Lending Club, the pioneer of peer-to-peer lending, will go public
$ 5 BILLION DOLLARS OF LOANS
Loans between individuals will soon be invited to Wall Street. Lending Club, the pioneer and US market leader, has just officially launched its IPO process. The company, founded and led by the French Renaud Laplanche, says he wants to raise 500 million dollars. Its valuation is estimated at about $ 5 billion.
Seven years after its launch, Lending Club’s success has not been denied. “Our business continues to grow very quickly,” says Laplanche. The platform has just exceeded the 5 billion dollars (3.8 billion euros) in loans. In the first six months of the year, $ 1.8 billion has already been lent, compared to about $ 2 billion for the whole of 2013.
This growth is reflected in the company’s sales, which more than doubled between January and June, to $ 87 million. On each loan, Lending Club levies a commission of between 1.1% and 5%, depending on the level of risk of the borrower. These commissions represent almost all of his income. Profitable last year, with a net profit of $ 7.3 million, the company has however ironed in the red since the beginning of the year.
RATE OF INTEREST LOWER
Although they still represent only a tiny part of the lending market in the United States, personal loans are attracting more and more. Lending Club can borrow up to $ 35,000, repayable over 3 or 5 years. The average is just over $ 14,000. Interest rates start at 6.8% for the least risky profiles. They can reach up to 30%. The average is 14.4%. A level that may seem high but remains lower than the rates practiced by the traditional system.
The use of Lending Club is particularly advantageous for people already in debt, who must repay purchases made with their credit cards, at rates that may exceed 20%. “This is the main use of the platform,” says it’s CEO. “The gain is important, of the order of 4 to 6 points,” he says. The platform also benefits from the bad image of finance. “With telecom operators, credit card issuers are the companies that Americans like the least,” said Mr. Laplanche.
Lending Club also attracted nearly 80,000 investors, who received nearly $ 500 million in interest. The service is not open to everyone: we must respect conditions of resources and heritage. Investors can choose between seven risk categories, with rates that vary in the same direction. To limit the risks, the company advises them to diversify their investments as much as possible, for example by allocating 25 dollars to 100 different borrowers instead of wagering 2,500 dollars on one.
In the face of competition, Lending Club is starting to diversify but does not yet plan to set up outside the United States. In March, the company opened its small business platform, allowing them to borrow up to $ 100,000. The following month, she bought Springstone Financial, specializing in student and health loans. It has also accelerated its sales and marketing efforts, doubling its expenses in the field.
Already a market leader, Lending Club had experienced in May 2013 a great spotlight with the arrival in its capital of Google. The web giant has invested $ 125 million. Six months later, it was the turn of Russian billionaire Yuri Miller, who made a name in recent years in Silicon Valley by investing in Facebook, Twitter, Zynga, Airbnb or Groupon.
The company has also attracted big names in US venture capital, such as the Kleiner Perkins and Union Square Ventures funds. But not only. Its board of directors includes John Mack, former CEO of Morgan Stanley Bank, Larry Summers, Treasury Secretary under Clinton, and Mary Meeker, a leading Internet analyst.