Lending Club, Middleman for Small Loans, Plans a Stock Offering

In its nearly eight years, the Lending Club, the biggest marketplace for peer-to-peer loans, has garnered fans across Wall Street. Now, the company hopes to bring even more investors into its fold.

The company filed to go public on Wednesday, hoping to seized on the rapid success of the peer-to-peer lending industry as it grows into a robust alternative to traditional bank loans.

In a prospectus, the Lending Club listed $500 million as a preliminary fund-raising target, though that is generally regarded as a placeholder and the firm could seek more. But even at that level, it would rank it among the 10 biggest-ever stock market debuts of an Internet company.

The Lending Club has been the leader in the peer-to-peer lending industry for several years, overtaking slightly older competitors in the process. From its founding through June 30, the company says that it has financed more than $5 billion worth of loans and paid out nearly $494 million in interest to investors.

Driving its success has been the rise of peer-to-peer lending, which essentially connects investors with potential borrowers online. The Lending Club steers clear of riskier borrowers by focusing on individuals with clean credit histories with FICO scores higher than 640. It uses computer algorithms to match up loan applications, and their risk of default, with appropriate investors.

Borrowers can secure loans at an average interest rate of 14 percent, while largely avoiding some of the red tape that comes from traditional lenders. They might also be able to obtain loans at sizes that regular banks won't make.

Though initially meant to help bypass banks by drawing capital from ordinary individuals willing to make loans, the industry has instead attracted big mutual funds and hedge fund firms eager to lend money when standard interest rates remain low. Its chief executive, Renaud Laplanche, was partly inspired by the 18 percent interest rate on his credit card.

So popular has peer-to-peer lending been among big institutions that the Lending Club and its competitors have had to put limits on how many loans they can buy, as well as how quickly they can bid on upcoming loans.

The presence of Wall Street isn't limited to lenders on Lending Club's marketplace. On its board are Lawrence H. Summers, the former Treasury secretary; John J. Mack, the former chief executive of Morgan Stanley; and Mary Meeker, the venture capitalist and onetime star Internet analyst.

The company, which has already raised nearly $400 million in funding to date, counts among its backers heavyweights like Google, the venture capital firm Kleiner Perkins Caufield & Byers and the mutual fund giants T. Rowe Price and BlackRock.

And anticipation over the Lending Club's impending I.P.O. had been so high that many of Wall Street's biggest investment banks battled to claim a piece. The filing disclosed that the stock sale will be led by Morgan Stanley and Goldman Sachs.

As it has grown, the Lending Club has moved beyond debt consolidation into newer, potentially more lucrative offerings like loans for small businesses, students and elective surgery.

The fervor for peer-to-peer lending has propelled the Lending Club's growth enormously in recent years. The company originated $1.8 billion worth of loans in the first six months of the year, more than doubling what it did in the same time last year.

It reported $86.9 million in the first six months of the year, up 134 percent. And it adjusted earnings before interest, taxes, depreciation and amortization which excludes some noncash charges, rose 55 percent, to $5.9 million.

Left unsaid in the filing were several crucial details about the Lending Club's I.P.O. Among them: the price range that the company will seek for its shares, which of its existing investors plan to sell their holdings, and on which exchange the company will list.

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