Lendingclub.com entered the Fintech space in 2007. Indeed, it has been one of the best online marketplace, to secure a personal loan. Fiver years ago, the company began to offer business loans. Today, the publicly traded company has announced that it will no longer be underwriting business loans. In other words, say good-by to lending club business loans.
What does this mean?
When a Lender decides to stop underwriting deals, it means that they will not longer fund deals. Lenders, like lending club raise capital, manage capital and underwrite the loans. In return, they make a profit on the interest the collect after paying expenses and investors. The NYSE, company has been raising money for years via its peer to peer platform. However, now it will not be using that capital to provide business funding. Why? Business lending for lending club accounted for 7% to 8% of its business, the remaining was personal loans. They have been battling for the last five years, competing against companies like On Deck, Rapid Finance, Paypal.com and others.
Business borrower options?
In reality, lending club is not the only business lender. Fintech, is becoming more specialized by the day. Without a doubt, lending club’s market niche is personal loans. Business borrowers can turn to other lenders. However, the online lending space is not for every business owner. For example, if you are top seller on amazon.com, perhaps your best option is amazon business loans. Amazon is more likely to provide you with business funding than any other lender in the market.
Your data affects your credit decision today
They have your sales data, they have your track record and more data about you. Taking this into account, they can make a faster credit decision. Paypal.com will act in a similar fashion. Since you are a customer of paypal.com, they can access all your data and deliver a loan fast. These are just two lenders. Today, there are about 20 to 40 online lenders specializing in different niches. For instance, Lendinero.com specializes in latino-owned and minority-owned businesses. Other lenders, focus on invoices or specific transactions.
A better future for business borrowers
In summary, the specialization of online lenders online makes the customer experience better. Business borrowers will have better options as the fintech market evolves thru time. The fact of the matter is that businesses are very different in nature. Understanding this will force lenders to become more segment based. Maybe, the future will not only be fintech, instead it may be called business segment lending. Lending club’s exit, provides better options for business borrower. At the same time, new opportunities for existing lenders, fintech, and online marketplaces.
