Risk profiles in networked loan market and lending management system

Abstract

Systems, methods, and apparatus for receiving, from a lender, a lending order that specifies a desired risk profile, end term, and interest rate for a loan, the risk profile specifying a plurality of parameters used to determine a risk of a loan; and generating a portfolio loan that includes a plurality of atomic loans with a plurality of different borrowers or borrower requests that, in combination, satisfy the desired risk profile, term, and rate specified in the lending order, wherein the atomic loans each comprise a direct contractual agreement between the lender and a borrower.

Description

RELATED APPLICATIONS[0001]The present application is a continuation of U.S. application Ser. No. 11 / 501,057, filed Aug. 9, 2006, and titled “Networked Loan Market and Lending Management System,” which claims priority from U.S. Provisional Patent Application No. 60 / 706,751, filed on Aug. 10, 2005, and U.S. Provisional Patent Application No. 60 / 796,857, filed on May 3, 2006, the contents of which are incorporated herein by reference.FIELD AND BACKGROUND OF THE INVENTION[0002]The present invention relates to generating and processing lending and borrowing transactions and more particularly, but not exclusively to a system and a method for generating and processing lending and borrowing transactions by means of matching between borrowers and lenders. Borrowed money is a primary source of capital for both businesses and consumers. Banks and other financial institutions are the primary facilitators, bridging between lenders and borrowers, managing risks and collecting fees in the process....

AI Technical Summary

Benefits of technology

[0036]The flexibility of the loan market allows each user, whether acting as a borrower or a lender, to get the terms that best suit him.

Problems solved by technology

Micro-Lending, within and outside the traditional banking sector, involves lending of relatively small amounts (typically less than $25,000), to micro entities (individuals or organizations) who lack the collateral or the capacity to convince traditional banks that they are able to repay a loan, and are therefore considered a risky client group.

Micro entities frequently have limited track record or financial reporting capacity.

The costs of processing small loans and the risks involved in lending to micro entities make financial institutions hesitant to develop services for micro entities and small time entrepreneurs.

All these factors limit the access to credit available for micro entities.

The emergence of credit reporting agencies and the Internet have broadened the access to such information, but have not eliminated the trust and long-term relationships aspects of lending and borrowing decisions.

Lenders without local presence have only limited direct access to local borrowers.

Similarly, borrowers are limited in their access to lenders without local presence.

The banking system is characterized by high costs.

The high costs include both fixed costs, such as: fixed assets (branch offices, distributed IT infrastructure, etc.), and variable costs of operation, which include required capital reserves expensive workforce, information systems services, insurance, and regulatory costs.

The costs include both operational costs (bank branch operation costs, salaries, providing local physical points of service to the public), and financial costs associated with the fact that banks need to hold reserves that cover the risk associated with the fact that the bank is a part of the transaction

The high costs are reflected by a large spread between the interest rates paid to lenders and those collected from borrowers.

The fact that the loan market is characterized by a limited number of mega banks and financial institutions using a limited number of lending policies, limits the options available to a specific borrower based on his unique circumstances.

Consequently, the financial institutions lack the ability to address very specific situations that current risk profiles fail to address.

For example lending to a Chinese borrower may be deemed safe for one lender and too risky to another lender.

Borrowers of small amounts from thousands of Dollars to a few Million Dollars are limited in their ability to issue public debt securities.

Even if they can issue such securities, the cost may be prohibitively high and the regulatory requirements may be complex.

Consumers and many businesses invest their short term cash surpluses in low interest money market accounts because they do not have a better way to maximize their gain from small amounts available for relatively short periods.

The public market for small debt issues is very limited and illiquid and there is almost no market for non-public debt issues.

Currently, lenders lack the ability to leverage their knowledge or assessments in lending to particular industries, geographies, or other profiles of entities.

Current lending processes represent cumbersome, inefficient and costly processes that were appropriate in the past.

The processes fail to weigh together the needs of borrowers, lenders, and other parties involved in the lending process.

Current lenders and borrowers face a rather limited number of choices, with regards to the lenders / borrowers, lending / borrowing support services—which are limited to traditional banking systems, etc.

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