Lending Club, the Sunnyvale, Calif. lending service where people borrow and lend money among each other, bypassing the banks, and theoretically getting better rates, said it has raised $10.26 million in a first round of financing.
Canaan Partners and Norwest Venture Partners made the investment.
The deal makes the the social lending industry very crowded, and the funding is a large amount for such a young company with little track record — especially when there’s so much competition (see our coverage). Prosper and Zopa both do something similar, and have raised much more cash. CircleLending, Wonga and GlobeFunder are other players (see coverage here).
However, Lending Club was first to build an application on Facebook, which it says has more than 13,000 Facebook users. It says $750,000 in loans have been made. It wants to use the money to expand beyond Facebook.
Lending Club’s investors say the market is still in its earliest stages: “The multi-billion dollar consumer lending market is just beginning to leverage the power of social networks,” said Dan Ciporin, a venture partner at Canaan.”
Lending Club is available to individual borrowers with credit scores at or above 640. Using Lending Club, borrowers can apply for personal loans of $500 to $25,000 to be funded by individual lenders. To date, lenders have funded 80 percent of all loan requests, the company says.
The company says it uses pre-set criteria such as credit worthiness, being friends on Facebook, sharing network affiliations, belonging to the same groups or by geographical location.