Anthony Hilton: Google's new business Lending Club borrowing from the past
Saturday 18 May 2013
A few days ago, Google bought a slice of a business called Lending Club in a deal which valued the whole at $1.6bn (£1bn). Not bad for a company barely five years old.
It is a peer-to-peer lender, which uses the internet to cut out the banks by putting those with money in direct touch with those who want to borrow. It says that by the end of the year its loan book will be more than $2bn, so the enthusiasm of the Google executive who did the deal is not quite as over the top as it sounds. Lending Circle, he said, “is using the internet to reshape the financial system and profoundly transform the way that people think about credit and investment”.
Anyway Wednesday evening found me at one of London’s swankier hotels at the launch of a British equivalent, a company called Relendex. It is not the first peer-to-peer lender in the UK because we already have Zopa supplying personal loans and Rate Setter catering more for SMEs. But what sets Relendex apart is it is geared to commercial property finance and hopes to mobilise quite large sums of money.
The opportunity is vast because £150bn of existing commercial property loans fall due in the next couple of years. The banks do not want to refinance many of the smaller assets, which means the owners of a lot of fully let and high-quality buildings will be looking for finance. Relendex hopes to meet this need.
Intriguingly, though this is clearly bang up to date, the business model of a peer-to-peer lender is pretty much the same as that of the first building societies. Then dozens of individuals came together to pool their savings so one of them could build a property, and then another and another until all their needs were satisfied. So the basic financial principle is more than 200 years old. Perhaps best not to say that to the man from Google though.
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