Alternative lenders Prosper Marketplace and OnDeck Capital are tightening up an already close relationship by agreeing to share strategy as well as exchange loan referrals, the companies announced this week at the LendIt conference in New York.
The two lenders, which don’t compete — Prosper runs an online marketplace for consumer loans, while OnDeck’s platform is for small-business lending — already have a referral deal, and in their announcement didn’t offer many details about what will change. But under the new “strategic partnership,” the two companies will work together to develop new lending solutions and shared marketing efforts, they said.
The closer ties will also provide some potential competitive protection again LendingClub, which competes directly against Prosper for consumer loans, and has also begun to ease its way into the same small-business lending space where OnDeck operates.
Prosper offers consumers access to fixed-rate, fixed-term personal loans ranging from $2,000 to $35,000. OnDeck offers small-business loans between $5,000 and $250,000, and also offers its customers business lines of credit. The two companies are roughly the same size, with startup Prosper valued at about $1.2 billion after making $3 billion in loans, while OnDeck, which had an IPO in December, has a market cap of $1.38 billion and has loaned more than $2 billion to small businesses across the U.S. and Canada.
While the two companies will operate in a “more and more integrated” way, they have no plans to merge, OnDeck CEO Noah Breslow told American Banker. He added that many small-business owners take out personal loans to support their businesses, making a natural overlap with Prosper’s business, as acquiring and underwriting the two kinds of loans are very different.
Prosper has grown more than 350 percent over the past year, and has made a string of deals to increase its momentum. In January it acquired American Healthcare Lending, which makes loans up to $100,000 for elective medical procedures such as plastic surgery and fertility treatments, for $21 million. It also struck a deal in March with the 160-bank Western Independent Bankers consortium to serve as a funding source for personal loans that the community banks could issue.