Prosper Marketplace Inc. has emerged from a quiet period mandated by regulators, but only some of its ambitious proposals have received the go-ahead.

The San Francisco peer-to-peer lender was expected to resume facilitating loans between individuals last night, and also to unveil a secondary market for those debts.

But Prosper's innovative proposal to let banks resell their loans to its users remains in mothballs, and that could hinder its plans to become an important link between financial companies looking for liquidity and consumer investors' potentially vast pool of cash.

Prosper was the first mover in the U.S. peer-lending market and remains one of the largest players, even though it has been largely shuttered since October. Observers said the company's re-entry could provide a significant boost to the emerging sector, and that offering a secondary market could attract more users.

Prosper said the poor economy and the ongoing credit crunch are driving up demand for its lending services, and its still-in-development open market proposal, which would help banks offload loans and increase liquidity, was a key part of its long-term strategy.

Chris Larsen, Prosper's founder and chief executive, said that the open market differs from traditional secondary markets for bank loans because it would enable lenders to sell debt one loan at a time instead of packaging them into securities, the latter approach cited by many as a key contributor to the mortgage crisis.

Selling individual loans "is exactly what policymakers are calling for," Larsen said. "It is absolutely the right course."

Prosper was forced to pull the pull the plug on an early rollout of the open market system in May, and it remains unclear when, or if, it would become available. In April, Prosper had announced that lenders in California could sell some of their debts to consumers through its Web site, but it shut down the service after 10 days before any pending sales could be completed.

Larsen said that he originally wanted to introduce the service in just California after securing approval from state regulators; having its open market for banks and other lenders up and running there, he hoped, would persuade the Securities and Exchange Commission to quickly issue its approval for Prosper to expand it to other states.

Larsen said the SEC was aware of what Prosper was planning in California, and "the intent was to show them what it is and give them comfort." Instead, "it looked like it was going to be a distraction" that would slow the approval process "rather than speed it up."

In April there were four nonbank lenders that had committed to using Prosper's system to resell their loans, Larsen said. He anticipates even more demand if the system gets SEC approval.

"I can't tell you the amount of interest in that product we had, on both sides of the equation, lenders and investors," he said. Lenders are particularly interested because it would provide them with some liquidity in uncertain times.

"You just have to get the regulators to get comfortable with it," he said. But "that takes longer than the economy collapsing."

Larsen said he could not estimate when the SEC would approve the open market proposal; one issue is that it is being evaluated by the SEC's policy arm, while the lending services and the secondary market that went live yesterday were vetted through a securities registration filing.

But he said that creating the open market was an important part of his vision for Prosper's future. "Open market is a winner, and we are absolutely 100% committed to that," he said.

Under the service announced in April, lenders could resell through Prosper loans with fixed interest rates and terms of up to seven years. The loans could be secured or unsecured, but they could not be for real estate. The loans had to be current, and borrowers must have made at least three payments.

Bobbie Britting, a research director with the consumer lending practice at TowerGroup Inc., an independent research unit of MasterCard Inc., said that the open market idea would appeal to financial companies and consumers looking for a place to invest.

"From a pure market demand, I think there probably will be demand out there, on both sides, both the borrowers and the lenders," she said.

Prosper's chief rival in the peer-to-peer lending market has no plans to develop such a system.

Renaud Laplanche, the chief executive of Lending Club Corp., said he wants to focus on increasing awareness of peer-to-peer lending services, and that having his rival back in the game would actually abet his cause.

Prosper's receipt of SEC approval "helps everybody" in the P-to-P lending space, he said.

"Now that the two main players … follow the exact same framework, cleared by the SEC at the federal level, I think it gives a lot of comfort and certainty that now investors can rely on."

Prosper stopped facilitating new loans in October after it faced scrutiny from regulators, and in December it disclosed it was paying a fine of $1 million to regulators, which perceived the loans as unregistered securities. The people making the loans were not lenders but investors, they said.

During its quiet period, Prosper continued to service existing loans; Lending Club went through a similar process last year.

The lending services that Prosper introduced Monday are similar to what it offered before its hiatus. Borrowers request loans and disclose their income and creditworthiness; lenders decide which requests they want to fund.

A new feature for Prosper is its secondary market, which, like the secondary market Lending Club launched in October, allows lenders to resell loans to one another.

People from all states except Iowa, Kansas, Maine and North Dakota can borrow through Prosper, and 14 states have approved the service for lenders.

Edward Kountz, a senior analyst for e-business and channel strategies at Forrester Research Inc., said that while Prosper has a following, to succeed it must do more than just resume operations.

"In the long-term, what we've seen is that overall volumes are still relatively small," he said. In a way, this has been a good thing for Prosper because its shutdown has not "had a material impact … on the space."