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Though still a microscopic part of the estimated $11 trillion consumer lending market, peer-to-peer lending is going to matter in a big way sooner than you think, say those familiar with the sector.
February 25 -
The peer-to-peer lender, which has both threatened banks' traditional businesses and cultivated Wall Street ties, is now selling its loans to community banks and working with them to offer personal loans as a counter to big banks' dominance in credit cards.
December 11
Lending Club, the peer-to-peer lender that specializes in personal loans to consumers, is expanding its offerings to include small-business loans.
The San Francisco company announced that it has begun making business loans with fixed interest rates ranging from 5.9% to 29.9%. Loan sizes will range from $15,000 to $100,000, with terms from one to five years.
Many of those loans are small enough that they don't make economic sense for traditional lenders, says Lending Club's chief executive, Renaud Laplanche.
"What we're trying to do is bring a low-cost, affordable credit solution for mainstream small-business owners," Laplanche said in an interview.
Lending Club joins a host of other nonbank lenders, including
Like those competitors, Lending Club is touting its ability to make a quick decision on a loan application. Lending Clubs business loan website
Lending Club believes that its technology can lower the price of small-business credit, Laplanche says. He adds that the company expects the average interest rate on its business loans to be in the low teens. The loans also will carry an origination fee of 1% to 6%, according to Lending Club's website.
Some of Lending Club's loans will be secured by a personal lien from the business owner and a lien on the other assets of the business, according to Laplanche. Others will be completely unsecured.
Lending Club's loans are funded by investors who visit the company's website and select specific credits in which they want to invest. That group includes institutional investors,
Initially, Lending Club plans to make its business loans available only to institutional investors. But once the loans establish a track record, the company expects to open them to individual investors as well.
Since Lending Club was launched in 2007, the company has funded more than $3.8 billion in personal loans. Laplanche indicated that he does not expect small-business lending to surpass its personal-loan business.
"I think consumer lending is a bigger space than small-business lending in general," he said. "So we think small-business lending over time is going to be an important part of our business. We don't know what the end stage will be, but I wouldn't be surprised if consumer lending continues to be the dominant part of the portfolio."
