Global B2B website Alibaba.com has formed a strategic partnership with Lending Club, a leading U.S. lending marketplace, that makes working capital available to potentially millions of U.S. small businesses that source inventory from China.
The partnership, announced today, has spawned a new product called Alibaba.com e-Credit Line powered by Lending Club, which allows U.S. companies to apply online via the Alibaba.com website for credit lines of $5,000 to $300,000 to finance purchases of goods from Chinese manufacturers and other China-based suppliers who have virtual Alibaba.com storefronts.
Officials for both companies stressed that their goal is to make supply-chain financing available efficiently and lower cost than loans from banks and other conventional lenders. Through Alibaba.com and Lending Club, U.S.-based small businesses can apply for lines of credit in under five minutes to pay suppliers for purchases on Alibaba.com.
Lending Club and Alibaba.com match repayment terms to the cash-flow cycles of borrowers, vet suppliers and shipments, and transfer the funds directly to the supplier. Repayment terms vary from one to six months. Monthly fixed interest rates start at 0.5 percent (6 percent APR).
“It’s a very simple and easy process for small businesses at terms that really match their cash flow needs and makes credit affordable to them,” said Lending Club’s founder and CEO Renaud Laplanche, adding that the service “can become a competitive advantage for small businesses across America.”
San Francisco-based Lending Club, which in December listed on the New York Stock Exchange and recently struck a deal with Google, operates an online platform that matches investors, including pension funds and family offices, with borrowers. From its inception in 2007 through Sept. 30, 2014, Lending Club facilitated more than $6 billion in loans to more than 400,000 borrowers.
“The need we fill is the same that banks have been trying to fill for centuries,” Laplanche said. “The way we are filling that need is more tech enabled with more automation and lower costs than a traditional bank.” The company’s business model allows it to handle “a pretty broad spectrum of loan quality” including small business loans because Lending Club can match borrowers with investors with the appropriate risk tolerances, he said.
Partnering with Alibaba.com, which has millions of registered buyers, gives Lending Club direct access to a large base of potential customers, as well as online transaction and trade data that can help lenders more accurately assess risk.
“The hope is over time, as we continue to work together, we will collect more and more data on the Alibaba marketplace and on transactions between specific suppliers in China and buyers in the U.S,” Laplanche said. “This will enhance underwriting and help us make decisions faster, at lower risk, and at lower interest rates.”
Michael Lee, Alibaba.com’s global marketing and business development director, said Lending Club’s solution furthers the website’s goal of making financing “as efficient as possible” for buyers.
The partnership with Alibaba.com, owned by e-commerce giant Alibaba Group, is a multiyear, exclusive agreement, Laplanche said. “It’s a big commitment on both sides. We’re very excited about making financing easier to obtain so that businesses are able to more seamlessly enter into transactions on the Alibaba platform.”
Due to state lending regulations, e-Credit Line loans currently are not available to borrowers in Iowa, Idaho, Maine, North Dakota, Nebraska or Rhode Island.