Peer-to-peer platform CircleBack Lending has joined forces with the investment banking firm Jefferies to facilitate the sale and securitization of up to $500 million in loans.
The US–based platform says that the fixed-rate installment loans range in size from $3000 to $35,000 and only consumers at the higher end of the credit risk spectrum will be able to access the loans. As a borrower you must boast a FICO score of at least 660 and must also pass a “thorough” interview and verification process conducted by a loan analyst from the company in order to take out a loan.
CircleBack Co-Founder and CEO, Michael Solomon said:
“These transactions through Jefferies will allow us to provide our loans to a much wider segment of the U.S. population, which remains in need of responsible alternatives to traditional bank loans and credit cards.”
“It is also a strong vote of confidence in our company that one of the premier investment banks in the world has chosen us as a source of prime consumer credit assets.”
CircleBack launched in 2013 and has provided $4 million in loans to high-quality borrowers for the purposes of debt consolidation, home improvement, and small business working capital. The platform reckons that the next step for lenders will depend in part on the development of a robust securitization market for the loans they originate. And with industry loan volumes still small compared to the $11 trillion-plus US consumer credit space, CircleBack believes there remains a great deal of room for growth.
Jefferies will aim to leverage its expertise in the securitization market to structure securities backed by CircleBack-sourced loan assets that can be rated by agencies like S&P and Fitch, and subsequently sold to a wide array of fixed income investors. Such investors may include insurance companies, asset managers, endowments, and even the banks that marketplace lending platforms are competing with for borrowers.
Securitizations are a hot topic in the US peer-to-peer lending space right now. A number of major platforms – including the likes of Lending Club, Prosper and SoFi – have already sold securitization bundles. The fact that the investment product hasn’t yet reared its head in the UK is further evidence that institutional involvement in peer-to-peer lending remains far greater in the States than in the Europe and the UK.