One of the top IPOs of 2014 was Lending Club, a peer-to-peer lending service that is disrupting the business of commercial lending. With share prices up over 45 percent since its IPO launch, Lending Club connects individual investors with startup businesses looking to make a name for themselves.
Yesterday, (Jan. 15), Lending Club announced a deal with Google to establish a line of credit to over 10,000 of Google’s partnership businesses using Google’s own money and Lending Club’s loan service to help expand the reach of Google’s resale partners, and ultimately grow Google’s bottom line as well.
Unlike traditional banks or venture capital firms, Lending Club works by crowdsourcing investment funds up to a certain ceiling for individuals and businesses. Typically, the lending cap for Lending Club is up to $50,000 for individuals, or $300,000 for businesses. The advantage of the Google deal though is that Google’s partners can access up to $600,000 in loans, twice the lending cap, and will be two-year plans with interest-only payments in the first year to allow for the most flexibility a business can provide. From Google’s perspective, lending out its own capital to partner firms allows those firms to keep selling Google’s business services as their footprint grows, meaning that Google will also be increasing its revenue from the lending and licensing practices.
This mechanism in P2P lending will lead to “automated, cost-effective” lending that will make it easier and cheaper for businesses to get off the ground, while stimulating revenue for Google and Lending Club. Google can now invest greater sums in its partner network, while Lending Club gains more clients and increases its market advantages in P2P lending, which has become more trusted and secure thanks to Lending Club and companies like Google putting their name on venture funds to give them legitimacy.