December 18, 2014
American Banker recently named marketplace lending its Innovation of the Year.
This announcement was made after Lending Club - the industry's biggest company - and OnDeck both held successful IPOs, and then saw their stock prices surge on the first day of trading. Lending Club held a blockbuster primary offering that many interpreted as an omen of how much potential this sector holds, according to American Banker.
Lending Club IPO
The company raised $1 billion in its IPO, and reached a valuation of more than $8 billion on its first day of trading. This climb continued, causing Lending Club's valuation to break past $10 billion, according to PYMNTS.com. The marketplace lender previously indicated its plans to use any funds raised to expand its market share both domestically and overseas, the media outlet reported. David Klein, the CEO of marketplace lender CommonBond, commented on the blockbuster IPO, according to American Banker.
"The Lending Club IPO, I think, was just a manifestation for so many people of the fact that marketplace lending's time has come," Klein told American Banker. He emphasized the company's multi-billion dollar valuation, and stated that: "I think what's behind all of that is the promise of making finance better."
OnDeck Capital offering
After Lending Club made headlines with its primary offering and sharp rise in market value, OnDeck Capital, an alternative lender that provides financing for small businesses, raised $200 million in an IPO and then enjoyed a 38 percent increase in its share value on the first day of trading, according to The New York Times. After pricing at $20, the company's stock closed at $27.81.
While these major industry players held robust IPOs this month, the marketplace lending sector has been building momentum steadily, American Banker reported. Around 100 such lenders are operating in the U.S., according to one estimate.
The industry's robust growth has been drawing the attention of institutional investors including hedge funds, and these market participants have been supplying the industry with ample capital, according to American Banker.
How banks can benefit
As marketplace lending continues to grow, the sector may become impossible to ignore. Traditional banks should tune in to this expansion, as they might be able to benefit from the burgeoning industry. If banks want to bridge the gap with marketplace lenders, they might consider working with Garnet Capital Advisors.
This loan sale advisory firm boasts seasoned professionals who have substantial experience not only in traditional banking, but also in marketplace lending. By working with Garnet, banks can find the ideal partner so they can make prudent loan sale purchases that comply with existing rules and regulations.