Prosper Growth And Usuary Laws

As can be observed from my analysis of Prosper's August income, they need to do some growing if they intend to survive long term. Prosper's ability to expand it's lending has been limited by the various state usury laws that limit the interest rates that lenders can fetch. This has been highlighted by Prosper Lending Review's commentary on the Pennsylvania rate cap and one borrower's attempt to get a loan despite the state's cap. The question, though, is how much can Prosper grow it's available market by navigating the various state usury laws.

To answer this question, lets look the populations for all the US states (circa 2005). The top 20 states represent about 75% of US population, and improving the borrowing and lending options in any one of these would be a tremendous boost to Prosper's available market. I've ranked each state based on Prosper's current loan limits with ratings of Excellent (loans above 20%, AA-HR likely to fund), Good (loans 20% - 17.5%, AA-C likely to fund), Marginal (loans 17.5% - 12.5%, AA-B likely to fund), or Poor (loans 12.5% - 10%, only AA's likely to fund), Very Poor (loans under 10% - good luck getting anything). The ratings were roughly derived from Prosper's 30-day interest rate average.

State	Population	Max Rate	Rating
California	36.1M	30%	Excellent
Texas	22.8M	(Personal) 10% (Business) 18%	Marginal
New York	19.2M	16%	Marginal
Florida	17.8M	18%	Good
Illinois	12.7M	30%	Excellent
Pennsylvania	12.4M	6%	Very Poor
Ohio	11.4M	25%	Excellent
Michigan	10.1M	25%	Excellent
Georgia	9.0M	30%	Excellent
New Jersey	8.7M	16%	Marginal
North Carolina	8.7M	30%	Excellent
Virginia	7.6M	12%	Poor
Massachutes	6.4M	20%	Good
Washington	6.3M	25%	Excellent
Indiana	6.3M	21%	Excellent
Tennessee	6.0M	12.25%	Poor
Arizona	5.9M	30%	Excellent
Missouri	5.8M	30%	Excellent
Maryland	5.6M	24%	Excellent
Wisconsin	5.5M	18%	Good

It's important to remember that a majority of Prosper's loans (dollar weighted) come from the B - D credit ratings, and, from the analysis, it's obvious that Prosper has a fair number of pick-up opportunities if they can get their legal ducks in a row for the states that require additional licensing to loan at higher rates (like Pennsylvania). After all, there's almost 77 million people in those marginal states.