By Guglielmo de Stefano on Friday 16 October 2015
Lending Club had been testing a multi-draw line of credit product over the last few months.
After the release of the Lending Club Open Integration tool in August 2015, the world’s foremost marketplace lending platform today has launched another new product to increase access to credit for small businesses.
The new tool is a multi-draw line of credit product, giving small businesses convenient and flexible credit options. Its functionality is extremely straightforward and businesses can see whether they qualify or not in a few minutes. Similarly to the SME term loan product released in 2014, eligible firms must have been operating for two years and they must be able to generate revenue streams of at least $75,000 per year.
The new product’s main differentiator is the way that money is lent. Loans are not issued in one single tranche, but businesses can draw what they need and at the time they need it. Lines of credit range from $5,000 to $300,000, with no fees or hidden costs. The only cost is a 1-2% fee when a line is drawn. Fixed interest rates per annum range from 5.9% to 25.9%. Variable interest rates start at 6% per annum, ranging up to an upper limit 21.6% per annum.
The result is a more flexible product that allows borrowers to potentially reduce their cost of borrowing, since they won’t pay interest from the outset. Lending Club’s Founder and CEO Renaud Laplanche commented:
"Small business owners continue to experience insufficient access to affordable and transparent credit that can give them the confidence to make investments and create jobs. Our platform's new multi-draw line of credit product gives them a predictable, flexible, low cost way to access credit 'on demand' if and when they need it."
The platform has been piloting the new product over the last few months with the cooperation of selected partners, including Alibaba.com and Ingram Micro (a B2B company in the technology industry). After a successful trial run, the product is now completely available to all qualified small businesses.
John Arensmeyer, Founder and CEO of Small Business Majority, a US small business advocacy organization, founded and run by small business owners, weighed in:
"Small businesses are starved for capital, and we welcome new products that offer more options in the marketplace as credit cards may be too small, cash advances too expensive and not transparent, and bank lines can be very hard to get. […] Lines of credit provided through companies like Lending Club that are committed to transparency and responsibility are greatly needed."
Similarly, Kelly Carter, Sr. Director of Credit Development for Ingram Micro Inc., which had a critical role in developing the new product, added:
"Ingram Micro wanted to expand its financial offerings and provide its channel partners with an efficient, flexible, and transparent approach to securing more capital to better service the needs of small businesses nationwide. The new Ingram Micro Lending Club solution enables our channel partners to purchase technology directly from Ingram Micro via a credit line of up to $300,000. It's fast, it's easy and our channel partners are eager to take advantage of it."
This new product is the evidence that Lending Club is branching out into new niches, taking on not only “historical competitors”, such as Prosper and Funding Circle US, but other platforms that are more focused on lines of credit, including OnDeck, Kabbage and Dealstruck. Compared to these options, Lending Club’s new product carries at least one clear competitive advantage: price. OnDeck’s line of credit carries an APR of 13% to 36%, Kabbage charges 20% to 113% and Dealstruck 11% to 22%, plus the prime rate (3.25%) on its inventory line of credit.