Alibaba selects LendingClub to lend to US buyers of Chinese goods, by Agencies

The Chinese (C) and US (R) flags fly over signs of Alibaba Group Holding Ltd hung on the facade in front of the New York Stock Exchange before the company's initial public offering (IPO) under the ticker "BABA" in New York September 19, 2014. [Photo/Agencies]

Alibaba Group Holding Ltd is teaming with LendingClub Corp to offer financing to US businesses to buy from Chinese suppliers, hoping to make it easier for American firms to tap the world's largest economy.

LendingClub, an eight-year-old San Francisco startup, said it will provide its core service of matching small business borrowers with lenders on Alibaba.com, the Chinese company's global wholesale platform.

In the exclusive arrangement, LendingClub becomes the main source of US buyer financing on Alibaba.com. It will offer loans of up to $300,000, typically for a few months, at rates of 0.5 percent to 2.4 percent - a fraction of the double-digits that credit cards incur.

"They were looking for a technology-aware platform and also a partner that can operate at a low cost, so that the cost of credit for US buyers would be lower," LendingClub founder and CEO Renaud Laplanche told Reuters.

Alibaba derives the lion's share of its revenue from retail platforms Taobao and Tmall. But it got its start supporting small businesses with Alibaba.com, which Jack Ma co-founded out of his Hangzhou apartment in 1999.

The service is used by businesses on the lookout for cheap products. Alibaba posted revenue of $631 million in international wholesale commerce in the year to March 2014, a sliver of the $8.5 billion in revenue over the same period.

Alibaba intends to grow its US footprint by connecting American sellers with increasingly affluent Chinese buyers. It is also trying to aid smaller businesses and merchants, an effort analysts say earns it goodwill while laying the foundation for a longer-term expansion.

The Chinese company settled on LendingClub because it found its platform faster and easier to use than a traditional bank. The startup, which has provided some $6 billion in loans since its 2007 inception, is capable of keeping up with demand, said Michael Lee, Alibaba.com's global marketing director.

"They're capable of providing an instant approval decision..., that a traditional bank may not be able to. This is really critical to the borrowers," Lee said.

The lending risk will be borne by its pool of institutional investors including foundations, endowments and pension funds.

Laplanche said the short-term nature of the envisioned loans, typically six months, tended to reduce overall risk.

Alibaba will now look for similar providers to extend financing beyond the United States, to major markets such as Britain, Australia, Germany and Canada, Lee said.