skill and although they have only been buying loans for a short time, they like what they have seen so far.

Random Forest also invests in other asset classes beyond consumer credit. They have positions in secured automobiles, repair and turnaround real estate, and secured commercial debt, bringing their unique data science skills to each asset class.

My opinion

While many of the Lending Club and Prosper’s early challengers are gone, Peerform is still going strong. In fact, they are one of the few platforms that has been acquired and thrived within their new parent.

They have become a hybrid platform using their market and balance sheet to grow their lending operations. Their agreement with Random Forest is innovative and the new loan products they are bringing to market are unique in the industry. Peerform has clearly opened up new avenues and they are now a business to watch.