September 8, 2015 / 3:23 PM / 4 years ago

UPDATE 1-Online lender CommonBond raises $35 mln in latest funding round

(Adds details on Nelnet deal paragraph 10)

By Olivia Oran

Sept 8 (Reuters) - Online student lender CommonBond Inc said on Tuesday it has raised $35 million in its latest round of funding, as investment for marketplace lending companies continues to climb.

The New York-based company declined to give its overall valuation following the raise, but said the funding was from new investors August Capital and Nyca Partners, as well as existing investors.

CommonBond’s current investors include former Citigroup Inc Chief Executive Vikram Pandit, former Thomson Reuters Corp CEO Tom Glocer and ex-Barclays Plc wealth head Tom Kalaris.

“Marketplace lending is moving from marginal to mainstream in 2015,” CommonBond CEO David Klein said in an interview.

Klein said the funding will be used to expand the company’s operations and to build out its team and technology.

The popularity of online lenders to consumers and small businesses has exploded in the last several years as an alternative to traditional banks. New regulations following the financial crisis have forced banks to have stricter capital requirements which in turn have reduced their ability to lend in certain areas.

CommonBond, which funds and refinances graduate school loans at lower interest rates, is just the latest online lender to announce funding, following the initial public offerings last December of LendingClub Corp and On Deck Capital Inc .

Last year, lending startups raised more than $1.4 billion in equity financings across 48 deals, the highest annual total ever for the industry, according to research from CB Insights.

CommonBond has 35 employees and plans to expand to 60 by the end of the year. It expects to originate more than $500 million in loans by the end of the year.

CommonBond secured $150 million in loan purchase commitments in February from student loan servicing company Nelnet to finance more loans.

In July, the company hired former Macquarie Capital banker Morgan Edwards as its chief financial officer.

Due to regulatory scrutiny, many large banks have pulled back from the student loan market, which topped nearly $1.3 trillion at the end of the second quarter. CommonBond competes with Social Finance Inc or SoFi for student loan refinancing business. CommonBond says it saves borrowers more than $14,000 on average over the life of the loan. (Reporting by Olivia Oran in New York; Editing by Matthew Lewis and Andrew Hay)

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