03 - 02 - 2015 | |
The companies behind two of the hottest stock market debuts of 2014, Lending Club and the Alibaba Group, are teaming up - to help American companies buy parts from Chinese manufacturers.
The two announced on Tuesday that they would form a partnership to provide financing for manufacturers in the United States to buy products and supplies through the Chinese marketplace Alibaba.com. Through Lending Club, the giant of the online marketplace lending industry, those companies can line up from $5,000 to as much as $300,000 for each purchase order.
It's an unusual move meant in part to replace traditional business supply-chain borrowing, at least for the small- to medium-size businesses that look to Alibaba for a portion of their manufacturing. Rather than have to rely on banks or other traditional lenders who require collateral for their financing, these customers can instead use Lending Club's systems to procure an unsecured business loan with near-instant approval.
"This partnership is going to make a pretty big difference in terms of U.S. business' ability to buy goods from China," Renaud Laplanche, the chief executive of Lending Club, said in a telephone interview.
And it is a unifying of two of the most talked-about online marketplaces of the moment. Alibaba is one of China's biggest Internet companies, whose multiple platforms - including Alibaba.com, which is meant for wholesale purchases - draw millions of customers. And Lending Club helped define what once was known as peer-to-peer lending, in which potential investors can go online to be matched with hopeful borrowers.
The loans for the new venture, to be called "Alibaba.com e-Credit Line, Powered by Lending Club," comes at lower interest rates than what others can provide. According to Mr. Laplanche, the new venture offers a monthly interest rate starting at 0.5 percent, about half of what a more traditional lender could provide.
But unlike more traditional manufacturing financing options, such as "factoring," the loans aren't backed by particular assets.
Alibaba had begun searching for a lending partner several months ago, eventually reaching out to both traditional banks and newer market-based lenders. After what amounted to a lengthy audition process, including trips to Alibaba's offices in China, the Chinese e-commerce giant ultimately chose to go with Lending Club.
"First of all, they are also a platform business," Michael Lee, Alibaba.com's global marketing and business development director, said in a telephone interview, adding that customers had asked for an simple financing solution for some time. "They are also very transparent with their rate and the way they do business. And they got good feedback from their own users."
For Alibaba, according to Mr. Lee, the hope is that customers will use such financing to make orders at least once a year. And if the system proves as easy to use as both sides hope, it could help convince more American businesses to order from Alibaba.com more often.
For Lending Club, the move is meant to help further a move into new kinds of lending. Though it began life by offering debt consolidation loans to help pay off credit cards, the company has pushed to enter new kinds of financing, including elective surgical procedures and small-business loans.
Last month, the company formed a similar kind of partnership with Google, offering a way for businesses that resell the American technology giant's services to gain low-cost financing.
"It's showcasing Lending Club's unique ability to provide financing for the new economy," Mr. Laplanche said.
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