Lending Club Signs a Deal With a Consortium of 200 Community Banks

Small Community Bank

The big announcements keep coming from Lending Club. While the partnerships with Google and Alibaba were big news, the deal announced today may have a more dramatic impact on Lending Club’s future.

Today, Lending Club announced a partnership with BancAlliance, a consortium of 200 community banks with assets ranging from $200 million to $10 billion. Similar to the bank partnerships Lending Club already has in place these banks will be investing in consumer loans originated by Lending Club, loans that they don’t want to or couldn’t afford to make themselves. They will also be sending their own customers and prospective borrowers to Lending Club.

According to the Wall Street Journal one of these community banks, Sugar River Bank in Newport, N.H., will be committing $5 million to this program:

At the end of 2014, Sugar River Bank’s loans to individuals totaled $1.4 million, or less than 1% of its $261 million in assets. Now the bank is committing $5 million for individual loans through the Lending Club deal by purchasing the loans of borrowers who apply through the Lending Club website. Sugar River Bank makes mostly real-estate and small-business loans, but doesn’t have enough demand to justify a large program for evaluating borrowers with different credit histories.

What this does is further cement Lending Club, and this industry in general, as a way for banks to partner to grow their business. For any bank without a significant credit card portfolio this is becoming a no-brainer. Smaller banks can now do what they used to do for most of the 20th century: make personal loans to people in their community.

On the flip side this gives Lending Club many of the benefits of a branch network without any of the costs. Consumers will soon be able to walk into banks all over the country and apply for an unsecured consumer loan that will be underwritten by Lending Club. And this is a program that is eminently scalable. I can see no reason why most of the 7,000 banks in this country won’t have a program like this in place in the near future.

Here is a link to the official press release.

Google and Lending Club Announce Their First Partnership

Today, Lending Club announced a new partnership, one that many of us have been anticipating for some time. It has been almost two years since Google invested in Lending Club and we have all been waiting for some kind of partnership to be announced since then.

While the partnership announced today is not what many of us anticipated it is significant because it marks a first for Lending Club and could open up an entirely new growth area for the company.

Google for Work Partners Program

The deal announced today between Lending Club and Google is for partners in the Google for Work program who are looking for a loan. But what is interesting is that these loans will not be put on Lending Club’s platform, they will all be funded directly by Google. Lending Club will create a special program with customized underwriting rules just for Google.

The pilot will allow loans up to $600,000 for approved Google reseller partners. These are companies that are reselling Google for Work services who are looking to expand. There will be no origination fees on these loans and they will be two-year loans with only interest due in the first year. This will allow Google partners to get favorable loan terms probably better than they could get elsewhere.

A New Way to Deliver Credit

I called Lending Club this morning and chatted with CEO Renaud Laplanche to get some background on this new partnership. Laplanche explained why he is so excited about this new program: [Read more…]

The Biggest Marketplace Lending News Stories of 2014

Sunset

As the sun sets on another year I like to look back and think about the biggest news stories of this year. And what a year it was. There were so many firsts it was hard to cull the list of stories down to just five.

But here are my top five news stories of 2014 in chronological order.

1. Lending Club Makes its First Acquisition (coverage in Lend Academy, Techcrunch)

When I received a call from Lending Club back in April announcing some big news I was expecting it would be IPO related but I was completely wrong. Lending Club made their first acquisition, a traditional lender called Springstone Financial, that specializes in loans for dental patients as well as private school education. This was a milestone for Lending Club and our industry in general as it was the first significant acquisition by any platform. To pay for this acquisition Lending Club raised $65 million in equity that valued the company at $3.76 billion.

2. Funding Circle Raises $65 Million (coverage in Lend Academy, Businessweek)

The global leader in online small business lending raised this major funding round over the summer, more than doubling how much they had raised to date. This round put Funding Circle in a very strong position in the two markets it operates in: the USA and UK. It dominates online small business term lending in the UK where it does more loans than the rest of the industry put together.

3. CircleBack Lending Gets $500 Million Commitment from Jefferies (coverage in Lend Academy, Financial Times)

[Read more…]

OnDeck Capital Has a Successful IPO Today

OnDeck Capital IPO at the NYSE

Following hot on the heels of the Lending Club IPO last week comes another online lender going public. Last night, OnDeck Capital priced its IPO at $20/share which was above the expectations of $16 – $18 per share. At $20/share OnDeck raised about $200 million and was valued at around $1.3 billion.

This morning its shares began trading on the New York Stock Exchange under the symbol ONDK and like Lending Club it received a solid first day bump. Shares opened at $26.50 and traded up throughout the day, closing at $27.98 – a 39.9% increase over the IPO price.

While OnDeck is an online lender like Lending Club, the two companies have very different business models. OnDeck’s focus is purely on small business lending and they are not a true marketplace. They primarily fund their loans off their own balance sheet. Having said that, they do have the OnDeck Marketplace where institutional investors can purchase whole loans and that program continues to grow. When I had OnDeck CEO, Noah Breslow, on the Lend Academy Podcast back in June he said that he was seeing increased demand from investors and that there was a waiting list for investors looking to deploy capital on the OnDeck Marketplace.

Speaking of growth, OnDeck has been on a tear lately. According to their S-1 in the first nine months of this year they originated $788 million in loans, a 171% increase over the same period last year. Their total loan volume originated since inception stood at just over $1.7 billion as of September 30, 2014.

[Read more…]

The Lending Club IPO: A First Hand Account at the NYSE

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Lending Club banners outside the New York Stock Exchange on IPO day

When I first started writing about this industry in 2010 I did it because I loved the concept and believed in its potential. Back then I was pretty much alone in that thinking.

But earlier today many thousands of investors around this country decided that they also believed in this industry’s potential as they bought equity in Lending Club in the first IPO this industry has ever seen.  It was an historic and groundbreaking day.

When Lending Club sent me an email early last week inviting me to their IPO celebration today on the floor of the New York Stock Exchange I didn’t hesitate. I wanted to be there and was honored that they included me.

So, this morning I arrived at the NYSE at 8am. There were dozens of people milling about outside admiring the huge Lending Club banner including a who’s who of the P2P lending industry. All the invited guests, numbering probably 100 or so, then headed inside where we were all presented with a bright red Lending Club jacket. [Read more…]

Thoughts from Industry Leaders About the Lending Club IPO

NYSE

This is an exciting time for anyone who follows this industry. It is officially IPO week for Lending Club and it looks like Thursday is going to be the big day.

For retail investors participating in the IPO through the Directed Share Program you should have received an email from Fidelity today. This letter was basically a duplicate of one that was sent out last week, the big difference being that the price range has increased from $10 – $12 a share up to $12 – $14 a share. This morning Lending Club filed the fourth version of their S-1 that reflected this change.

It looks like participants in Fidelity’s Directed Share Program will have a six hour window from 6pm until Midnight Eastern Time on Wednesday evening to confirm their expression of interest. From what I have heard these small windows are pretty typical with IPOs – I have heard some Loyal3 IPOs use a window of just one hour.

I reached out to a number of industry leaders today to get their thoughts on this historic event. Given that Lending Club is the first company to go public in our industry we will never again have an IPO like this one. So I wanted to get a range of perspectives on the record.

Here is what Aaron Vermut, CEO of Prosper has to say: [Read more…]

Lending Club Offering 50 Million Shares at $10-$12 in IPO

Lending Club S-1 Registration Amendment 3

Lending Club has a new S-1 registration out this morning as they begin their investor roadshow this week. It gives us a window into their expected valuation and the amount of money they expect to raise. From their filing:

LendingClub Corporation is offering 50,000,000 shares of its common stock and the selling stockholders are offering 7,700,000 shares of common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of common stock. We anticipate that the initial public offering price will be between $10.00 and $12.00 per share.

After the IPO there will be 361,111,491 shares of common stock outstanding at Lending Club so at $12/share this will result in a $4.33 billion valuation. This is less than all the pundits originally suggested and is only a small increase over the $3.76 billion valuation Lending Club received in April. Of course, they are no doubt hoping to get a pop on day one that will value the company much higher than that.

Lending Club Directed Share Program

There is a little information in the prospectus about their Directed Share Program (the shares that will be set aside for retail investors). Here is the entire paragraph relating to that program.

[Read more…]

Lending Club Increases IPO to $650 Million Targeting Mid-December

According to this piece published in the Financial Times this afternoon Lending Club has boosted the size of its planned IPO from $500 million to $650 million. Tracy Alloway and Arash Massoudi, the reporters who penned the story, are probably the best sourced journalists when it comes to the Lending Club IPO so we can be confident these are not just idle rumors.

Here is an excerpt from the article:

Lending Club had initially aimed to sell around $500m worth of stock in its IPO on the New York Stock Exchange but has decided to increase the size of the offering to about $650m, according to people familiar with the deal.

One person added that the company would likely set a valuation range that starts at $3.8bn – Lending Club’s value during its final private financing round earlier this year – and then adjust the pricing based on investor demand.

Analysts expect the company to achieve a valuation of between $4bn and $5bn. A spokesperson for Lending Club declined to comment.

The article also goes on to state that the investor roadshow should start next week and that Lending Club is targeting a mid-December IPO. This is also what I have been hearing.

The most interesting part of the article, in my opinion, is the news about the valuation. It was Alloway and Massoudi who first broke the story back in June about the $5 billion valuation for Lending Club. Since then I have heard rumors of $6 billion and even $10 billion but with the valuation range starting at $3.8 billion Lending Club is clearly looking to be a little more conservative. This is probably a good thing – no one wants to see the stock down 20% in their first day of trading due to an aggressive valuation.

There will likely be more news over the next two weeks and I will do my best to keep all Lend Academy readers up to date and informed.

Happy Thanksgiving everyone.

My Quarterly P2P Lending Results – Q3 2014

Every quarter I take some time to share how my p2p lending returns have been doing. I open the kimono and take you inside my Lending Club and Prosper accounts to share my returns. I do this because I believe in transparency and I want people to see how returns can change over time.

I have been sharing these returns since 2011 and this quarter marks the 12th edition of this returns post. You can go back and look at all these quarterly reports to see how things have changed over time for me.

Today, all of these accounts are on autopilot. While I used to pick loans by hand back in the early days I like the passive approach today. I know there are many Lend Academy readers who prefer an active approach and are logging in every day to invest or are selling notes regularly on the Folio trading platform.

While I agree it is possible to earn higher returns doing that I am quite comfortable with the returns I make particularly when I consider that everything runs in an automated fashion. Today I used Nickel Steamroller for most of my investing although I do use Lending Club’s own automated tool for one of my accounts and Bluevestment with P2P Picks for another.

Overall P2P Lending Return Now at 11.28%

Before I get into the details of my returns I want to give a quick overview for newcomers. I have had six accounts, four at Lending Club and two at Prosper for several years. These accounts have formed the core of my p2p lending portfolio and their results can be tracked back to the fourth quarter of 2011. Recently, I have added two new accounts into the mix. In February I opened a Prosper SMA account through Lend Academy Investments, my new wealth management firm, and last year I invested in the Direct Lending Income Fund, a fund that invests in small business loans.

Below is the quarterly table of all my p2p lending investments. I have continued to separate these two new accounts from the six established accounts – mainly so I can continue to track the overall returns of these core accounts. Speaking of which, my returns declined again for my core accounts as defaults continued to increase, my overall return for my core accounts went down from 11.15% to 10.15%. This marks the second consecutive quarterly decline for both my core accounts and my overall return which stood at 11.28% as of September 30.

Click on the graphic below to see the full size chart.

P2P Lending Quarterly Returns Q3 2014 Summary

As you look at the above table you should take note of the following points:

  1. [Read more…]

How to Invest in the Lending Club IPO

On Monday, Lending Club explained to retail investors how they could participate in their upcoming IPO. They did not choose Loyal3 as many people expected, but instead their shares will be available through Fidelity.

I admit I have not been following this closely this week. I have been in London for the LendIt Europe conference and have been very much pre-occupied with that. Anyway, Ryan over at Peer & Social Lending has an excellent write up of how to register for the IPO – you can read all the details there.

There is a deadline to register – it is 12 noon PT this Sunday, November 23. So, I wanted to let you know as soon as I could. Below is a graphic of the email that was sent out by Lending Club on Monday that has more information.

Lending Club IPO Directed Share Program

[Update Nov 25, 2014: I just received the following email today from Fidelity with steps needed to participate in the Lending Club IPO Directed Share Program. You will only receive this email if you had followed the steps above by last Sunday.]

Fidelity Email re Lending Club Drected Share Program

 [Update Dec 1, 2014: Lending Club released a new S-1 with more details about the IPO.]