Lending Club Program Pairs Investors and High-Risk Borrowers

The world’s largest online investment marketplace has introduced a program to match risk-tolerant lenders with borrowers who don’t qualify for conventional bank loans.

Lending Club’s innovative new Select Plus platform is an aid to borrowers whose financial history and credit scores disqualify them from taking out bank loans. Select Plus identifies these borrowers for lenders willing to work with them on loans and investments. The program is intended to help borrowers get funds they need and help lenders achieve attractive returns.

Last year alone, the San Francisco-based fintech company received more than 14 million bank loan applications, many of which could not be approved because people did not meet the requirements set by the bank lender, whether due to bad credit history, low credit scores, or other reasons.

The new program will allow Lending Club to broaden its customer base to include those who fall outside bank lender criteria, while providing new opportunities for sophisticated investors.

This allows all three parties to benefit: Investors will have access to potentially high, risk-adjusted returns; borrowers will take out loans in accordance with the company’s rate parameters; and the Lending Club itself will further expand its customer base and generate greater demand.

Lending Club Chief Capital Officer Valerie Kay says the new program is a major step forward in the company’s evolution. "We continue to unlock the power of the marketplace model to generate access and ultimately savings for borrowers by finding and matching the right capital sources with the right borrowers," Kay said.

Select Plus is just the latest in a series of Lending Club innovations that includes such instruments as CLUB Certificates and Levered Certificates, which respond to the demands of different categories of investors and borrowers who need access to mainstream consumer lending.

The first investor to use Lending Club's Select Plus platform will be Theorem Partners LLC. Theorem managing partner Hugh Edmundson says that integrating Theorem’s credit investment model with Select Plus will offer access to affordable loans for borrowers who have so far been rejected. "We are excited about this initiative and that Lending Club's scale and expertise in demand-generation will open up a path to financial health for more borrowers," Edmundson said.

Founded in 2007, Lending Club has facilitated billions of dollars in loans though WebBank, an FDIC member. A sign of the company’s growth is that fully a quarter of its historical loan volume occurred during the last 12 months.