| 
  • If you are citizen of an European Union member nation, you may not use this service unless you are at least 16 years old.

  • Stop wasting time looking for files and revisions. Connect your Gmail, DriveDropbox, and Slack accounts and in less than 2 minutes, Dokkio will automatically organize all your file attachments. Learn more and claim your free account.

View
 

Lending Club

Page history last edited by Brian D Butler 11 years, 8 months ago

 

 

Lending Club

 

peer-to-peer lending

FACEBOOK app

Website: www.lendingclub.com

Contact: contact@lendingclub.com

 

Highlights:

 

• Existing technology

• Has lending license (trying to get banking so they can offer interest)

• English version only

• Facebook app

• Interest rates set by website (how?)

• Uses Equifax to qualify credit ratings of users

 

Typical Customer:

Predominantly professional males with a higher education and income levels within the top 30th percentile. They are tech-savvy, distrust brokerage firms and have an above-average risk tolerance.

 

Main Market:

Lending Club estimates that the 63 million U.S. households with annual incomes of between $31K and $78K hold $490 billion in credit card balances carried over; Credit card refinancing is Lending Club’s prime target addressable market. Lending Club’s proprietary modeling has carved out a $108 billion addressable opportunity within the U.S. consumer credit industry.

 

News Highlights:

 

 

STRATEGY:

Going forward, Lending Club will have a two-prong “affinity strategy” to grow its loan base, Crowe and Ciporin told me: 1) building out a Lending Club destination Web site and 2) licensing the platform on a private label basis to alumni associations, professional associations, professional and social networks and other affintiy groups and online communities, on a revenue sharing basis.

 

Under the direction of founder and CEO Renaud Laplanche, Lending Club, in fact, has long been on a determined track to “disintermediate a $2.4 trillion industry” well before F8 was announced to the world AND with or without Facebook.

 

The consumer facing Lending Club Facebook App may LOOK like a cool, turnkey F8 tool, but the $10.26 million in VC Laplanche attracted is due to the (very) heavy technology and regulatory lifting Lending Club had already accomplished independendently of Facebook.

 

The Lending Club Facebook App can NOT be readily replicated due to the high-level software and IP assets necessary for financial transactions processing AND the stringent regulatory hurdles a loan processor must pass.

 

How much more efficient. Lending Club’s numbers say it “saves its members the equivalent of 6% of the loan amount” (net Lending Club fees).

Lending Club also aims to be to the lenders rescue, positioning itself as offering investors “the ability to gain higher returns than those offered by CDs and savings accounts” while “benefiting from an asset class whose performance is more predicable than stocks and is not correlated to the stock market”:

 

FEES

All Lending Club loan transactions generate fees: Borrowers are subject to an approximate 1.5 % loan origination fee and an approximate 1/2 % fee is collected from lenders. In order to generate fees, Lending Club must approve and transact loans, while still honoring its stringent credit scoring and review policy to minimize prospective defaults.

 

Videos:

Excellent video – interview of Lending Club – 1 hour Q&A discussing how site works

http://www.youtube.com/watch?v=hGq3hv1RTao

 

How the site works: http://Lending Club.com/

 

video ads: http://www.youtube.com/watch?v=G43bLni8Or4

For complete history, see: http://www.crunchbase.com/company/lendingclub

Lending Club is a p2p lending site that matches lenders with borrowers. The site uses the Facebook application platform soley to connect lenders with borrowers, due in part to Facebook's viral nature and the fact that friends trust lending to other friends. The loans are aimed at atypical borrowers, people borrowing for one-time events, like weddings and vacations, and credit card debt consolidation.

Lending Club loans have fixed interest rates with average loan durations of three years. Borrowers have to go through a rigorous credit check and grading process before they can start receiving loan requests. Lending Club claims to have high credit standards and they turn away a lot of too-risky borrowers.

Lending Club makes borrowers go through a credit assessment and hand out credit grades ranging from A-G. Lenders can browse borrowers' profiles and find someone they want to lend to depending on the amount of risk they are willing to take or depending on who the borrower is (like a friend).

Borrowers can use anonymous screen names to post their loan requests on the Lending Club Facebook application. Most of the loan requests are for consolidating debt so most borrowers probably don't want their credit histories to be public information. On the other hand, being open with potential lenders can increase the chance of landing a loan.

According to Lending Club, average loan sizes clock in around $5,500, with $1,000 being the minimum loan size and $25,000 the max. Borrowers with low credit grades have higher average interest rates than borrowers with high credit grades.

 

News reviews of “Lending Club”

 

• On a side note: acknowledging that trust is a key issue, another 'bankless banking' venture that's moving swiftly is Lending Club. Just 6 weeks after launching, Lending Club has facilitated over USD 250,000 in loans. What makes Lending Club different? Starting with Facebook, it latches on to an existing social network to leverage human connections that are already in place: "We believe that person-to-person lending will gain faster adoption in an environment where people feel connected to one another." More updates to follow as P2P lending develops!

Baked in Facebook, Social Lending StartUp Raises VC Cash

Written by Om Malik

Wednesday, August 22, 2007 at 5:34 PM PT | 11 comments

It may turn out to be a new way of proving your model: Launch an application on the Facebook Platform, see if it works, and if it does, take your hard data to a group of VCs and raise capital to grow your business.

At least that’s the way it worked for Lending Club, a Sunnyvale, Calif.-based startup that is going to announce $10.26 million in Series A funding from Canaan Partners and Norwest Venture Partners tomorrow.

The company offers personal loans ranging from $500 to $25,000 to people with credit scores at or above 640. All of the loans are funded by individual lenders; to date, lenders have funded 80 percent of all loan requests. The startup, headed up by founder Renaud Laplanche, soft-launched its offering on Facebook in May 2007, yet it currently has 13,000 users and has given out — so far — $750,000 in loans.

The peer-to-peer lending is an interesting (and growing) business, as indicated by the early success of startups such as Prosper, which has been funded by Accel Partners, Benchmark Capital, Fidelity Ventures and Omidyar Network. Other players in this market include Loanio, Zopa and CircleLending. (see a related story from the WSJ: Options Grow For Investors to Lend Online)

But back to Facebook as a pre-funding lab: Think about it, and tell me if that can actually work.

Peer to peer lending service Lending Club will close a $10.26 million series A round of financing from Norwest Venture Partners and Canaan Partners tomorrow. This comes a few months after the company’s $2 million angel round. Coinciding with the investment, Jeff Crowe and Dan Ciporin (former ceo of shopping.com) are joining Lending Club’s board of directors.

Similar to other P2P lending sites (Prosper , Zopa , Kiva ), LendingClub matches borrowers and lenders. However, LendingClub doesn’t work through their own website, but solely through Facebook on the application they launched at the F8 platform launch conference. Borrows and lenders a linked up using their “LendingMatch” system, which recommends loans based on credit and their social relationships to each other. The idea being that trusted relationships make lending more likely and defaults less likely. The application currently has over 13,000 installs.

Unlike Prosper, interest rates aren’t determined through bidding, but calculated based on the borrowers credit score, debt to income ratio, and amount of the loan. There are no hidden fees, and the interest rate is fixed for three years. In July the service surpassed $500K in loans. They recently claimed a little more than 4 out of 5 loans get funded and haven’t reported any defaults or late payments.

Comments:

It’s still the early days for this industry, and as TC commenters point out, it’s very much a case of Caveat Emptor

The finance space is hot right now as people harness the social networks to provide value added services.

boring. anyone can do this no barrier to entry. this is 10M for marketing

Yawn. For serious stuff, people would rather not operate through their Facebook profile. You’re not going to handle your mortgage, bills, etc. through Facebook. All the techies seem to forget that

Lending Club brings person-to-person loans to Facebook

By Dan Kaplan 05.24.07

Lending Club, the newest entrant in the emerging person-to-person lending market, is launching tonight on the Facebook platform.

The Sunnyvale, Calif. company has raised $2 million in angel funding to join the handful of companies that aim to cut banks out of the personal loan market. These companies have an edge because they offer lower rates to borrowers and promise lenders higher rates than they’d otherwise get in a savings account.

Online peer-to-peer lending services, Prosper, Zopa and CircleLending all have significant lead time and lots of venture backing; Zopa, for example, has raised around $34 million. But Lending Club is the first of its kind to integrate its services into a social network.

The social networking angle allows Lending Club to leverage trust. Though not a social network, CircleLending, which Virgin USA just bought, nevertheless positions itself as an intermediary for loans between relatives and friends. Both Zopa, based in the UK, and Prosper, of San Francisco, facilitate loans between complete strangers. Lending Club sits somewhere in between: According to CEO Renaud Laplanche, the goal is not to get friends to lend to friends, but to use the Facebook platform to enable lenders to find borrowers within shared networks, like groups or schools.

Lending Club’s process is quite similar to those of its competitors. Would-be borrowers go to the Lending Club application within Facebook and enter in their personal information and the amount they’re looking to borrow–a minimum of $1,000 and a max of $25,000.

Lending Club analyzes their credit rating and suggests an interest rate — between approximately 7 and 12 percent, at which they should expect to get a loan. They then choose a screen name to protect their privacy. If they want, they can put a line on their profile page that lists the amount they want to borrow, the interest rate they’re willing to take, and the percentage of the loan they’ve amassed so far.

Lenders who sign up enter in the amount they’re willing to loan and the interest rate they want. Then the Facebook platform gives Lending Club a boost: Lending Club uses what it calls “LendingMatch” technology to pair the two parties based on shared connections it finds. While it currently only uses criteria like shared schools or groups or geography, Lending Club plans eventually to link people through friends of friends. It does this without giving lenders direct access to borrowers’ Facebook profiles.

The company has 18 employees, including former executives from Mastercard, Wells Fargo, and eBay. The sources of the angel funding are undisclosed.

Joaquin Delgado 05.25.07 | 9:47 am

Hi, I’m the CTO of Lending Club. I would like to clarify that we do enable lending to many borrowers. As a matter of fact, LendingMatch is our proprietary search and recommendation algorithm that automatically creates and suggests diversified loan portfolio, given a level of risk aversion, thus simplifying the lending process. Individual lending, including to friends, is not banned either. We allow users to “browse and search” for loans if they want to pick and choose from the crop.

Patrick Gannon 05.25.07 | 6:16 pm

I work at Lending Club as well. Let me try to answer the two questions from Alex and Raj.

Alex: you would not lend to a single borrower - you would lend to a portfolio of borrowers. By constructing a diversified portfolio of many borrowers, we reduce the overall portfolio risk.

So, if one of the borrowers declares bankruptcy and defaults on the loan, the lender would be exposed only to a small portion of that loss. The rest of your portfolio (with dozens more borrowers) would not be affected.

Raj: Our lenders specify their risk tolerance and then we use our proprietary technology to construct a portfolio for them. The expected returns on these portfolios vary with the risk of the portfolio.

For the lowest risk portfolios, the expected returns are higher than CD rates and money market rates. For the higher risk portfolios, the expected returns are significantly higher.

Lending to Friends????

HaHaHa. Can you spell C-o-u-n-t-r-y-w-i-d-e F-i-n-a-n-c-i-a-l for the masses? There’s a reason banks exist and why you

avoid seeing your friend who was looking for that small loan he needed.

June 20 2007

Lending Club Passes $100,000 Mark In Loans To Facebook Users

Lending Club, the Facebook exclusive person-to-person lending service has passed the $100,000 mark in loans to Facebook users.

Lending Club was an original Facebook Platform/ F8 partner having launched with F8 on May 24. The company closed its first loan on June 6, and has since closed 27 more loans for a total of $101,250. An additional $212,650 in loans will close in the next 12 days. More than $180,000 is currently available from 271 lenders with around 10-15 new lenders transferring money to Lending Club every day.

The social networking angle of Facebook allows Lending Club to leverage trust by enabling lenders to find borrowers within shared networks. Lending Club uses technology to pair the two parties based on shared connections without giving lenders direct access to the borrowers Facebook profile.

P2P lending is a rapidly growing market. Lending Club faces stiff competition from companies such as Zopa, CircleLending and Prosper. Although it may not be the market leader in terms of volume, Lending Club’s growing success demonstrates the potential of Facebook as a sales and finance platform.

 

  1. Adam

June 20th, 2007 at 10:06 pm

I don’t understand why LendingClub’s model is such a constructive use of Facebook. They tout the interconnectedness and “trust” behind Facebook, but then hide everyone’s identity, and instead make you rely on nebulous and meaningless Facebook groups.

Perfect example: “Largest Facebook Group Ever”, is listed as one of the “top groups” in the screen shot above. How is someone’s membership in that group supposed to help me decide whether or not to lend them money?

 

  1. Renaud Laplanche

June 20th, 2007 at 10:38 pm

Adam,

I must admit we’ve struggled with that one. It’s a delicate balance between exposing connections and protecting privacy. The way we’ve solved this for now is by leaving it to the borrower to decide to link his Facebook ID to his Lending Club screen name or not (by picking up the same name and/or installing a widget on his Facebook profile page). Also, lenders and borrowers are matched based on groups/networks and connections as “friends”.

Some Facebook groups/networks are certainly more meaningful than others: school networks like MIT or Stanford are usually found more relevant to help lenders make decisions than belonging to “If you remember this you grew up in the 90s” :)

Renaud from Lending Club

 

  1. PhilR

June 21st, 2007 at 12:18 pm

Banks are always looking for alternate ways to isolate acceptable credit risks. It’s easy to find qualified people to lend to, much harder to find people who look bad but actually are low risk. They’ve pretty much maxed out using the traditional criteria so if a company can figure out how to do it with social networking, it could be huge. My advice would be to perfect the algorithms and then sell at a very high price to FICO or one of the big banks. Good luck!

 

  1. Renaud Laplanche

June 21st, 2007 at 1:47 pm

Marc,

Rates actually go all the way up to 18% for the most “risky” loans. The 11.68% rate is the expected net return AFTER defaults for a “G” portfolio (ie the most risky on a scale of A to G). You can find more information on rates, expected defaults, and expected returns at:

https://secure.lendingclub.com/info/check-borrower-rates.action and

https://secure.lendingclub.com/info/compare-lender-rates.action

Renaud from Lending Club

Comments (0)

You don't have permission to comment on this page.