There are a number of online lending platforms that offer small business financing and facilitate peer-to-peer consumer lending. CPG researched a selection of the most popular online lenders to understand their operating models and their growth since launch. In general, each of these non-depository platforms aims to profitably and efficiently serve small borrowers via technology and by employing sophisticated predictive analytics and electronic monitoring.
Small Business Lending
On the small business lending side, CPG researched three companies – Kabbage, Capital Access Network, and On Deck Capital. Although these firms vary in the size of the businesses they serve and the funding options they provide, they all emphasize:
These companies are closely-held so detailed financial data is not available; however available statistics do illustrate the tremendous growth of these relatively small operations:
Refer to Table 1 for additional information about target segments and growth.
The peer-to-peer lenders, Prosper and Lending Club, have several differences from the online small business lenders, specifically:
These peer-to-peer lenders, though relatively small, also have experienced rapid growth:
Titan Bank (Mineral Wells, TX) and Congressional Bank (Bethesda, MD) are traditional banks that have decided to expand their customer bases through online lending. These banks have partnered with Lending Club, buying and servicing loans Lending Club originates. Titan Bank also uses Lending Club to extend personal loans to its customers. On Deck also has partnered with traditional banks that can elect whether to portfolio the loans or simply refer them to On Deck.
These online lending platforms appear to have developed profitable and effective models for serving segments of businesses and consumers that banks have not been able or willing to serve. The key question to ponder becomes: How long will it take before these online competitors fix their sights on the borrowers that traditional banks currently serve?