The company has shown fast, steady growth in its business for years, staying ahead of competitors and making old-school banks look increasingly like relics. Capping the company's progress was Wednesday's regulatory filing detailing its plans to raise as much as $500 million in an initial public offering.
But the regulatory filing, along with Lending Club's recent moves, shows a sense of urgency. With competitors like Prosper nipping at its heels, Lending Club is angling for faster expansion into new lending markets.
That's why Lending Club added small-business loans in March and acquired Springstone Financial in April, which extends the company into medical and student loans. But all that expansion helped push the company into the red for the last six months after finishing a profitable 2013. Perhaps Lending Club has concluded it was time to leave behind the more conservative approach that characterized its early years.
If Lending Club's expansion succeeds, it's more likely that it will be the company that hooks you up when it's time to buy that new car, send the kid to college, or pay off that high-interest credit card. And those with money to save will be more likely to lend it out for vastly better interest than the near-zero rates that bank savings accounts offer today.
The expansion comes at a cost, though.
Increasing expensesIn 2011, Lending Club had a net loss of $12.3 million on revenue of $12.5 million. In 2012, that went to a loss of $6.9 million on revenue of $34 million. Things turned around in 2013, with net income of $7.3 million on revenue of $98 million.
But its increasing expenses whacked that profitability. Comparing the first six months of 2013, Lending Club's sales and marketing expenses rose from $16.1 million to $39.8 million. Engineering rose from $5.3 million to $13.8 million. Total operating expenses rose from $35.3 million to a whopping $102.8 million.
As the saying goes, you have to spend money to make money.
Lending Club is a juggernaut when it comes to peer-to-peer lending. As of June 30, it facilitated $5.04 billion in loans -- more than $1 billion of them in the second quarter of 2014. The chart shows the classic up-and-to-the-right direction that gets businesses salivating.
But it sees itself as actually pretty small in the scheme of things -- so far, at least. "We estimate that in June 2014 approximately $380 billion in outstanding consumer credit would meet our marketplace's credit policy," Lending Club said in the filing detailing its IPO plans.
