Marketplace lending company Lending Club is teaming up with a California-based nonprofit organization to make loans to small businesses that otherwise would have had their applications rejected.
The pilot program aims to provide $10 million in loans to small businesses in underserved parts of California. Small businesses that fit the geographic criteria and apply for loans from Lending Club will get routed into an automated screening process that sets a lower bar for approval than Lending Club normally would use.
The nonprofit lender, Opportunity Fund, will shoulder the credit risk associated with the loans. Prior to the program's launch, the applicants would receive rejection notices from Lending Club, according to Caitlin McShane, an Opportunity Fund spokeswoman.
She expressed confidence in the program's underwriting criteria, but also noted that Opportunity Fund plans to fund riskier loans than it has previously.
"Which is something we're excited to explore, to take more risk, and still make good loans to good borrowers," McShane said.
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In a news release, Lending Club Chief Executive Renaud Laplanche said: "Through this partnership, our goal is to make our technology available to Opportunity Fund to help them scale further, to meet the needs of a greater number of small business owners."
The partnership was announced Wednesday at the Clinton Global Initiative America conference in Denver.
In April, San Francisco-based Lending Club announced plans to provide $150 million in loans to Citibank a deal that is expected to help the New York bank meet its obligations under the Community Reinvestment Act to provide loans to underserved borrowers.
Kevin Wack contributed to this report.