Lending Club, the giant of the so-called peer-to-peer lending industry, garnered huge headlines for its highly anticipated initial public offering last month.
But its closest competitor, Prosper, wants people to know that it is not sitting still. After huge gains in sales last year, Prosper, an online marketplace for loans, is beginning the new year with a new acquisition.
The company announced on Tuesday that it had purchased American HealthCare Lending, which helps patients borrow money to pay for elective medical procedures like cosmetic dentistry and bariatric surgery, for about $21 million in cash.
The deal is intended to help buttress Prosper as it continues its multiyear turnaround. The company was an early pioneer of peer-to-peer lending — in which would-be borrowers go online to be connected with prospective lenders, all of whom are matched by computer algorithms — but stumbled, paving the way for Lending Club to take an enormous lead.
It is a business model that has drawn fans across Wall Street, even as these marketplaces seek in part to displace traditional banks.
(Investors still appear drawn to Lending Club, whose shares were still above the I.P.O. price as of Monday’s close, at $19.99. But they remain below their high of $29.29.)
Prosper has since rebounded from its earlier troubles, originating about $1.6 billion in loans on its platform last year and generating $83 million in revenue, according to its chief executive, Aaron Vermut. By comparison, it originated about $369 million in loans and collected $19.7 million in 2013.
Moreover, Mr. Vermut added in an interview, the company essentially broke even last year.
“Twenty-fourteen was a watershed growth year for us,” he told DealBook.
Now Prosper is working on broadening the types of products it can offer borrowers beyond the standard unsecured loan that is primarily used to pay off higher-interest credit cards. Buying American HealthCare Lending is a step in that direction.
Part of the “Silicon Slopes” community of tech companies in the Salt Lake City area, American HealthCare Lending harnesses the Internet to let patients search for lenders at their doctors’ offices, getting approval sometimes within minutes.
Behind the start-up, according to Mr. Vermut, is the idea of filling in a financing gap being created by insurance plans with climbing deductibles. Prospective customers can use the service to bridge that divide to help pay for things like fertility treatments and weight-loss procedures.
That presents a potentially lucrative business opportunity, with Prosper estimating the market for originating elective medical loans at about $20 billion a year and growing by double-digit percentages. Though the two are already partners, by yoking American HealthCare Lending closer to its own marketplace, Prosper contends that it can offer financing much more cheaply — while getting a presence in doctors’ offices.
“We felt that it’s the perfect place to be disruptive,” Mr. Vermut said.
Such expansion is part of Prosper’s campaign to grow bigger, while the company seeks to protect itself against possible bumps in the road. Another initiative is a big marketing campaign aimed at bringing in retail investors, particularly wealthy individuals, as lenders for its platform.
That effort is intended in part to ensure that Prosper is not dependent on hedge funds that may flee the marketplace if interest rates rise later this year to pursue a hot new investment strategy. At the moment, Mr. Vermut said, about a third of the company’s investor base is made up of retail and high-net-worth individuals, a ratio he would like to change.
A potentially bigger innovation that the company is working on is signing up asset management firms as partners to create new types of funds, like closed-end mutual funds and exchange-traded funds, that allow individuals to invest in Prosper loans from their brokerage accounts.
But what about following Lending Club onto the public markets? Mr. Vermut said that while he salutes his rival for having made the jump — and defining a new type of industry in the process — his own company is not planning on taking that leap anytime soon.
“We’ve been in turnaround for two years,” he said. “There’s more work to be done.”