February 13, 2015
Lending Club recently announced a partnership with Alibaba Group whereby the peer-to-peer lender will provide small businesses with lines of credit for purchasing Chinese goods through the e-commerce giant's online marketplace.
Both of these companies recently held large initial public offerings, and their interests dovetail as Lending Club has been looking to expand its small business lending, which many consider the largest portion of the alternative lending market, according to American Banker.
Selecting a partner
Alibaba chose to have the P2P lender originate its short-term credit lines after carefully reviewing potential partners for this role, American Banker reported. This process was "competitive," stated Renaud Laplanche, founder and CEO of Lending Club.
Alibaba eventually chose Lending Club after the P2P lender visited Alibaba's China offices, according to The New York Times. The company made this final choice after looking at both innovative lenders and traditional banks.
"First of all, they are also a platform business," Michael Lee, global marketing and business development director for Alibaba.com, stated when explaining the decision, The New York Times reported. "They are also very transparent with their rate and the way they do business. And they got good feedback from their own users."
The company's customers have long desired a more straightforward method of obtaining financing, he added.
By harnessing this new opportunity, companies can secure lines of credit for between $5,000 and $300,000, according to American Banker. These agreements carry monthly loan rates between 0.5 percent and 2.4 percent and last as long as six months. Lending Club will underwrite these loans, and Salt Lake City-based WebBank, a long-time partner of the P2P lender, will supply all funding.
While this offer applies to U.S. companies only, Laplanche told The New York Times that the program will have a major impact on these firms and their capacity to purchase Chinese goods. While seeking financing via a traditional lender would likely require a waiting period and collateral, applying through Lending Club's systems can provide a very fast decision on an unsecured loan.
The partnership between Alibaba and Lending Club only affects U.S. companies interested in buying Chinese goods, a small portion of the alternative lending market. Regardless, it is a sign of how loan origination could undergo substantial change as innovation continues to impact the market.