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:

Corporations like Google have always wanted to provide credit to their partners and clients but didn’t have the ability to do so. By joining with Lending Club they now have this ability. It is a new way to deliver credit. Google can fund the loans and accept a lower interest rate benefitting the borrower who will have more money to spend on Google’s services.

When I asked Laplanche if they would ever make these loans available to current Lending Club investors he said probably not. The reason being that these are low interest loans and he didn’t think there would be much demand from investors.

How low are the interest rates being charged? They start at 5% for the first year and will then vary in the second year depending on payment record. And there are no upfront fees for the borrower whatsoever.

Despite this fact Lending Club will earn a fee for every new loan they originate and will also earn servicing fees as the loan is paid back. Laplanche would not disclose the fees they will earn on either side but I think it is safe to say that they will be lower than their published fees.

Two Significant Factors

I think there are two significant factors in play with this deal. First, we are dealing with Google, an incredibly successful company that has one of the largest databases of small businesses on the planet. If this partnership goes well maybe it could be expanded to Google’s Adwords clients. That would open up a massive source of business borrowers for Lending Club.

Second, this partnership marks the first time that Lending Club has created a customized underwriting model for one client. In Lending Club’s quest for scale some people have questioned whether Lending Club can really access enough borrowers to maintain their rapid growth. This turns the tables on that idea. With one deal Lending Club could get access to a huge number of borrowers that costs them virtually nothing. Clearly, Wall Street likes this deal sending Lending Club’s stock price soaring almost 5% today as of this writing.

This partnership is not what I was expecting to be the first joint venture between Lending Club and Google. I asked Laplanche about future partnerships between the two companies and not surprisingly he would not give any indication other than to say that this is not the end of what they will do together.

It will be very interesting to see how this develops. You can read more about this deal on VentureBeat and the Financial Times.

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Hmm
Hmm
Jan. 15, 2015 6:03 pm

So Google is going to make $600K low-interest loans to web developers and systems integrators based on LC’s SMB credit model and underwriting platform. Would love to see how this portfolio performs, and what LC will make of a pilot of this size. But alas..I am sure we will never know.

Nonetheless – snazzy press release!

Chris
Chris
Jan. 16, 2015 12:35 pm

The google partnership is very exciting. With heavy weights like google and Wells Fargo in your court it will be hard to miss. I anticipate several exciting announcements from Lending Club in 2015. With the stock currently at 22 +- And the quiet period ending on the 21st of Jan. I see nothing but upside. I see very little downside risk. 2015 is going to be a winning year for Lending Club.

Jason Jones
Jan. 16, 2015 4:14 pm

Imagine what Lending Club could do if they could tap into PageRank data and other Google search algo data. The amount of data that these two companies could collectively aggregate and analyze is staggering. LC’s credit models and loss prediction curves could be so finely tuned through data collaboration. Big Data is all about collecting historical data to predict future outcomes. These two companies share a common goal in monetizing big data, just in different ways – advertising and lending. I just wonder if Google would share their data (probably not). LC could develop LaplancheRank!

Sarfaraz Sadruddin
Jan. 16, 2015 10:06 pm

For google to “share” data it has to go beyond collaboration. Probably acquihire. Also google can be a trillion dollar company in the near future. Also growth of google is overseas more than USA (LC is not overseas)

Don Davis
Jan. 17, 2015 12:07 am

Sounds like disruption to me. I’m happy to give all the low interest rate loans to Google and keep more high interest rate loan inventory available for us.. 🙂

Sarfaraz Sadruddin
Jan. 18, 2015 2:23 am
Reply to  Don Davis

Well said 🙂