The End of Credit as We Know It

By Wayne Mulligan, on Thursday, October 22, 2015

Credit is a critical part of our country’s economic engine.

Businesses and consumers use it for nearly every economic action they undertake—from leasing equipment, to buying a home, to paying for medical bills.

The consumer side alone currently makes up 20% of U.S. GDP.

While credit can make the wheels of our economy turn smoothly, too much of it could put us in a dangerous tailspin when the eventual downturn arrives.

Fortunately, some brilliant minds in finance are currently focusing on this problem:

The solutions they’re creating have the ability to save many Americans from the next big credit crunch...

And as an added benefit, these solutions can deliver handsome returns to investors like you.

Let me explain...

Inside a Closed Door Meeting

Matt and I spent the past few days in a closed-door meeting at one of our country’s most historic hotels: The Hotel Del Coronado on the Southern California Coast.

Attendees included executives from some of the largest banks & brokerages like JP Morgan and TD Ameritrade, the former CEO of Yahoo, and one of the most prolific financial technology investors in the world.

The purpose of the meeting was to explore the trends impacting the financial services industry, and to look at how new technology innovation could help investors like you get ahead.

We participated in over two dozen talks and panels, but the most important conversation of the week occurred after the meetings had adjourned.

Over a glass of Glenlivet in a secluded cabana overlooking the sunset, we had the opportunity to sit down with a visionary entrepreneur/investor.

He started and sold one of the first (and largest) online gold trading and storage companies in the world, and he’s funded several multi-billion companies like Uber and ZocDoc at their earliest stages.

So we listened intently as he told us about two new investments he’d recently made...

The Future of Credit in America

Matt and I often write about a concept known as “The Private Bond Market.”

This new “market” is actually a collection of online marketplaces where consumers borrow and lend money to one another directly. This allows them to bypass middlemen like banks and credit cards, saving money and earning market-beating yields, respectively.

Some of these multi-billion dollar marketplaces include companies you’re probably familiar with, like Lending Club and Prosper.

These companies legitimized marketplace lending...

But now our friend is helping build the next phase of this market.

Produce Pay

One of his investments is in a new start-up called Produce Pay.

Instead of focusing on a product that contributes to more U.S. consumer debt, Produce Pay helps America’s heartland better manage its cashflow.

Here’s how it works...

Currently, a farmer ships his produce to a wholesaler. The wholesaler then sells it to a retailer like a supermarket chain.

The farmer doesn’t get paid until the retailer pays the wholesaler, which is typically more than 45 days after shipment.

This puts the farmer in a precarious situation:

He has to pay for all of the growing, processing, and harvesting upfront—and then he has to wait nearly two months to get paid back.

His only option is to borrow money. And this is where the trouble starts...

Although the farming industry as a whole is massive, shipments of produce from any individual farmer can be small—far too small for a big bank to service profitably.

So farmers are often forced to borrow money from friends and family, or they have to rely on high interest rate cash advances from the wholesaler.

This is the type of debt that could lead to a fearsome credit crunch and jeopardize us all.

Produce Pay is hoping to change all that.

Through its technology platform, Produce Pay allows investors like you to provide farmers with short-term loans immediately after their produce ships.

It charges farmers a 1% to 1.5% fee.

1.5% may not sound like it would lead to a market-beating yield, but since these loans are just 45 days, cash can be loaned out again and again several times a year.

Our entrepreneur/investor friend is currently earning nearly 15% per year on his Produce Pay loans.

And the best part—these loans are all backed by the U.S. government. This way, even if an issue were to arise for the retailer or wholesaler, the farmer (as well as Produce Pay and investors like you) will always get their money.

Another company he’s investing in helps patients receive zero-interest rate loans to pay for high-deductibles on healthcare costs.

This is another massive area of the credit market that traditional banks don’t currently service because the individual dollar amounts are too small.

Meanwhile, our friend is earning close to 20% per year in this medical lending space—all without increasing the debt burden on the end user.

What Does This Mean For You?

These new business concepts are extremely powerful...

They’re creating forms of credit that never existed before.

They’re also helping consumers and businesses reduce their debt, and limit their reliance on high-interest banks and credit cards.

Produce Pay is currently in “beta” as it ramps up...

You can learn more about it on its website here »

And we’ll link to the medical lending site as soon as it’s made public.

Happy investing.

Best Regards,
Wayne Mulligan
Wayne Mulligan


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