While spokeswomen from both Google units say the two operate as separate entities (even though Google is the sole limited partner in Google Ventures), it can't be a coincidence that both are eyeing investment opportunity in the alternative lending space. As traditional capital remains tough to come by, even with somewhat improved bank credit, alternative lenders such as On Deck and Lending Club are to be reckoned with. A large part of the Google AdWords business comes from small businesses, so it's in the company's interests to see small businesses grow and expand. The alternative lending market, which includes credit cards and receivables financing, hovers around $1 billion vs. SBA bank lending at about $35 billion. Rohit Arora, CEO of Biz2Credit.com, an online marketplace connecting small- and medium-sized businesses with lenders and other tools and resources, says, however, that as more banks start lending to small businesses again, higher credit-quality businesses will have more choices, meaning alternative lending to those businesses is likely to decline. "There is still a gap for loans for businesses less than 2 years old and those looking for loan amounts up to $25,000, and this might be the gap that Google is focusing on," Arora says.
Lending Club has issued more than $1.65 billion in loans since 2007, including more than $350 million in the last quarter through peer-to-peer lending, which facilitates personal loans to borrowers of up to $35,000 in three- or five-year terms from qualified retail and institutional investors. Small businesses have been increasingly using alternative forms of lending such as peer-to-peer lending when more traditional financing has been tough to get. The company also plans to expand into small-business lending later this year. On Deck CEO Noah Breslow said in an interview in February that while there wasn't pressure to go public this year, it could be an option in the next two to three years. The fast-growing small-business lender has funded more than $450 million in loans to Main Street businesses through its technology-led loan platform. Yet, given that Google Ventures is involved now, combined with the fact that On Deck keeps adding more investors to its list, and lending by the firm continues to rise -- even as traditional lenders dip their toe into small-business lending again -- it's feasible that time frame could be stepped up. Breslow wasn't available for comment. "On Deck has found an efficient way to connect millions of small businesses around the country with the working capital they need to grow their companies," Karim Faris, general partner at Google Ventures, said in a statement. "We invested in On Deck because we believe in the team's game-changing vision, strong talent and disruptive technology.
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