Online Lenders

LendingClub gets out of direct SMB lending, wants to be a platform again

  • Lending Club changes tack on its growth plans for SMB lending.
  • With Funding Circle and Opportunity Fund, look for the lender to announce more lending partnerships.
LendingClub gets out of direct SMB lending, wants to be a platform again

LendingClub will stop directly funding business loans and begin funneling prospective business borrowers to partners.

In an announcement today, the lender formally launched a partnership with SMB lender Funding Circle and Opportunity Fund, a nonprofit small business lender.

How it will work: LendingClub will continue to own the user experience and provide loan applications and prequalified offers to SMB prospects. LendingClub will route ‘established, creditworthy’ businesses to Funding Circle for credit analysis and underwriting — Opportunity Fund will address the rest.

What’s happening here: LendingClub is effectively pulling the plug on direct business lending, a business it started five years ago. Business lending never took off like the firm’s consumer products.

Now, the firm sounds like it’s headed back to its roots as a marketplace lender, using partnerships to scale. In 2018, the firm received 14 million loan applications, but funded just a small fraction of them. Opening up the platform to other lenders will provide Lending Club with growth channels and less exposure to credit risk.

“With partners like Opportunity Fund and Funding Circle, we’re creating an ecosystem where LendingClub’s members can take advantage of additional services from trusted providers that can help them generate more savings,” said Scott Sanborn, CEO of LendingClub.

“This enables us to both deliver greater value to our applicants and capture a new revenue stream for LendingClub, while further simplifying our business and setting the stage for more partnerships and innovations for Club Members.”

Ecosystems are all the rage: For its part, Funding Circle is also executing on an ecosystem strategy, partnering with banks and with other financial products, like Stripe. This combination of direct lending and working with partners is behind Funding Circle’s performance — the company has loaned more than $2 billion to 12,000 SMBs in the US.

“This relationship with LendingClub will play a key role in accelerating our growth as well as increasing access to affordably priced capital for businesses whose credit needs remain unmet by the traditional financial system,” said Bernardo Martinez, US managing director at Funding Circle.

Online Lenders

A deeper look into the payroll advance industry

  • Along with 10 other states, New York is looking into the payroll advance industry.
  • Branded as a kinder, gentler version of payday lending, it's possible that the industry's tipping model is more than it seems.
Paige Stern | August 13, 2019
Online Lenders

‘We call it Dream Fuel’: Behind the growth of PayPal’s SMB lending business

  • PayPal is scaling its SMB lending business and its program recently surpassed $10 billion.
  • svp of credit Darrell Esch joins the podcast to talk about where the business is headed.
Zack Miller | August 07, 2019
Online Lenders

Affirm’s Max Levchin: ‘Walmart doesn’t get enough credit for its customer focus’

  • Walmart has recently rolled out Affirm's POS financing broadly in its stores.
  • CEO and founder Max Levchin sat with Tearsheet to talk about the state of the business.
Zack Miller | June 21, 2019
Online Lenders, Podcasts

Mirador’s Trevor Dryer: ‘The world doesn’t need another high price lender’

  • Banks and credit unions are able to compete digitally with non-bank lenders.
  • Mirador helps them compete on speed and customer experience.
Michael Deleon | June 17, 2019
Online Lenders, Podcasts

MSTS’ Brandon Spear on credit as as service: ‘Find a way to solve payments painpoints and you’ll create a real advocate inside a business’

  • MSTS was started by a Fortune 100 to help with fuel payments.
  • Now, the company wants to help large B2B companies solve complex payment issues.
Zack Miller | June 10, 2019
More Articles