October 20, 2014
Lending Club, one of the leading peer-to-peer (P2P) lenders in the world, is opting for New York stock exchange (NYSE) for its anticipated upcoming IPO according to The financial Times. This comes as a boost to the fast growing P2P industry which provides online platform for borrowers and lenders to exchange funds. Lending Club’s IPO is expected to take place before the end of this year. The company is hoping to sell $500 million worth of shares and gain a valuation of about $5 billion.
Another lending company, SoFi or Social finance is also expecting to raise $250 million in an IPO. This company specializes in student loan refinancing and has surpassed the $1 billion mark in funded loans to more than 13,500 members. It utilizes an alumni-funded lending model that connects students and recent graduates with alumni and institutional investors. On student loans, SoFi has helped achieve savings of $11,783 on average over the lifetime of loan. SoFi’s student members also enjoy entrepreneurship support, career coaching and unemployment protection.
OnDeck Capital, another P2P lender which specializes in small business loans, has also filed for an IPO as reported by The Financial Times earlier. The company uses cutting edge technology to evaluate companies based on their performance and not their credit score. The company has helped finance more than $1.5 billion to over 700 industries. It has a strong hold in U.S. across all the 50 states serving more than 20,000 businesses.
Royal Bank of Scotland is also looking to entering the P2P lending market by partnering with a third party. RBS plans to work with alternative finance providers in order to provide lending support to smaller businesses. The anticipated lending platform by RBS would target SMEs in the initial phase. RBS is also launching a business accelerator program for SMEs by partnering with NatWest.
B2B, P2P (Peer-to-Peer), B2C lending have been the most sought after financial services for hundreds of years. Some segments, especially P2P is rapidly gaining traction as a credible and vital alternative to large scale banks when it comes to loans and financing. The new breed of P2P lending companies offers affordable lending facilities especially to the SME market. Recent estimates claim that this sector could be a trillion dollar industry within the next decade. In 2013 & 2014, lending companies raised total funding of $567 million which accounts for 24% of the total funding raised by payment companies, as per a new report.
The P2P lending companies are paving the way to reshape the provision of finance. This sector also holds opportunities for alternative and traditional banks to work together and build a financial framework better suited to customers. This new marketplace is evolving rapidly and is also witnessing tie ups between banks and lending companies. This in itself is a huge milestone.