Peer-to-peer lending platform Crowd2Fund has launched a new secondary market which has been described as a “game changer” for investors.
The secondary market was relaunched this week with a new name – the small business exchange. It will operate on a trial basis for three to six months while Crowd2Fund staff test the user experience and business processes. After this time, the platform may introduce an equity element.
Introducing the exchange on its website, Crowd2Fund said that it would be “a game-changer for investors on our platform as it enables them to diversify their portfolio and exit their investments.”
Chris Hancock, founder and chief executive of Crowd2Fund, told Peer2Peer Finance News that the platform’s deal flow is now above pre-Covid levels and the platform is onboarding a lot of new investors, while expanding its team.
“There is a macro argument here that post-Covid, a secondary market for a small business exchange when scaled up can really create liquidity for small businesses that isn’t really available post-Covid,” Hancock said.
“A secondary market can be a useful tool post-Covid for small businesses.
“The Crowd2Fund platform was built and designed to have a secondary market in mind that allows investors to access their capital and trade their investments. There is an element of gamification with the trading but also diversification so people can diversify their portfolios and deploy more capital into the secondary market.”
The small business exchange sets a floor and ceiling price for each trade. These prices are set by an algorithm and reviewed by a member of Crowd2Fund’s staff.
“The floor price is set on a number of variables,” says Hancock. “The floor price adjusts the original price based on the performance of the business.
“The ceiling price is calculated in a similar way. By having this moderated approach it has some level of protection when purchasing an investment because the system has repriced the loan.
“The benefit of having a floor and ceiling price means that the gamification element is still there. If a seller wants to sell the loan quickly they can offer a higher price but if they want to make a profit out of the loan then they can offer it at a lower price.”
The exchange went live on 27 July but it has already completed its first trades.
“Out team and partners have undergone a huge amount of work to deliver this pioneering element to the platform that has not been done anywhere in the world in a properly regulated and controlled manner,” added Hancock.
“And I hope the investor community enjoys it.”