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[Fred93]

But the point that Prosper is sorely missing is that the lender are NOT loaning borrowers money.  They are lending Prosper money.  If we don't know they have enough money to stay operational through out the duration of the loan, how can a lender possible evaluate the risk?... They do not have sufficient funds to cover 3 years of operations. 

I know several people here keep saying that over and over, but I just don't think its a very significant issue.  Here's why:  Sure, if they go belly up, there will be a big set of liabilities, ie the notes sold to "lenders", but Prosper will also have a big set of assets, the loans made to borrowers.  These assets will after a short time in operation greatly dominate Prosper's other assets, and the notes will similarly dominate Prosper's liabilities, so the main assets and liabilities in a bankruptcy would be the loans and the notes.

[ira01]

But the point that Prosper is sorely missing is that the lender are NOT loaning borrowers money.  They are lending Prosper money.  If we don't know they have enough money to stay operational through out the duration of the loan, how can a lender possible evaluate the risk?... They do not have sufficient funds to cover 3 years of operations. 

I know several people here keep saying that over and over, but I just don't think its a very significant issue.  Here's why:  Sure, if they go belly up, there will be a big set of liabilities, ie the notes sold to "lenders", but Prosper will also have a big set of assets, the loans made to borrowers.  These assets will after a short time in operation greatly dominate Prosper's other assets, and the notes will similarly dominate Prosper's liabilities, so the main assets and liabilities in a bankruptcy would be the loans and the notes.

We don't know that.  For instance, maybe the next infusion of VC cash will be structured as a loan.  $20M would be a big chunk of Prosper's originations for the next year or two.  Or maybe Larsen will loan Prosper $10M for operating capital.  Who knows?

[Fred93]

We don't know that.  For instance, maybe the next infusion of VC cash will be structured as a loan.

Yes, I'm presuming some reasonable financial dynamics moving forward.

$20M would be a big chunk of Prosper's originations for the next year or two.

But of course after receiving a $20M injection they would not be near bankruptcy!  That might give them oh... maybe a 2 year runway.  At the end of 2 years, they could have $100M or $200M of consumer loans in their portfolio, and have sold same amount of notes, which would dominate the $20M loan you suppose above.  

[xraider]

Fred, do you really think Prosper will build up a sizeable portfolio of loans? I'd be surprised if their volume approaches what it was.

[Fred93]

Fred, do you really think Prosper will build up a sizeable portfolio of loans? I'd be surprised if their volume approaches what it was.

An interesting and important question for them.  Fortunately its not such an important question for me, as I'm not presently investing.  I don't know.  They've certainly lost a lot of brand momentum, and they also presently operate under a big impediment (limited # states).  These business dynamics factors are hard to guess. 

[Urbi_et_Orbi]

If Prosper can point to their notes as assets/collateral, then it would seem to me that Prosper could hobble along for a while.

Profitability, on the other hand, is much more dificult to visualize.

[Senator]

Do we even know whether they have enough funding to last 6 months?

[ira01]

Do we even know whether they have enough funding to last 6 months?

IIRC, their SEC S-1 stated that they have enough funding only until the end of this year.

[Senator]

....so 5 months for sure, but after that who knows, right?

[onthefence]

Do we even know whether they have enough funding to last 6 months?

IIRC, their SEC S-1 stated that they have enough funding only until the end of this year.

With the ~2 mill per month burn rate, they shouldn't have until the end of the year operating as normal.  They would have to make drastic cuts to do so.

They could have picked up additional venture capital.  They could have picked up a venture loan backed by their loan assets.  Right now, Prosper's financial fitness is a complete black box.  They could be doing OK.  They could just be skating by.  They could be going all Maddoff & getting into a situation where the cost of business operations today is being paid for by the loan assets they have in place.

Being in the dark on a financial situation like this should not led credence to their position.  If they aren't telling us, we have to assume the worst.  And given their past behavior it would be extremely prudent not to bank of unicorn kisses & fluffy bunny poofs.

[Fred93]

They could have picked up additional venture capital.

Much easier now that they are back up & runnin' than when they were shut down.  I feel sure they're workin at it.

They could have picked up a venture loan backed by their loan assets.

No.  Two reasons.  First they are just now starting up the model where they own the loans.  Second, in the present and future they will have a note (liability) for each loan (asset), so there is no net asset here to borrow against.  

Right now, Prosper's financial fitness is a complete black box.

No.  That's just wrong.  Prosper's financial situation is fully documented in formal SEC filings.  This is about as good as it gets!

[onthefence]

The question on what happens to your notes if prosper goes bankrupt is continued here:
http://www.prospers.org/forum/what_happens_if_prosper_30_goes_bankrupt-t15348.0.html

[Capital_Finance_Group]

I just hope they keep getting funded long enough to get all my loans either fully collected or in charge off status.