The platform recently ticked off 18 months in business.
To date, it has received applications for $62.1 million in loans but has only written $10.1m.
“Our investor numbers are expanding rapidly and whilst we have also grown our loan applications and originations by more than 100% its simply not enough growth to satisfy ever growing investor appetite,” said managing director Wayne Croad in a company update.
The country’s first peer-to-peer lender, Harmoney, has tackled the problem with a funding line from its shareholder Heartland Bank.
In January, Lending Crowd had 482 investors. Each loan had an average of 40 investors earning 12.65%.
By July, there were 765 investors on the platform, 48 on average per loan and a return of 11.94%.
More than three-quarters of loans were secured against vehicles, 3% against property and 21% against property and vehicles.
“This year we set out to raise new capital for a national marketing campaign to grow the loan volume and activate further site innovations. We have spoken to interested parties however the proposals received to date are not conducive to maintaining our goal of building a retail investor focussed peer-to-peer lending business model,” Croad said.
It offers borrowers rates from 7.9% to 19.75%.
Finance expert Claire Matthews, from Massey University, said it was not a surprise that some peer-to-peer operators were struggling for funding.
“Initially peer-to-peer platforms had a novelty factor which would have attracted some investors, plus there are the ‘early adopters’ who are keen to be part of anything new.,” she said.
“Now we are moving in to a new ‘mature’ phase of the peer-to-peer platform and it requires more mainstream buy-in. There will always be plenty of borrowers, who can’t or don’t want to borrow from traditional lenders such as banks. But the risks of being involved with a peer-to-peer platform are quite different for an investor.
“It is reasonable that potential investors are now saying, effectively, that the return is not sufficient for the risk that is being taken. Of course, the peer-to-peer platforms have to be careful about raising rates because that will increase the cost to borrowers at least some of whom will return to traditional lenders if they can get a better rate.”
At Zagga which focuses on lending against property as a first registered mortgage, Marcus Morrison said the main issue was that investors fell at either end of the risk curve. Some were very risk averse while others were very keen to take risk - in return for an interest rate that his platform didn't consider was fair to borrowers.
He said it was a matter of education, to explain to investors that the Zagga model was different to unsecured options in the market.
Lending Crowd and Squirrel Money have been approached for comment.
