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Stanford University MBA Applies Peer-to-Peer Model to Small Business Lending

A Stanford Graduate School of Business (GSB) MBA saw a great opportunity to apply the efficiency of the sharing economy to an area into which it hadn’t yet emerged—small business lending—through Funding Circle.

Sam Hodges, along with a group of Oxford University grads, teamed up to form the company in 2010.

Funding Circle has expanded from the United States to Europe, with business now thriving in Spain, Germany and the Netherlands. By rapidly matching borrowers directly with lenders online, Funding Circle relieves the consumer of the burden and risk of dealing one-on-one with banks. The company has facilitated more than $2 billion in loans, and it has raised $270 million in venture capital.

“Small business lending is still very badly broken,” Hodges said of the current state of the loan industry. “We’re just scratching the surface.” Funding Circle’s peer-to-peer model is part of a revolution in the lending industry, though Hodges acknowledges that his business and those similar to it must remain flexible within the confines of the bigger banks.

“In some cases we go head to head with banks,” he notes. “…But [in other] cases we do many services that banks aren’t able to do… We think marketplace lending is much more stable than a traditional….financial system. You don’t have a ‘too big to fail’ phenomenon.”

After graduating from Stanford with an undergrad degree in engineering, Hodges interned with various investment and venture capital firms in New York, Beijing and San Francisco. The decision to pursue his MBA was pivotal for Hodges, allowing him to take his real-world knowledge and add to it leadership and entrepreneurial training.

Of his time at Stanford, Hodges says, “I picked up a lot of skills that are directly relevant [to Funding Circle]. We were building something quickly with a high degree of passion.”

 

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About the Author

Maggie Boccella
Maggie Boccella

Maggie Boccella, a lifelong resident of Philadelphia, is a freelance writer, artist and photographer. She has consulted on various film and multimedia projects, and she also serves as a juror for the city's annual LGBTQIA Film Festival.

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