In many ways, Canada has long lived under the shadow of the U.S. The alternative lending industry has proven to be no exception. The last few years, however, have seen Canada turn the corner on marketplace lending (MPL).
With MPL markets around the world (especially Europe, U.S., and UK) maturing, startups around the world are scampering to find new locations and new opportunities to tap. Though it is not fair to term Canada as a new entrant to the fintech ecosystem, it has finally garnered the attention as one of the most promising alt-lending hubs.
Canadian Alternative Lending Numbers
As the above image indicates, the Canadian alternative finance industry is on a strong growth momentum. All segments of alt-lending (consumer, SMB, real estate) have shown multiple times growth albeit on a very low base. With a GDP of over 1.5 trillion dollars, it is a massive market for lenders. The current size of the market does not even reach a billion dollars, a paltry sum for a country with household debt over 2 trillion dollars.
A Supportive Regulatory Framework
Ontario Securities Commission (OSC), the fintech regulatory body of Canada, has been very supportive of the industry and is one of the major tailwinds for alternative lending in Canada. In October 2016, OSC started LaunchPad with an aim to support and guide fintech startups with compliance. This initiative was followed by the establishment of a Fintech Advisory Committee in January 2017, which helps apprise the regulator on fintech-related developments as well as regulatory challenges faced by businesses. Feedback from the committee will be used by OSC to frame future regulatory guidelines.
Lending startups will still have to comply with different regulatory compliance obligations depending on what kind of financial services are offered by them. Also, depending on which province they are operating in, they will be subject to different regulation and licensing requirements.
Leading P2P Lenders in Canada
- Lendified was founded in 2015 by Troy Wright and is headquartered in Toronto, Ontario. It raised $80 million in a couple of funding rounds. Small business owners can apply online in under 10 minutes, receive an instant quote, and get funded in as fast as 48 hours. It offers loans ranging from CAD $5,000 to CAD$150,000 with APR ranging from 8%-18% and terms ranging from 6-24 months.
- Borrowell was founded in 2014 by Andrew Graham and Eva Wong. It’s also headquartered in Toronto. It recently raised over $57 million in funding for aggressive expansion and offers free credit score monitoring, personal loans, and product recommendations. It has lent over $10 million to over 10,000 customers. Borrowell offers loans ranging from $1,000-$35,000 and offers two terms–36 months or 60 months–with APRs ranging from 5.6%-25%.
- Financeit was founded in 2011 by Casper Wong, Michael Garrity, and Paul Sehr. Headquartered in Toronto, it has managed from inception to raise over $38 million and recently was acquired by Goldman Sachs for an undisclosed amount. Over the years, Financeit has worked with over 7,000 merchants and processed over $2.5 billion in loan applications. Financeit offers a platform that allows businesses to offer consumer financing to their customers from various devices in Canada. It works with multiple lending partners and automates the banking role for its partner financial institutions, entirely managing loan origination, credit adjudication, regulatory reporting, loan servicing, and collections.
- FundThrough was founded in 2014 by Steven Uster. Its headquarters is in Toronto, and it has raised over CAD $26 million in multiple funding rounds. FundThrough is an innovative technology company helping American and Canadian small business owners improve their cash flow through invoice factoring and financing. It charges 0.5% fees on the top of the funding amount and the borrower has to repay within a period of 12 weeks. The average invoice ranges from $1000 to $100,000 while the average outstanding loan is around $50,000-100,000.
- Lendful Financial was founded in 2015 by Alex Benjamin and is located in Vancouver, British Columbia. It has raised $15 million in multiple funding rounds and offers three-to-five-year, fixed-term loans to credit-worthy borrowers with a credit score of 650 and over. It offers loans up to CAD $35,000 with APRs starting from as low as 7.9%. Loan terms range from 3 to 5 years.
- Lending Loop was founded in 2014 by Brandon Vlaar and Cato Pastoll. Headquartered in Toronto, it has raised $12 million in debt and equity. Lending Loop is Canada’s first and only regulated peer-to-peer lending marketplace focused on small businesses. Its core focus is on providing businesses with accessible capital at a fair rate of interest through a simple online process. Loans range from $5,000- $250,000 with rates starting as low as 5.9% and terms from 3-60 months.
- Progressa was founded in 2013 by Ali Pourdad, David Gens, and Michael Jover. Since inception, it has raised over $11 million. Progressa is a direct-pay lending platform that helps Canadian individuals who are in debt pay back their due bills. It pays its users’ bills directly so they are able to manage debt, interest payments, and collections. The platform provides users with partial payment loans between $1,000 and $15,000 with payback terms ranging from 6 to 60 months. It enables its users to get access to automated interest rate reductions every six months helping them cut down borrowing costs with good payment behavior.
From a global point of view, Canada is a relatively small market and still at a nascent stage. But the supportive regulatory framework coupled with growing interest of VCs and investors in the Canadian market says that major expansion is just around the corner. The Canadian market would also be conducive for U.S. players looking to expand their geographical ambitions.
Written by Heena Dhir.