New York Times: Brother Can You Spare a Loan?

The New York Times has an article about p2p lending this morning. Here's an excerpt:

The debt supply was abundant back in 2005, when Renaud Laplanche dreamed up Lending Club, now one of the best known of a batch of companies that have added Web-enabled “peer to peer” lending to the ways that individuals can borrow money. Like many online innovations, it adds scale to an old idea. In this case the old idea is borrowing money from your social network — “social network” having morphed from the people you have a personal connection to into its contemporary iteration of people connected by computer screens and servers. While starting up another company, Laplanche found it financially advantageous to borrow from friends, and he wondered whether an Internet version of this idea could be created for people without flush contacts.

...Certainly the credit crunch that started last year has made a lot more people interested in new forms of borrowing. “To some extent, we got lucky,” Laplanche admits. A little more than half of the requests involve restructuring current debt with better terms. These really took off recently, as credit-card companies jacked up rates on some balances. Meanwhile, someone has borrowed $25,000 to finish a recycling plant in Uganda; others are paying off college loans or covering medical bills. And some requests seem surprisingly dissonant with the downturn: home-renovation projects, somebody asking to borrow a few grand to take the family to Disney World, a triathlete who wants a new bike. “There’s a guy buying a pony,” Laplanche adds.

Open an account with Lending Club here.

Lending Club previews new lender feature at FinovateStartup09

Today at FinovateStartup 2009, Lending Club previewed a new feature which shows lenders how their returns stack up against other lenders. Currently, the average lender makes 9.05% after fees and defaults according to Lending Club. This feature will show you, via a nice graphical interface, how you compare against others. See the screen shot below:


Lending Club also emphasized the success of their secondary loan platform which launched six months ago. Since then over $2,000,000 in loans have been traded and the time to liquidity is two days. In addition to providing liquidity to new lenders, this platform provides new investment opportunities. There are 1800 loans on secondary loan platform right now.

Lending Club raises $12 million

Lending Club just announced they raised an additional $12 million in funding and hired a new marketing officer. Previous funding includes $10 million in late 2007 and an additional $4 million in September 2008. From the press release:

SUNNYVALE, Calif.--(BUSINESS WIRE)--LendingClub.com, the peer lending network that brings together investors and creditworthy borrowers, announced today that it has closed a $12 million Series B round of funding. Morgenthaler Ventures led the round and is joined by existing investors, Norwest Venture Partners and Canaan Partners. Rebecca Lynn, a Morgenthaler Principal, is joining Lending Club’s board of directors.

Lending Club also announced today that it has added Pamela Kramer as Chief Marketing Officer. Ms. Kramer is an established marketing veteran with more than 17 years of experience. She was most recently Chief Marketing Officer of MarketTools, Inc and, before that, spent 9 years in leadership roles with E*TRADE Financial helping to shape the development of online investing in various capacities, including most recently as Chief Marketing Officer.

“This additional capital will allow us to continue to expand our capabilities and accelerate the growth of our customer base. Lending Club is proud to be building a network where individuals come together to provide financial value to each other beyond what traditional banks can provide. We are equally proud to have great investment partners in Morgenthaler, Norwest and Canaan Partners,” said Renaud Laplanche, Lending Club’s CEO and Founder.

“We were attracted to Lending Club because it offers a compelling proposition in any market, but especially in today’s environment,” said Rebecca Lynn, Principal at Morgenthaler Ventures, “Borrower members find much-needed relief in a tight credit environment, and lender members have earned an average annual return of 9.05% over the last 20 months, which is better than most investment alternatives.”

Harvard Business Review: P2P Lending is 'breakthrough idea' for 2009

Harvard Business Review has named P2P lending as one of the top 20 breakthrough ideas for 2009. John Sviokla, vice chairman and director of innovation and research at Diamond Management and Technology Consultants, predicts p2p lending will be one of the "most important financial-services innovations in the coming decade."

Here is an excerpt from the Harvard Business Review:

...peer-to-peer lending is cheaper than consumer credit. Lending Club’s rate for the best credit risks is 7.88%, whereas the bank rate for personal loans, on average, is over 13%. A credit-worthy borrower gets the money faster and for 5% less.

Why now? First, the internet and social networks enable peer-to-peer interaction on an unprecedented scale. Second, electronic mechanisms for assessing potential customers are emerging. Lending Club starts with traditional credit scoring and adds a proprietary assessment of customers’ reputations within their social networks. You may think of Facebook as fun and games, but important underwriting information is hidden in there for those who know how to look.

So what? A profound secondary effect of the down market will be an increase in the availability of peer-to-peer finance and its convergence with traditional lending. My bet is that mainstream investors and banks will cherry-pick the best investors in Lending Club and other systems – reducing risk by tapping their superior credit-assessment capabilities – and fund them to grant more and bigger loans. Moreover, within five years every major bank will probably have its own peer-to-peer lending network.

If innovative legislation were drafted to allow peer-to-peer risk coverage, similar transactions might begin to flourish in the insurance market. Precise knowledge of local conditions would allow individuals to band together in order to underwrite the cost of insuring properties in safe neighborhoods or to make insurance more widely available in higher-risk neighborhoods.

The current economic constraints will only accelerate the growth of these new entities. I predict that they will be among the most important financial-services innovations in the coming decade.

To borrow or lend through Lending Club click here.

CBS features Lending Club

CBS featured a Lending Club lender and borrower in a short video this week. Iraq war veteran Rob Ramonas borrowed from Lending Club when he was unable to borrow from banks. He plans to become a lender and "pay it forward" when his loan is paid off. Lending Club lender Howard Rubinstein was intrigued by the opportunity to make more than he could through bank CD's and has invested thousands of dollars. He estimates he is making about 10%.

According to CBS news, p2p lending is on the rise and is expected to grow to $6 billion by 2010.



CBS featured p2p lending in March 2008. Unlike the feature in March, there is no mention of Prosper or Zopa which have closed due to regulatory challenges. Lending Club is registered with the SEC and is experiencing increased loan volume.

Lending Club opens for investors from 15 states; allows lenders to sell loans

Six months ago Lending Club halted lending operations in order to register with the SEC. They have now completed the registration and have opened their doors to lenders again from selected states. If you are from Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Louisiana, Minnesota, Mississippi, Montana, New York, Rhode Island, South Dakota, West Virginia, or Wisconsin you can lend on the new platform.

In addition, Lending Club has a trading platform where lenders can now sell loans to other investors. This is the first p2p lending company to offer liquidity.

According to the official announcement this registration will bring the following changes:

• Under the registered offering, Lending Club lenders will now invest in notes that correspond to portions of loans made to borrower members. The notes have stated interest rates ranging from 6.69 percent to 18.63 percent, after a 1 percent service charge is applied.
• By partnering with FOLIOfn Investments, Inc., a registered broker dealer, Lending Club becomes the first social lending network where lenders have the option of a trading platform. On the trading platform, lenders who become customers of FOLIOfn will be able to put notes up for sale in the event they need liquidity before the completed term of a note.

Lending Club at Santa Cruz Tech MeetUp

Despite the recently announced 'quiet period,' Lending Club's Rob Garcia met with dozens at the Santa Cruz Tech MeetUp on Wednesday. Here's a brief report from the Santa Cruz Sentinel:

"Rob Garcia said Lending Club was an alternative for investors looking for higher returns and borrowers seeking lower interest rates. Rates for personal unsecured loans start at 7.88 percent; a total of $15 million in loans have been issued. The firm is registering with securities officials, and no investments are currently being accepted."

Credit crunch solutions

Pennsylvania's Pittsburgh Post Gazette interviewed Lending Club's CEO as part of a special six-part series on coping with the credit crunch crisis. A couple months ago they featured Prosper founder Chris Larsen. Here's a short excerpt from the article:

"Many people who previously would have been able to borrow from banks months ago find themselves in a situation where they are being turned down. Some of those people are turning to social lending networks like Lending Club.

Renaud Laplanche, CEO of Lending Club based in Sunnyvale, Calif., said lenders in the online community are regular people who don't operate under the same restrictions banks do and are not affected by the credit crunch.

He said loan volume has been increasing 100 percent each month since the company opened in May. This month, about $4 million in loans were made through the Web site. The three-year unsecured loans are $5,000 to $7,000 at interest rates of between 10 percent and 12 percent.

'It's a good rate for the borrowers and an attractive rate for the lenders,' Mr. Laplanche said, adding that the default rate is less than 10 percent. 'I think the credit crunch is a contributing factor (in the increased volume.) There are other factors, but the credit crunch is a main factor.'"