For some time now we have had something of a duopoly in the consumer p2p lending space. Lending Club and Prosper have dominated the market and no strong third contender has emerged.
Well, that is all about to change with the announcement today from CircleBack Lending. They have secured a $500 million deal with investment banking firm Jefferies. While this is certainly not a peer-to-peer deal I believe it is the largest single investment in the marketplace lending industry from any one source.
I have written about CircleBack Lending before. I covered their launch just over a year ago and again when they secured a $1.9 million funding round. But I have known CEO Michael Solomon for several years. CircleBack Lending is actually his second startup in this space, his first was a company called Loanio that launched back in 2008 in the midst of the financial crisis and the SEC regulation decision.
While Loanio never got off the ground, Solomon has admitted he was too early, CircleBack Lending has been far more successful. The marketplace lending space is heating up now and this latest deal demonstrates the tremendous interest this asset class is garnering from Wall Street.
About This $500 Million Deal
There is an official press release out this morning about this deal. It explicitly states that:
Jefferies aims to leverage its expertise in the securitization market to structure securities backed by CircleBack-generated assets that can be rated by agencies like S&P and Fitch, and then be sold to a wide array of fixed income investors…
So this deal is all about securitizing the consumer loans originated by CircleBack and then packaging these loans to sell to insurance companies, endowments, banks and other large investors.
When I spoke with Michael Solomon yesterday at the ABS East Conference in Miami, he said that he has aggressive growth plans for CircleBack. He believes that all the pieces are in place now for CircleBack to be a strong contender in this industry. His growth targets for the next year are extremely aggressive and they include putting this $500 million to work and more. If they can pull that off they will clearly be the fastest growing platform in the entire marketplace lending space.
I wish them well and will be following along with interest. Solomon has agreed to share loan volume numbers with Lend Academy so we will be able to chart their progress over the coming months.
