LendingClub will become the primary source of U.S. buyer financing on Alibaba.com
Alibaba is yet to take on Amazon in the U.S. consumer e-commerce market. The Chinese company is targeting small and mid-size businesses. Alibaba has signed a deal with the San Francisco-based peer-to-peer lending company LendingClub to provide financing to the U.S. small and mid-size businesses buying from Chinese suppliers.
Easy financing for businesses buying on Alibaba platform
The move is Alibaba’s latest push to lure American business to its platform. LendingClub will match small business borrowers with lenders. It will become the primary source of the U.S. buyer financing on Alibaba.com. The U.S. start-up will provide loans of up to $300,000 to pay for goods from Chinese suppliers on Alibaba’s trading platform.
The new venture called “Alibaba.com e-Credit Line, Powered by Lending Club” will offer financing over one to six months at rates of 0.5% to 2.4%, much lower than interest rates that credit cards incur. LendingClub simply connects borrowers with lenders for a small fee, instead of lending money itself. It went public in December, and is currently valued at close to $7 billion.
Why Alibaba chose LendingClub
LendingClub CEO Renaud Laplanche told Reuters that Alibaba was looking for a tech-savvy partner that could operate at a low cost to keep the cost of credit lower for the U.S. buyers. The Hangzhou-based company picked LendingClub because its platform is relatively faster and easier to use than a traditional bank. LendingClub provides a quick approval decision, said Alibaba’s global marketing director Michael Lee.
A large number of American small businesses purchase bulk items such as computer equipment, makeup sets, and blue jeans from Chinese suppliers through Alibaba’s trading platform. Until now, U.S. businesses that needed short-term financing to buy those goods were using a Chinese bank that Alibaba had partnered with. Now LendingClub will offer financing to such businesses.
Reducing the lending risk
Instead of relying on traditional lenders that require collateral, these businesses can use LendingClub to get an unsecured loan with quick approval. Short-term nature of such financing reduces the overall lending risk, which is borne by a pool of investors including endowments, pension funds and foundations.
Alibaba was recently criticized by the Chinese regulator SAIC for not doing enough to prevent the sale of fake goods on its platforms. The regulator also accused Alibaba employees of taking bribes.
Alibaba shares rose 0.73% to $90.79 in pre-market trading Tuesday.
