Alibaba, LendingClub Offer U.S. Buyers Loans for China Goods
(Bloomberg) -- Alibaba Group Holding Ltd. is replacing one of the biggest banks in China with a company a fraction of its size to help U.S. businesses finance bulk orders of T-shirts, iPhone cases and other items.
The e-commerce giant announced Tuesday that LendingClub Corp. will offer loans of as much as $300,000 to U.S. companies buying goods from Chinese suppliers on Alibaba.com. The service was previously provided by Bank of China Ltd., one of the country’s Big Four state-owned banks.
Alibaba is trying to reach 2 billion individual customers and 10 million small businesses outside China as its e-commerce dominance at home limits growth potential, Chairman Jack Ma said last month. The deal gives LendingClub access to millions of potential new customers as the peer-to-peer lending pioneer seeks to expand beyond consumer loans. The San Francisco-based company climbed 6.4 percent at 9:32 a.m. in New York.
“We started seven years ago mostly helping consumers pay off existing credit,” LendingClub Chief Executive Officer Renaud Laplanche said in a phone interview. Increasingly, the company will be “providing lower-cost financing at the point of sale, whether it’s for, in this case, businesses buying goods bought from China” or consumers buying items online.
Loans for Alibaba.com purchases can be for as long as six months and are designed to be paid off in full at the end of the term, Laplanche said.
Monthly interest rates range between 0.5 percent and 2.4 percent, based on the borrower’s credit history and financial health, according to the program’s website. A business paying the maximum rate could expect to pay about $43,200 interest over six months on a $300,000 line of credit.
The lowest rate is half as much as what buyers on Alibaba.com were able get from Bank of China, Laplanche said. LendingClub can provide cheaper financing because its model is more efficient and was designed to plug into other online businesses, he said. A Beijing-based spokeswoman for Bank of China said the lender had no immediate comment.
To assist new customers, Alibaba will help vet suppliers and shipments, and transfer funds directly if buyers chose. The e-commerce company is expanding after a record $25 billion initial public offering in September, which made it more valuable than Amazon.com Inc. and EBay Inc. combined.
LendingClub’s IPO in December was also among the biggest share sales last year, and the company briefly attained a valuation of more than $10 billion. The offering put a spotlight on a group of companies seeking to overhaul how people and businesses borrow money.
LendingClub began lining up credit for small businesses last year and, in January, struck a deal to help Google Inc. extend financing to some of its partners.
“Many investors have yet to appreciate the growth potential of the various verticals in which LC could apply its business model,” Mark Palmer, an analyst at BTIG LLC, said in a research note Tuesday. “LC’s partnership with Alibaba, coming on the heels of the announcement of the company’s deal with Google, provides yet another demonstration of the company’s potential reach and growth prospects within the small-business lending space.”
LendingClub jumped to $20.50. That compares with Monday’s close of $19.26 and the $15 price from the IPO.
Alibaba’s sites include Taobao Marketplace, which enables millions of individuals and small businesses to sell products. Tmall.com provides a virtual shopping mall, and Juhuasuan operates using a flash-sales model.
Alibaba is the top shopping site in Russia and Brazil, markets where it currently has no employees. AliExpress -- a site for users outside China -- is the No. 1 shopping site in Russia, researcher TNS said in September.
The company’s PayPal-like online payment system Alipay has 17.9 million active users overseas in more than 100 countries and is accepted by 2,000 merchants overseas, the company said in October.
“We want to make financing as efficient as possible for the millions of U.S. buyers that do business through Alibaba.com,” Michael Lee, Alibaba.com’s global marketing and business development director, said in an e-mailed statement. “Our mission is to make it easy to do business anywhere.”
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