CircleBack Lending Secures a $500 Million Investment from Jefferies

CircleBack Lending Jefferies $500 Million Deal

For some time now we have had something of a duopoly in the consumer p2p lending space. Lending Club and Prosper have dominated the market and no strong third contender has emerged.

Well, that is all about to change with the announcement today from CircleBack Lending. They have secured a $500 million deal with investment banking firm Jefferies. While this is certainly not a peer-to-peer deal I believe it is the largest single investment in the marketplace lending industry from any one source.

I have written about CircleBack Lending before. I covered their launch just over a year ago and again when they secured a $1.9 million funding round. But I have known CEO Michael Solomon for several years. CircleBack Lending is actually his second startup in this space, his first was a company called Loanio that launched back in 2008 in the midst of the financial crisis and the SEC regulation decision.

While Loanio never got off the ground, Solomon has admitted he was too early, CircleBack Lending has been far more successful. The marketplace lending space is heating up now and this latest deal demonstrates the tremendous interest this asset class is garnering from Wall Street.

About This $500 Million Deal

There is an official press release out this morning about this deal. It explicitly states that:

Jefferies aims to leverage its expertise in the securitization market to structure securities backed by CircleBack-generated assets that can be rated by agencies like S&P and Fitch, and then be sold to a wide array of fixed income investors…

So this deal is all about securitizing the consumer loans originated by CircleBack and then packaging these loans to sell to insurance companies, endowments, banks and other large investors.

When I spoke with Michael Solomon yesterday at the ABS East Conference in Miami, he said that he has aggressive growth plans for CircleBack. He believes that all the pieces are in place now for CircleBack to be a strong contender in this industry. His growth targets for the next year are extremely aggressive and they include putting this $500 million to work and more. If they can pull that off they will clearly be the fastest growing platform in the entire marketplace lending space.

I wish them well and will be following along with interest. Solomon has agreed to share loan volume numbers with Lend Academy so we will be able to chart their progress over the coming months.

Subscribe
Notify of
21 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Dan B
Dan B
Sep. 24, 2014 12:04 am

After reading all this does anyone have any idea of how one becomes a “lender” in this company?? Because I don’t…………….& if there is no way to become a lender unless you are an institutional investor, insurance company, bank or an endowment, then, what’s the point again?
What, that it’s great for borrowers that there’s finally a competitor to LC & Prosper……………But the vast majority of us here are lenders & 98.5% of us can’t lend through it?

Observer
Observer
Sep. 24, 2014 8:24 am

this company has barely any loan volume. this is PR hocus pocus. i am not even sure i believe this.

Observer
Observer
Sep. 24, 2014 11:22 am
Reply to  Peter Renton

how much volume has this company done? why do they need a half billion dollar commitment. Sorry – don’t buy it.

Prescott
Sep. 26, 2014 2:49 pm
Reply to  Observer

So they committed up to 500M over how long? It’s likely not even Jeffery’s house money. So they’ve created a pool of 500M that they can call down as loan volume ramps up, if the curves don’t go south. It makes for good PR, but I’m not sure I’m excited about it at all. LC and Prosper have institutional investors putting similar numbers up – they are just less flashy about it.

Karen
Karen
Sep. 24, 2014 8:48 am

I had a Loanio note that just stopped paying after the site quit. It was a frustrating experience. Hope this new plan works out better for him!

rawraw
rawraw
Sep. 24, 2014 12:04 pm
Reply to  Peter Renton

Is the comment “all the two companies have in common is management” really supposed to make anyone feel comfortable?

“While Loanio never got off the ground, Solomon has admitted he was too early, CircleBack Lending has been far more successful.”

So his excuse was he is too early. And this new company with little to no history has been not just more successful, but far more successful? This article reads a little like Tulip Mania to me.

Dan B
Dan B
Sep. 24, 2014 2:23 pm
Reply to  rawraw

Rawraw……….Having any success at all makes one far more successful than complete & utter failure.
I for one am not going to give Peter much grief about the over the top favorable press here. I am absolutely certain that Peter is not thinking about his “Event Planning” business & that these guys may be a prime candidate to put $20-30k into his pocket by being a Lendit Conference sponsor. 🙂

Dan B
Dan B
Sep. 24, 2014 9:38 pm
Reply to  Peter Renton

Since when has signing a piece of paper for a “commitment” of funds to invest become a measure of a loan company’s track record?
I thought this company was in the business of lending? So shouldn’t its track record have something to do with its 14 months in business lending? Or does its eyebrow raising volume of a staggering 3-4 loans per day not paint an impressive enough picture for the narrative you’re trying to construct?

I don’t keep a record of every company that is featured here (believe it or not), but you’re right. I do notice a number of small sponsors I don’t recall seeing on these pages.

I’m not questioning your integrity. For the record, I’ve always believed that you have as much integrity as the next man. It is the identity of that next man that I’ve sometimes questioned. 🙂

core
core
Sep. 24, 2014 10:50 pm
Reply to  Peter Renton

“I invite you to take a look at the LendIt 2014 sponsors and see how many have never been featured on Lend Academy.”

I don’t quite follow that logic. The way I read it, the suggestion is that since there are _some_ (maybe “several”) Lendit sponsors that have not been featured on LendAcademy, that means one has nothing to do with the other? *cornfused*

To me that seems like saying: “Craigslist personals isn’t a haven for perverted psychos. Some of my victims come from other places too.”

But $20k to be a sponsor seems cheap to me Dan. (Unless of course you were referring only to Peter’s personal cut.) I mean cheap compared to the raping that the average Joe withstands just to get in the door… for the privilege of watching live commercials. And from what I understand, even the noncommercial presenters have to pay? It seems the only people who aren’t getting the shaft there are the cocktail waitresses.

core
core
Sep. 25, 2014 11:04 am
Reply to  Peter Renton

Peter, I think it’s time for a throwdown. Please invite DanB for your next podcast. If you are still doing those. That one, I’d listen to.

thezfunk
thezfunk
Sep. 25, 2014 7:42 pm

I am glad to see the industry continuing to grow.

My concern is the gleeful eagerness to securitize these consumer loans; because that worked out so well a few years ago with home mortgages. Maybe I’ll put together a basket of E-HR loans and pay a company to stamp them ‘A’ and then sell them off to a market desperate for yields. It sure worked out for a few in the past.

Prescott
Sep. 26, 2014 2:52 pm
Reply to  Peter Renton

Ratings don’t really work that way. You can create an A rated security with enough credit support and low enough coupon.

Dan B
Dan B
Sep. 26, 2014 7:25 pm
Reply to  Peter Renton

It is not a matter of stupidity. What you flippantly suggest as unlikely is very likely to happen. Jefferies is apparently betting half a billion that they’ll be able to repackage & rebrand these loans to institutions…………………….Institutions, many of whom have implemented all kinds of BS internal regs to prevent themselves from buying risky debt.

So, if they’re prohibited from buying BBB, what do you think, Peter, these repackaged loans are going to be other than some sort of A?

Dan B
Dan B
Sep. 27, 2014 8:14 am
Reply to  Peter Renton

I pretend even less than you Peter, but what I do know is that most human beings are simple creatures. Until these supposed experts are sent to jail, walked off a plank or at the very least reduced to years of manual labor for their irresponsible & many would say, criminal mistakes, the enduring lessons of the ’08 crisis are that when push comes to shove the government will come in & bail you out. In fact the bigger the mistake, the higher the chance of getting bailed out. So you’ll have to forgive me for saying that all the conversations you’ve had where everyone seems “acutely aware” is merely window dressing meant to assuage the less inquisitive.