00:18.840 --> 00:22.650 Vlad Sherbatov: My guest today is Mario Bottone. Mario has led 00:22.650 --> 00:26.070 global organizations in various sectors over the past 20 years, 00:26.550 --> 00:29.850 and is currently the Chief Marketing Officer at Thinking 00:29.850 --> 00:34.410 Capital. Thinking Capital is one of Canada's original FinTech 00:34.410 --> 00:38.160 companies, and in many ways has transformed the way small 00:38.160 --> 00:42.270 businesses access capital they need to grow. The Montreal based 00:42.270 --> 00:46.170 company has been around since 2006. And since then, has helped 00:46.170 --> 00:50.070 over 16,000 small businesses with smarter access to 00:50.070 --> 00:54.030 financing. Amid the COVID-19 crisis, Thinking Capital has 00:54.030 --> 00:57.720 created an extensive resource library, including the Small 00:57.720 --> 01:01.500 Business Health Index, which gathers sales data on a daily 01:01.500 --> 01:05.430 basis from 600 merchants to illustrate the impact on the 01:05.430 --> 01:08.700 Canadian small business landscape, by industry and by 01:08.700 --> 01:13.170 region. Mario joins me today to discuss the impact of COVID-19 01:13.410 --> 01:16.050 on the small business industry, as well as the lending 01:16.050 --> 01:20.070 community, new important trends that are emerging, as well as 01:20.070 --> 01:23.400 what the short and long term economic recovery process may 01:23.400 --> 01:23.540 Mario, thank you so much. And let's just dive right in. I've 01:23.540 --> 01:23.910 look like. 01:32.390 --> 01:35.090 been following the Small Business Health Index that 01:35.090 --> 01:38.120 Thinking Capital has put together, that breaks down the 01:38.120 --> 01:41.570 impact of COVID-19, or small business owners, both by 01:41.600 --> 01:44.330 industry as well as by geography, can you just share 01:44.330 --> 01:47.180 some of the main insights that you've been able to gather so 01:47.180 --> 01:49.490 far from this health index? 01:49.900 --> 01:53.830 Mario Bottone: We started to keep track of the potential 01:53.830 --> 01:59.440 impact of COVID Burley in March. But it got obviously amplified 01:59.440 --> 02:02.680 pretty dramaticly over the course of two weeks and around 02:02.680 --> 02:06.010 mid March, we were all caught a bit off guard. And this is where 02:06.010 --> 02:09.820 we kind of took an initiative, in light of the fact that we had 02:10.150 --> 02:15.040 roughly around 600 or so merchants data on a daily basis 02:15.040 --> 02:18.040 that we were tracking, we decided that at that point in 02:18.040 --> 02:21.280 time to kind of take a look at what was happening with direct 02:21.280 --> 02:25.210 sales activities. And, of course, we kind of wanted to 02:25.210 --> 02:29.410 kind of look at the progress or the lack of progress, I would 02:29.410 --> 02:33.550 say from week to week, day to day, and also benchmark it, you 02:33.550 --> 02:36.160 know, we had a situation where we had to kind of figure out 02:36.190 --> 02:38.560 what would be a good benchmark, we come to suggest something 02:38.590 --> 02:42.190 earlier in the year on February 8, in terms of the data to have 02:42.190 --> 02:45.670 a benchmark. But we also wanted to kind of track what was 02:45.670 --> 02:48.580 happening in the short term in terms of we want to have a 02:48.580 --> 02:53.290 rolling week over week type of look of the data. And hopefully, 02:53.290 --> 02:55.930 at one point or another track the recovery in the economy to a 02:55.930 --> 02:58.990 certain extent as well, right? Like some of these industries at 02:58.990 --> 03:03.760 this stage of the game have been able to make the giant leap to 03:03.970 --> 03:08.410 the next phase and kind of conditioning themselves for 03:08.440 --> 03:12.130 COVID-19 world to come up restaurants offer takeout 03:12.460 --> 03:16.750 opportunities to provide your product through an E commerce 03:16.750 --> 03:20.140 channel. There are companies that are better adapting to 03:20.140 --> 03:23.440 this, the way the data was set up. It's kind of a combination 03:23.440 --> 03:27.040 of amalgamation all these types of companies. So by no means are 03:27.040 --> 03:31.900 we able to parse out specific strategies that certain sectors 03:32.290 --> 03:36.010 are implementing and seeing if they're less effective, or more, 03:36.040 --> 03:40.360 it's anecdotal. That being said, it still was very early on, you 03:40.360 --> 03:44.680 saw dramatic declines, day to day, week over week. And when 03:44.680 --> 03:47.020 everything stopped specifically for the restaurant and bar 03:47.020 --> 03:50.620 sector, that's where it fell off the cliff, that are some that 03:50.620 --> 03:53.170 are basically adapting better than others. So it's an 03:53.170 --> 03:55.660 interesting look, you know, by no means that we have all the 03:55.660 --> 03:58.660 small businesses in Canada, you know, we don't have like, four 03:58.660 --> 04:02.410 or 500,000, you know, merchants reporting their daily activities 04:02.410 --> 04:06.760 here. But it's a snapshot. And it still gives, you know, along 04:06.760 --> 04:10.510 with other information that we provide in our resource center, 04:10.510 --> 04:12.490 and it's one of the first things we did, I think we did pretty 04:12.490 --> 04:15.220 quickly as we started building up something we thought was a 04:15.220 --> 04:20.050 useful repository for small medium business that we could 04:20.050 --> 04:23.650 direct some of our customers to. But this is an extension of 04:23.650 --> 04:26.500 that. We're hoping that it also gives us the first lead 04:26.500 --> 04:29.350 indicators that the economy is starting to slowly but surely 04:29.350 --> 04:29.900 Vlad Sherbatov: I mean, I'm looking across the board and 04:29.900 --> 04:29.950 come back to. 04:31.880 --> 04:34.730 like you said, it may not be capturing every business owner 04:34.730 --> 04:37.070 out there may not be capturing all the tactics and how they're 04:37.070 --> 04:40.730 actually adapting to what's happening. But when you compare 04:40.730 --> 04:43.940 them side by side, certain things definitely jump out. Like 04:43.940 --> 04:47.090 for example, when you look at the grocery sector, they are 04:47.090 --> 04:50.540 down but they're down only about 12% when we're looking at this 04:50.540 --> 04:54.200 particular week versus the benchmark week versus average, 04:54.200 --> 04:58.520 it's minus 60%. And the sports and leisure industry had an 04:58.520 --> 05:01.970 uptick because people are now work to by fitness equipment. 05:02.270 --> 05:05.780 Can you just speak about some of the outliers that you've noticed 05:06.050 --> 05:08.540 the impact and pull it is different on them than the rest 05:08.540 --> 05:09.200 of the industries. 05:09.720 --> 05:11.700 Mario Bottone: There's winners and losers in any crisis, right? 05:12.150 --> 05:17.970 In many ways, this particular industry emerged from the 05:18.030 --> 05:22.740 industry that were in, emerge from the ashes of the 2008 05:22.740 --> 05:27.450 crisis, right. So companies do emerge from these types of 05:27.450 --> 05:30.750 situations, what's different in this particular situation is 05:30.750 --> 05:33.570 that some of the companies have to get through the storm before 05:33.570 --> 05:36.300 they see the light of the day afterwards, afterwards, right. 05:36.300 --> 05:41.070 So there's a lot of work to be done. The key to this situation 05:41.070 --> 05:44.640 is to be able to weather the storm, and to be in a position 05:44.700 --> 05:49.320 of, you know, kind of adjusting your business model to reflect 05:49.320 --> 05:52.800 this post COVID-19 world, because I don't think we're ever 05:52.800 --> 05:57.810 going to return entirely to a state of normalcy that we had 05:57.810 --> 06:02.610 prior to this place is not going to happen. So you know, we have 06:02.610 --> 06:07.260 to be as an organization able to identify, you know, those types 06:07.260 --> 06:14.610 of sectors that are going to be able to survive, stabilize, and 06:14.610 --> 06:17.490 then potentially thrive, and entrepreneurs across this 06:17.490 --> 06:21.750 country, those who've been doing business a certain way, have to 06:21.750 --> 06:26.040 adapt the bounce back, or the rebound scenario on the economy 06:26.040 --> 06:29.040 is going to be slow and gradual, it's going to be a bit of a 06:29.040 --> 06:33.960 dance in many ways that certain sectors of the of the economy 06:33.960 --> 06:38.640 opening up while others stay quarantined. And some of these 06:38.670 --> 06:43.410 merchants will reemerge those with better models that allow 06:43.410 --> 06:45.840 them to go through the storm and others who are going to, you 06:45.840 --> 06:50.430 know, literally kind of re emerge from this situation as a 06:50.640 --> 06:54.360 completely different business, or significantly different 06:54.600 --> 06:56.670 business settings, probably a more accurate way of saying it. 06:57.150 --> 06:59.730 So, you know, we'd look at it and say to ourselves, okay, 07:00.120 --> 07:06.330 merchants that had embraced an E commerce type of approach 07:06.360 --> 07:11.220 platform, are had a significant digital footprint. Now they're 07:11.310 --> 07:15.660 well equipped to potentially weather the storm. You know, 07:15.690 --> 07:20.910 physical businesses, such as restaurants that provide like an 07:20.910 --> 07:26.340 ordering takeout option. Again, they're probably down 07:26.340 --> 07:29.310 considerably in our index, which suggests that but those who 07:29.310 --> 07:32.550 basically have a takeout option at least have a lifeline, those 07:32.550 --> 07:38.310 businesses are our best equipped to kind of see, see it through 07:38.370 --> 07:42.480 and stabilize over the course of the recovery, which will be 07:42.810 --> 07:49.440 fairly long. There are local construction businesses, who are 07:49.440 --> 07:54.450 going to be called upon to retrofit establishments to abide 07:54.450 --> 07:57.060 by post COVID-19 regulations, you're starting to see it right 07:57.060 --> 08:02.340 now and go to grocery stores, you see these glass or plastic 08:02.340 --> 08:07.410 partitions that are being put up. That in itself, is we look 08:07.500 --> 08:10.890 as a lender and look at organizations that have the best 08:10.890 --> 08:14.850 opportunity for stabilization, potential growth, those are 08:14.850 --> 08:16.020 other areas too. 08:21.640 --> 08:24.160 The other thing that I think is being underestimated here, and 08:24.160 --> 08:29.500 it's not really, I would say, was not in our, our sweet spot 08:29.500 --> 08:32.410 as a lender and talking about the capital, but is something 08:32.410 --> 08:36.820 that has been emerging over the last five to 10 years, and it's 08:36.820 --> 08:41.020 going to become more prevalent, I think, in this new world is 08:41.020 --> 08:45.100 the gig economy workers. They'll technique to you know, in some 08:45.100 --> 08:48.760 instances, or one or two people shops, maybe they'll have to be 08:48.760 --> 08:51.040 three, four or five, they'll have to make some investments, 08:51.040 --> 08:57.010 because now you can see a lot of our traditional businesses 08:57.010 --> 09:00.640 needing to require new skill sets, whether it is to get an E 09:00.640 --> 09:04.180 commerce site, or additional it, maybe some specialized 09:04.180 --> 09:10.000 marketing, digital marketing, some logistics, some physical 09:10.150 --> 09:15.610 Embarkment or retrofits for their product, or their weather 09:15.640 --> 09:18.370 stations and how they deliver their product. All those 09:18.370 --> 09:24.040 different elements now will make for smaller workers, smaller 09:24.280 --> 09:29.470 sized organizations or gig economy type workers to be 09:29.710 --> 09:34.450 potentially more solicited. And those are type of organizations 09:34.450 --> 09:39.220 that might need to invest to handle more demand for their for 09:39.220 --> 09:43.510 their services. And the other thing too, is, you know, in 09:43.510 --> 09:47.320 light of some of the issues with supply chain, we all experienced 09:47.320 --> 09:52.030 that initial shock of going to Costco and seeing that we're 09:52.030 --> 09:54.760 running out of toilet paper and other products. Try to find a 09:54.760 --> 09:59.500 Lysol wipe somewhere it's impossible. There's gonna be a 09:59.500 --> 10:03.910 greater dependency moving forward on doing something 10:03.940 --> 10:07.330 related to local supply and manufacturers and distributors, 10:07.810 --> 10:11.110 I can ensure local suppliers and businesses might be able to 10:11.110 --> 10:14.680 benefit from some of these changes that are occurring. 10:14.860 --> 10:18.850 Vlad Sherbatov: We actually did a survey a few weeks ago. And we 10:18.850 --> 10:22.150 served a couple of 1000 business owners that are in our database. 10:22.150 --> 10:25.240 And we just asked them about their situations. And in the 10:25.240 --> 10:28.240 very end, we also asked them to just share sort of their story, 10:28.240 --> 10:29.650 you know, if they're comfortable, because we just 10:29.650 --> 10:32.320 wanted to see sometimes it doesn't come through and stats, 10:32.500 --> 10:34.690 what the builds business or actually experiences, we asked 10:34.690 --> 10:38.410 him to share some stories. And there were so many cases that I 10:38.410 --> 10:43.030 read, where a business was actually set up here. And it 10:43.030 --> 10:45.730 could be in the manufacturing space, for example, or something 10:45.730 --> 10:48.490 in the construction related field, that they were actually 10:48.760 --> 10:51.820 able to work. But the problem was that they were expecting 10:51.820 --> 10:54.430 materials to come in from somewhere else. And that was 10:54.430 --> 10:58.000 literally the only sort of barrier to them actually getting 10:58.000 --> 11:00.250 through this crisis, you know, they didn't get shut down here, 11:00.250 --> 11:02.650 they were able to stay at home, they don't have a retail store, 11:02.680 --> 11:04.840 they don't need it, but they just couldn't get the materials, 11:04.840 --> 11:05.620 they couldn't do the work. 11:06.640 --> 11:10.540 Mario Bottone: Exactly, exactly. I think that's also gonna be a 11:10.540 --> 11:14.500 major consideration in terms of how we reopen the economy, is 11:14.500 --> 11:18.430 what access you do have in terms of supply. As I mentioned 11:18.430 --> 11:24.250 earlier, there's no quick fix to this. And I think the fix is 11:24.250 --> 11:28.780 really figuring it out from the health perspective, ensuring 11:28.900 --> 11:32.710 greater testing quarantine people faster, more effectively, 11:33.250 --> 11:39.550 and letting people come back to work, socialize, with less 11:39.550 --> 11:42.820 concerns about whether they're getting this thing. There's so 11:42.820 --> 11:45.610 many things emerging in terms of information right now, I'm gonna 11:45.610 --> 11:49.300 help friends. And I suspect in a couple of months from now, you 11:49.300 --> 11:52.510 know, we're gonna go much, much more, much more testing. And 11:52.900 --> 11:55.930 that's when we'll feel a little bit more confident that we truly 11:55.930 --> 12:00.730 are not going to get really true back to the normal situation, we 12:00.730 --> 12:04.780 were back in, let's say my first term in February when until we 12:04.780 --> 12:05.980 have the vaccine, I suspect. 12:06.250 --> 12:08.740 Vlad Sherbatov: Right. Mario, you talked a little bit about 12:08.740 --> 12:12.070 how everybody sort of needs to adapt. And that includes the 12:12.070 --> 12:15.280 lenders as well. And we all know that access to capital is so 12:15.280 --> 12:18.160 important for small business owners and small business 12:18.160 --> 12:20.980 owners, really anybody in Canada? So what are you 12:20.980 --> 12:22.810 currently doing with your current customers that are 12:22.810 --> 12:25.000 coming to you and calling you and saying, Hey, I have a loan 12:25.000 --> 12:28.450 outstanding? This is my situation? How can you guys help 12:28.450 --> 12:33.250 me? And my second question is post crisis, how does a business 12:33.250 --> 12:37.420 owner think about now in terms of setting themselves up to be 12:37.450 --> 12:40.150 eligible for financing in the future and have a type of 12:40.150 --> 12:44.110 business structure and systems in place that will make them 12:44.980 --> 12:48.010 attractive to a lender, for example, like thinking capital, 12:48.040 --> 12:51.340 so they will be able to access the working capital that they 12:51.340 --> 12:52.120 need in the future? 12:53.039 --> 12:55.379 Mario Bottone: Well, the answer to your first question is, you 12:55.379 --> 13:01.409 know, we've, we've been finding ways to extend loans, reduce 13:01.409 --> 13:06.329 payments, accommodated some of the cash flow restrictions that 13:06.329 --> 13:10.889 our customers have. So I think we owe it to them. Our senior 13:10.889 --> 13:13.859 lenders have been very accommodating as well. So in 13:13.859 --> 13:18.569 many ways, we've been paying it forward in terms of the type of 13:19.589 --> 13:23.429 understanding that everybody has at this stage, the game, this is 13:23.429 --> 13:25.739 something that one could have predicted, especially small 13:25.739 --> 13:29.279 businesses who are so tight, and Representative big portion of 13:29.279 --> 13:29.939 our economy. 13:35.150 --> 13:39.890 The challenge we'll have is that what worked pre COVID might not 13:39.890 --> 13:43.760 necessarily work post COVID. And we're going to have to figure 13:43.760 --> 13:48.110 out, you know, based on conditions that we think are 13:48.110 --> 13:51.650 going to prevail, have a bit of a crystal ball, we got to look 13:51.650 --> 13:53.900 at companies differently. Certainly we want to look at 13:53.900 --> 13:56.570 businesses that were able to make it through the crisis, 13:56.600 --> 14:00.260 because they had something to offer that sustained itself, and 14:00.260 --> 14:05.270 are probably in the best position to take, you know, to 14:05.270 --> 14:09.230 take the situation and just evolve and good business owners 14:09.230 --> 14:13.790 good business practices, a well known presence may be in a 14:13.790 --> 14:17.150 certain community, good customer base, you name it, those are 14:17.150 --> 14:20.810 type of organizations are going to, I think continue. I'll be 14:20.810 --> 14:23.600 it, you know, probably hurt by this, but probably continue. And 14:23.600 --> 14:27.890 we want to look at them maybe in similar ways. But it is also 14:27.890 --> 14:30.380 about looking towards the future and getting a better 14:30.380 --> 14:37.340 understanding as to which which of these organizations are best 14:37.340 --> 14:40.130 suited to take advantage of some of the emerging trends I 14:40.130 --> 14:43.880 mentioned earlier. Right. So yeah, we'll be evaluating them 14:44.150 --> 14:47.720 differently. There's no question the risk model we had before 14:48.020 --> 14:51.470 will have to be adjusted to reflect this post COVID economy. 14:52.080 --> 14:55.050 Vlad Sherbatov: Do you think that in addition to just the 14:55.050 --> 14:59.430 risk model, there will also be changes to the actual product 14:59.430 --> 15:01.920 offerings, I mean right now in the industry, some of the 15:01.920 --> 15:04.770 primary small business financing options, you have a term loan, 15:04.770 --> 15:07.590 you have a merchant cash class, maybe a line of credit as well. 15:07.680 --> 15:10.620 Do you think that there will be sort of evolution of product 15:10.620 --> 15:12.600 offerings as well, most of the surprises? 15:13.230 --> 15:15.810 Mario Bottone: That's a very good question. I think there 15:15.810 --> 15:20.670 will be adjustments made, I think the primary vehicles are 15:20.670 --> 15:23.130 going to stay similar. So there might be adjustments made 15:23.130 --> 15:27.180 accordingly, to reflect some of the intricacies associated with 15:27.990 --> 15:30.840 an economy that's emerging, you know, maybe there's more risk 15:30.840 --> 15:36.360 sharing, potentially, in certain circumstances, more guarantees 15:36.390 --> 15:40.950 that need to be offered in some instances. But that being said, 15:41.130 --> 15:45.000 I don't think there's going to be dramatic changes, I think 15:45.000 --> 15:47.580 there's just going to be a different way of applying them, 15:47.580 --> 15:51.930 perhaps to these to these organizations, and how we 15:51.930 --> 15:55.260 evaluate risk is going to change, that's for sure. You 15:55.260 --> 15:59.190 know, somebody in my entourage said the other day that 16:00.000 --> 16:04.230 restaurants have been around for 4000 years. So they'll be around 16:04.230 --> 16:08.010 after this too. They might be different, they might have to 16:08.010 --> 16:12.990 abide by certain codes and approaches. But there's still 16:12.990 --> 16:17.850 the need for people to get together and have a meal. We 16:17.850 --> 16:22.140 just got to figure out which ones have the best chance of not 16:22.140 --> 16:26.370 only being sustained through this process, but also thriving 16:26.400 --> 16:30.420 in a new model, a new a new post COVID economy. 16:36.360 --> 16:38.040 Vlad Sherbatov: What do you think, is the role of the 16:38.040 --> 16:41.010 FinTech online lending community as a whole and I know Thinking 16:41.010 --> 16:44.190 Capital is one of the one of the oldest players in the game, you 16:44.190 --> 16:46.680 know, so I've even heard somebody say that they were they 16:46.680 --> 16:50.490 were FinTech, before FinTech kind of became a word. So I 16:50.490 --> 16:53.070 would like to know from your point of view, what is the 16:53.070 --> 16:57.120 responsibility or the role that the that the online FinTech, 16:57.120 --> 17:01.530 small business lending community should have? Or has right now to 17:01.530 --> 17:03.960 help us as a country sort of get through this period? 17:05.190 --> 17:07.740 Mario Bottone: In general, if you look at the fact that the 17:07.740 --> 17:12.750 natural reaction everywhere, is to try to tap on the shoulders 17:12.750 --> 17:14.850 of the banks and say, Can you help us? Remember the 17:14.850 --> 17:17.130 government's here. Can you help us get the money to the right 17:17.130 --> 17:21.090 hands? Well, FinTechs are uniquely positioned because we 17:21.090 --> 17:23.940 deal with these small businesses on a day in and day out basis, 17:23.970 --> 17:26.700 we're talking to them, they're calling us. And we have the 17:26.700 --> 17:30.720 mechanisms and the technology to get the money to them within a 17:30.720 --> 17:35.310 period of time. That's extremely reasonable. So we're hoping that 17:35.580 --> 17:39.780 we can be a big player in this, in all this. That being said, 17:39.810 --> 17:44.100 this is about helping Canadian small businesses. And we believe 17:44.100 --> 17:49.530 that the answer is technology. Really, the answer is processes 17:49.530 --> 17:54.180 that go between 48 and 72 hours from application through 17:54.300 --> 17:58.890 disbursement of funds, we want to make sure that we're a 17:58.890 --> 18:03.330 solution that the government could utilize the agencies can 18:03.330 --> 18:05.910 utilize to get the monies to the right people at the right time, 18:07.170 --> 18:10.350 isn't going to happen, we're hoping, we're definitely gonna 18:10.350 --> 18:12.570 be there for the recovery. But we'd like to be there during the 18:12.570 --> 18:13.230 storm as well. 18:14.410 --> 18:16.330 Vlad Sherbatov: I think that's really great. And I get to see 18:16.330 --> 18:20.320 the letter that you did with the OnDeck. And, and I think that 18:20.320 --> 18:23.320 common goal that we have for the entire end for the entire 18:23.320 --> 18:26.530 economy to really be bound is how all the different even 18:26.530 --> 18:30.010 competitors are rallying together. And because we all 18:30.010 --> 18:32.290 have that common objective, and I think that was really, really 18:32.290 --> 18:34.480 great to see, I'm actually very proud of the way that our 18:34.480 --> 18:37.840 industry has responded so far, overall. And they're in a very 18:37.840 --> 18:40.390 proactive way, not just human on the business lending side. But 18:40.390 --> 18:42.910 even on the consumer lending side. There's so much great 18:42.910 --> 18:44.980 information that you've shared, I want to really, really thank 18:44.980 --> 18:47.230 you for your time. And for these insights. 18:47.290 --> 18:48.940 Mario Bottone: Thank you for this. Well, I think we need to 18:48.940 --> 18:51.490 be confident that the economy will get back on its feet one 18:51.490 --> 18:54.910 day, we just need to figure out, you know, who will be best 18:54.910 --> 18:58.300 suited to kind of take advantage of these new dynamics that we're 18:58.300 --> 19:01.240 going to have to face. And that's, I think, the goal of 19:01.240 --> 19:05.320 this, of this financing community now, look at the world 19:05.350 --> 19:06.820 a little bit differently than we did before. 19:07.950 --> 19:09.960 Vlad Sherbatov: Thank you so much for your time, Mario once 19:09.960 --> 19:12.630 again, and I hope you have a great rest of the day.