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Borrowers can take out up to $100,000, compared to $35,000 for personal loans
Lending Club CEO Renaud LaPlanche has been open about Lending Club’s plans to expand into home loans, business loans, and even student loans, and today it looks like the company is kicking off that expansion. The peer-to-peer lending platform announced Thursday that it will now offer business loans.
Business loans will range from $15,000 to $100,000 to start with, and will eventually increase to $300,000. Fixed interest rates will start at 5.9% with terms of one to five years and no prepayment penalties.
Personal loan borrowers can take out up to $35,000. The average A1 grade loan on Lending Club comes with an interest rate of 6.78%, compared with the national average of 9.8%.
"We designed this product to fit the needs of small business owners," said Laplanche, in a statement. "Bigger businesses can get large loans from banks, but smaller businesses are not well served by existing banking products from traditional banks. We believe our technology-driven solution can bring costs down and make credit more available and more affordable to small businesses in America."
Launched in 2007, over $3.8 billion in loans have originated through the Lending Club platform, which is nearly double where it was just eight months ago. Last summer, Lending Club passed the $2 billion in loan volume mark, and it’s growing at a rate of $750 million a quarter. Since facilitating its first loan in 2007, the company has doubled loan volume each year.
In the banking sector, efficiency is measured by operating ratio: marketing costs divided by loans outstanding. That usually translates to about 5% to 7%. So if the bank makes a $100 loan, it costs them $5 to $7. Lending Club, by comparison, has an operating ratio of just 2%, so if it issues a loan of $100, it only costs the company $2 to do so. As a result, the cost savings for Lending Club translate to lower interest rates for borrowers with the best credit history.
Lending Club has made headlines in recent months for its high profile directors. The company has attracted some of the most influential movers and shakers in the world of finance to its board of directors, including Internet analyst turned Kleiner Perkins partner Mary Meeker, former Secretary of the Treasury and Harvard President Larry Summers, and former Morgan Stanley CEO John Mack.
Lending Club has raised $220 million from Google Capital, Foundation Capital, Kleiner Perkins, Union Square Ventures, Thomvest Ventures, Norwest Venture Partners, Canaan Partners, Morgenthaler Ventures, and more.
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Lending Club is a social lending network where members can borrow and lend money among themselves at better rates.
Lending Club provides a much improved infrastructure for social lending: state-of-the-art technology to authenticate all users (ensuring making sure they are who they say they are); credit scoring systems which rate borrower risk; and, the automated clearing house (ACH) system to move the funds between both parties. In addition, we provide our LendingMatch™ system to minimize risk and allow community based lending.