Alternative Finances

Lending Club And Alibaba Pair Up On Financing

Lending Club and the Alibaba group are partnering to help American companies buy parts from Chinese manufacturers.  The team-up will give manufactures in the U.S. access to products and supplies sold on Alibaba.com, while Lending Club will help those business secure loans for as little as $5,000 to as much as $300,000 for each purchase order.

Alibaba and Lending Club were responsible for two of the largest IPOs in New York last week (Alibaba's was also the largest in history), and their surprising partnership seems aimed at replacing traditional supply-chain financing, at least for the small- to medium-size businesses using Alibaba for a portion of their manufacturing.

Typically banks or other traditional lenders require collateral for their financing; Lending Club’s system, on the other hand, gives access to unsecured loans with near-instant approval.

“This partnership is going to make a pretty big difference in terms of U.S. business’ ability to buy goods from China,” Renaud Laplanche, the chief executive of Lending Club, told The New York Times in a telephone interview.

The loans for the new venture, which will be called “Alibaba.com e-Credit Line, Powered by Lending Club,” also do not spike the interest rate, and in fact offer businesses a lower interest rate than what they face from other lenders. According to Mr. Laplanche, the new venture offers a monthly interest rate starting at 0.5 percent, about half of what a more traditional lender could provide.

But unlike more traditional manufacturing financing options, such as “factoring,” the loans aren’t backed by particular assets.

Alibaba has been searching for a partner with whom to jump into supplier lending for the last several months, a process that had the e-commerce megafirm looking at everything from traditional banks to market-based lenders.  Lending Club closed the deal after what The Times called a "lengthy audition process," which saw Lending Club's executive team making many trips to China to talk Lending in Alibaba's home office.

“First of all, they are also a platform business,” Michael Lee, Alibaba.com’s global marketing and business development director, said in a telephone interview, adding that customers had asked for a simple financing solution for some time. “They are also very transparent with their rate and the way they do business. And they got good feedback from their own users.”

Mr. Lee hopes customers will use such financing to make orders at least once a year. The system is  designed to be easy to use so that it has a better chance of  convincing more U.S.-based businesses to order from Alibaba.com more often.

For Lending Club, the move is meant to help further a shift into new kinds of lending. What started as a company premised on debt consolidation is continually growing and is now pushing to get in on different kinds of financing, including elective surgical procedures and small-business loans.

Last month, the company formed a similar partnership with Google, offering a way for businesses that resell the American technology giant’s services to gain low-cost financing.

“It’s showcasing Lending Club’s unique ability to provide financing for the new economy,” Mr. Laplanche said.

 

 

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