Brian Zwerner of Kensington Blake Capital Review of Consumer Loan Repricings

February 21, 2016

Kensington Blake Capital’s Managing Principal Brian Zwerner serves as a Senior Advisor to Provider Web Capital, a leading finance provider for small businesses in the healthcare sector.  Zwerner provides commentary on the recent repricings in the consumer lending space.

Recent news articles have highlighted that the two premier consumer lending platforms, Lending Club and Prosper, have raised the interest rates and expected defaults on their loans.  These two companies offer consumer installment loans through web-based platforms. These loans are typically used by borrowers to consolidate outstanding credit debt and extend terms out to 3-5 years.  The rates on these loans can vary widely from 5-25%, with the average rates in the low teens. 

Both Propser and Lending Club rely on marketplace models to fund their loans to consumers.  They have each established relationships with institutional and individual investors who purchase the loans originated on their platforms.  While they have many thousands of small individual investors signed up on their platform, it is my belief that a much smaller number of large institutional players drive the pricing for their businesses.  With the recent turmoil in the equity and debt markets, it is clear that these large investors are now demanding a higher rate for loans.

This small re-pricing event certainly shows the weakness behind the marketplace lending model.  While Lending Club and Prosper benefit from not having to raise capital and put assets and default risk on their balance sheet, they are beholden to investor appetite for their product. No number of investors signed up on their platform reduces the risk of a correlation to 1 event where all investors pull back at the same time and chose to sit on their hands.  We saw this type of activity in the credit crisis of 2008/09, we could certainly see it again.

Link to article on Prosper raising loan yields:–update-20160217-01247

Link to article on Lending Club raising loan yields:

More information on Provider Web Capital:



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