Is Lending Club Not a Viable Investment?

Lending Club is a peer-to-peer financial service that allows individuals to avoid traditional lenders to get personal loans. Lending Club was incorporated in 2007 and initially was a Facebook app. In 2008 Lending Club had to file with the SEC because the loans made could be considered risky. For a borrower, Lending Club has no risk. You fill out an application to borrow money, get accepted, and Lending Club investors commit cash in your loan. Investors of Lending Club notes do have risk when borrowing out their money. The two potential potential risks are:

• The debtor defaulting


• Lending Club files for bankruptcy

Currently Lending Club declaring for bankruptcy is not likely. Lending Club presently is well financed by investment capital. Lending Club has received several rounds of investment. They initially obtained a $2 million in angel investment. The company then obtained a $10 million A round in August of 2007 from Norwest Venture Partners and Canaan Partners. They then got $12 million Series B round, and as of April 2010 $24.5 Million in Series C financing. They now have $53 million in financing.

Lending Club completed SEC registration in 2008. In complying with the SEC, Lending Club must file quarterly reports which can be accessed online. At the time of this writing, September 30th, 2010 is their latest quarterly document. They have $21 million of cash available. A fact is many loans are funded by Lending Club themselves. So a few of their investment capital is tied up within the Lending Club loans . In theory if Lending Club needs cash, they could sell their own loans on the secondary market via FolioFN. Also each note Lending Club owns is generating income. According to the most current 10-Q statement, they have $6 million in Lending Club notes out of a total of $165 million. This implies if they did file for bankruptcy the investors would definitely want to continue loans going to ensure they do not loose their entire venture capital.
nervous about Lending Club going bankrupt, Lending Club covers this topic on their webpage. According to Lending Club’s frequently asked questions, if whatever reason they go bankrupt or cannot service their loans they have another business that is a successor. Lending Club has an agreement with Portfolio Financial Servicing Corporation (www.pfsc.com) to aquire loan maintenance.

Its extremely unlikely Lending Club is a scam. The sheer volume of labor, document trails and the amount of people connected makes this highly unlikely. Based upon their SEC paperwork they are fiscally stable and have a contingency plan should their company functions be no longer viable. The greater possibility as a Lending Club investor is the choice of the loans you invest into.

Thinking about investing in Lending Club? The article author gives a thorough Lending Club review. In comparison to other fixed income investments at the moment Lending Club provides sizable and stable returns.