Peer to Peer Lending? Lending Club Funds 24% of Loans

Like most other social lending sites, Lending Club‘s home page includes saccharine quotes from satisfied customers. The latest happy couple is Anna & Roger from Buffalo, who like that their loan isn’t being made by “an all-knowing computer somewhere based solely on numbers.” However, Lending Club’s sales report filings with the SEC indicate that 24% of loans funded since their relaunch last October have been funded by Lending Club itself. And I’m betting that they use computers. And numbers.

Lending Club has filed 20 weekly sales reports with the SEC as a condition of their securities registration, and because Lending Club is known to get in on the action (they funded $7 million of the first $16 million in loans issued), the SEC must have asked them to include their participation in their sales reports. Here’s an example where Lending Club contributed $17,750 of a $25,000 loan:

That means Lending Club is funding 71% of the borrower’s loan! And that’s not the most notable instance… in one case, Lending Club funded $12,800 of a $14,000 loan – 91%. Here’s what the data looks like over time (each point is a weekly report):

You can see that in the first few months of operation, Lending Club was funding high percentages of loans – between 30% and 50% each week. The percentage funded by Lending Club dropped into the single digits over the holidays, and has dropped again recently. Note that the weeks where Lending Club doesn’t pump money in turn out to be slower weeks. Is growth slowing overall? Is this why Lending Club has started removing the downloadable data file from their statistics page?

Is there a real story here? I mean, is there really anything wrong with a company eating their own dog food every now and then? If I put myself in the shoes of a Lending Club lender, it might be comforting to know that the people running the site are in on the action, too. Maybe that would improve collections? But in the shoes of a VC who had given Lending Club money, I would be pretty scared. Are these guys in the business of building a business, or just spending my money to make loans? I thought I’d funded a web startup, and instead I’m funding a bank. (And as a US taxpayer, I’m already funding my share of banks.)

Here’s another view of the data, showing Lending Club’s funding in blue (again, each bar is a weekly report):

Reading between the lines, I think there are a couple of take-home messages here:

• Lending Club really, really wants to be a web 2.0 company, but doesn’t get it. They really want to have a killer product that lots of people use, and they really want to appear transparent, but they aren’t willing to let it happen organically, and had they not registered with the SEC, no one outside the company would know that they have been using their own money to pump up their marketplace. And they don’t seem to understand why that’s a problem.
• Lending Club talks about being a technology company, but past behavior seems to indicate that they would rather just make loans.
• Given the recent trend in funding percentages (down to single digits lately), it looks like Lending Club is starting to run low on cash. Lending Club raised $4.1 million back in September, and has spent $2.4 million to date on new loans. That leaves less and less each week to spread around.

Here is the data for these charts:

And here is the full data set, including report date, loan amount, and Lending Club portion.

Follow @P2PLendingNews