Vlad Sherbatov: My guest today is Mario Bottone. Mario has led
global organizations in various sectors over the past 20 years,
and is currently the Chief Marketing Officer at Thinking
Capital. Thinking Capital is one of Canada's original FinTech
companies, and in many ways has transformed the way small
businesses access capital they need to grow. The Montreal based
company has been around since 2006. And since then, has helped
over 16,000 small businesses with smarter access to
financing. Amid the COVID-19 crisis, Thinking Capital has
created an extensive resource library, including the Small
Business Health Index, which gathers sales data on a daily
basis from 600 merchants to illustrate the impact on the
Canadian small business landscape, by industry and by
region. Mario joins me today to discuss the impact of COVID-19
on the small business industry, as well as the lending
community, new important trends that are emerging, as well as
what the short and long term economic recovery process may
Mario, thank you so much. And let's just dive right in. I've
look like.
been following the Small Business Health Index that
Thinking Capital has put together, that breaks down the
impact of COVID-19, or small business owners, both by
industry as well as by geography, can you just share
some of the main insights that you've been able to gather so
far from this health index?
Mario Bottone: We started to keep track of the potential
impact of COVID Burley in March. But it got obviously amplified
pretty dramaticly over the course of two weeks and around
mid March, we were all caught a bit off guard. And this is where
we kind of took an initiative, in light of the fact that we had
roughly around 600 or so merchants data on a daily basis
that we were tracking, we decided that at that point in
time to kind of take a look at what was happening with direct
sales activities. And, of course, we kind of wanted to
kind of look at the progress or the lack of progress, I would
say from week to week, day to day, and also benchmark it, you
know, we had a situation where we had to kind of figure out
what would be a good benchmark, we come to suggest something
earlier in the year on February 8, in terms of the data to have
a benchmark. But we also wanted to kind of track what was
happening in the short term in terms of we want to have a
rolling week over week type of look of the data. And hopefully,
at one point or another track the recovery in the economy to a
certain extent as well, right? Like some of these industries at
this stage of the game have been able to make the giant leap to
the next phase and kind of conditioning themselves for
COVID-19 world to come up restaurants offer takeout
opportunities to provide your product through an E commerce
channel. There are companies that are better adapting to
this, the way the data was set up. It's kind of a combination
of amalgamation all these types of companies. So by no means are
we able to parse out specific strategies that certain sectors
are implementing and seeing if they're less effective, or more,
it's anecdotal. That being said, it still was very early on, you
saw dramatic declines, day to day, week over week. And when
everything stopped specifically for the restaurant and bar
sector, that's where it fell off the cliff, that are some that
are basically adapting better than others. So it's an
interesting look, you know, by no means that we have all the
small businesses in Canada, you know, we don't have like, four
or 500,000, you know, merchants reporting their daily activities
here. But it's a snapshot. And it still gives, you know, along
with other information that we provide in our resource center,
and it's one of the first things we did, I think we did pretty
quickly as we started building up something we thought was a
useful repository for small medium business that we could
direct some of our customers to. But this is an extension of
that. We're hoping that it also gives us the first lead
indicators that the economy is starting to slowly but surely
Vlad Sherbatov: I mean, I'm looking across the board and
come back to.
like you said, it may not be capturing every business owner
out there may not be capturing all the tactics and how they're
actually adapting to what's happening. But when you compare
them side by side, certain things definitely jump out. Like
for example, when you look at the grocery sector, they are
down but they're down only about 12% when we're looking at this
particular week versus the benchmark week versus average,
it's minus 60%. And the sports and leisure industry had an
uptick because people are now work to by fitness equipment.
Can you just speak about some of the outliers that you've noticed
the impact and pull it is different on them than the rest
of the industries.
Mario Bottone: There's winners and losers in any crisis, right?
In many ways, this particular industry emerged from the
industry that were in, emerge from the ashes of the 2008
crisis, right. So companies do emerge from these types of
situations, what's different in this particular situation is
that some of the companies have to get through the storm before
they see the light of the day afterwards, afterwards, right.
So there's a lot of work to be done. The key to this situation
is to be able to weather the storm, and to be in a position
of, you know, kind of adjusting your business model to reflect
this post COVID-19 world, because I don't think we're ever
going to return entirely to a state of normalcy that we had
prior to this place is not going to happen. So you know, we have
to be as an organization able to identify, you know, those types
of sectors that are going to be able to survive, stabilize, and
then potentially thrive, and entrepreneurs across this
country, those who've been doing business a certain way, have to
adapt the bounce back, or the rebound scenario on the economy
is going to be slow and gradual, it's going to be a bit of a
dance in many ways that certain sectors of the of the economy
opening up while others stay quarantined. And some of these
merchants will reemerge those with better models that allow
them to go through the storm and others who are going to, you
know, literally kind of re emerge from this situation as a
completely different business, or significantly different
business settings, probably a more accurate way of saying it.
So, you know, we'd look at it and say to ourselves, okay,
merchants that had embraced an E commerce type of approach
platform, are had a significant digital footprint. Now they're
well equipped to potentially weather the storm. You know,
physical businesses, such as restaurants that provide like an
ordering takeout option. Again, they're probably down
considerably in our index, which suggests that but those who
basically have a takeout option at least have a lifeline, those
businesses are our best equipped to kind of see, see it through
and stabilize over the course of the recovery, which will be
fairly long. There are local construction businesses, who are
going to be called upon to retrofit establishments to abide
by post COVID-19 regulations, you're starting to see it right
now and go to grocery stores, you see these glass or plastic
partitions that are being put up. That in itself, is we look
as a lender and look at organizations that have the best
opportunity for stabilization, potential growth, those are
other areas too.
The other thing that I think is being underestimated here, and
it's not really, I would say, was not in our, our sweet spot
as a lender and talking about the capital, but is something
that has been emerging over the last five to 10 years, and it's
going to become more prevalent, I think, in this new world is
the gig economy workers. They'll technique to you know, in some
instances, or one or two people shops, maybe they'll have to be
three, four or five, they'll have to make some investments,
because now you can see a lot of our traditional businesses
needing to require new skill sets, whether it is to get an E
commerce site, or additional it, maybe some specialized
marketing, digital marketing, some logistics, some physical
Embarkment or retrofits for their product, or their weather
stations and how they deliver their product. All those
different elements now will make for smaller workers, smaller
sized organizations or gig economy type workers to be
potentially more solicited. And those are type of organizations
that might need to invest to handle more demand for their for
their services. And the other thing too, is, you know, in
light of some of the issues with supply chain, we all experienced
that initial shock of going to Costco and seeing that we're
running out of toilet paper and other products. Try to find a
Lysol wipe somewhere it's impossible. There's gonna be a
greater dependency moving forward on doing something
related to local supply and manufacturers and distributors,
I can ensure local suppliers and businesses might be able to
benefit from some of these changes that are occurring.
Vlad Sherbatov: We actually did a survey a few weeks ago. And we
served a couple of 1000 business owners that are in our database.
And we just asked them about their situations. And in the
very end, we also asked them to just share sort of their story,
you know, if they're comfortable, because we just
wanted to see sometimes it doesn't come through and stats,
what the builds business or actually experiences, we asked
him to share some stories. And there were so many cases that I
read, where a business was actually set up here. And it
could be in the manufacturing space, for example, or something
in the construction related field, that they were actually
able to work. But the problem was that they were expecting
materials to come in from somewhere else. And that was
literally the only sort of barrier to them actually getting
through this crisis, you know, they didn't get shut down here,
they were able to stay at home, they don't have a retail store,
they don't need it, but they just couldn't get the materials,
they couldn't do the work.
Mario Bottone: Exactly, exactly. I think that's also gonna be a
major consideration in terms of how we reopen the economy, is
what access you do have in terms of supply. As I mentioned
earlier, there's no quick fix to this. And I think the fix is
really figuring it out from the health perspective, ensuring
greater testing quarantine people faster, more effectively,
and letting people come back to work, socialize, with less
concerns about whether they're getting this thing. There's so
many things emerging in terms of information right now, I'm gonna
help friends. And I suspect in a couple of months from now, you
know, we're gonna go much, much more, much more testing. And
that's when we'll feel a little bit more confident that we truly
are not going to get really true back to the normal situation, we
were back in, let's say my first term in February when until we
have the vaccine, I suspect.
Vlad Sherbatov: Right. Mario, you talked a little bit about
how everybody sort of needs to adapt. And that includes the
lenders as well. And we all know that access to capital is so
important for small business owners and small business
owners, really anybody in Canada? So what are you
currently doing with your current customers that are
coming to you and calling you and saying, Hey, I have a loan
outstanding? This is my situation? How can you guys help
me? And my second question is post crisis, how does a business
owner think about now in terms of setting themselves up to be
eligible for financing in the future and have a type of
business structure and systems in place that will make them
attractive to a lender, for example, like thinking capital,
so they will be able to access the working capital that they
need in the future?
Mario Bottone: Well, the answer to your first question is, you
know, we've, we've been finding ways to extend loans, reduce
payments, accommodated some of the cash flow restrictions that
our customers have. So I think we owe it to them. Our senior
lenders have been very accommodating as well. So in
many ways, we've been paying it forward in terms of the type of
understanding that everybody has at this stage, the game, this is
something that one could have predicted, especially small
businesses who are so tight, and Representative big portion of
our economy.
The challenge we'll have is that what worked pre COVID might not
necessarily work post COVID. And we're going to have to figure
out, you know, based on conditions that we think are
going to prevail, have a bit of a crystal ball, we got to look
at companies differently. Certainly we want to look at
businesses that were able to make it through the crisis,
because they had something to offer that sustained itself, and
are probably in the best position to take, you know, to
take the situation and just evolve and good business owners
good business practices, a well known presence may be in a
certain community, good customer base, you name it, those are
type of organizations are going to, I think continue. I'll be
it, you know, probably hurt by this, but probably continue. And
we want to look at them maybe in similar ways. But it is also
about looking towards the future and getting a better
understanding as to which which of these organizations are best
suited to take advantage of some of the emerging trends I
mentioned earlier. Right. So yeah, we'll be evaluating them
differently. There's no question the risk model we had before
will have to be adjusted to reflect this post COVID economy.
Vlad Sherbatov: Do you think that in addition to just the
risk model, there will also be changes to the actual product
offerings, I mean right now in the industry, some of the
primary small business financing options, you have a term loan,
you have a merchant cash class, maybe a line of credit as well.
Do you think that there will be sort of evolution of product
offerings as well, most of the surprises?
Mario Bottone: That's a very good question. I think there
will be adjustments made, I think the primary vehicles are
going to stay similar. So there might be adjustments made
accordingly, to reflect some of the intricacies associated with
an economy that's emerging, you know, maybe there's more risk
sharing, potentially, in certain circumstances, more guarantees
that need to be offered in some instances. But that being said,
I don't think there's going to be dramatic changes, I think
there's just going to be a different way of applying them,
perhaps to these to these organizations, and how we
evaluate risk is going to change, that's for sure. You
know, somebody in my entourage said the other day that
restaurants have been around for 4000 years. So they'll be around
after this too. They might be different, they might have to
abide by certain codes and approaches. But there's still
the need for people to get together and have a meal. We
just got to figure out which ones have the best chance of not
only being sustained through this process, but also thriving
in a new model, a new a new post COVID economy.
Vlad Sherbatov: What do you think, is the role of the
FinTech online lending community as a whole and I know Thinking
Capital is one of the one of the oldest players in the game, you
know, so I've even heard somebody say that they were they
were FinTech, before FinTech kind of became a word. So I
would like to know from your point of view, what is the
responsibility or the role that the that the online FinTech,
small business lending community should have? Or has right now to
help us as a country sort of get through this period?
Mario Bottone: In general, if you look at the fact that the
natural reaction everywhere, is to try to tap on the shoulders
of the banks and say, Can you help us? Remember the
government's here. Can you help us get the money to the right
hands? Well, FinTechs are uniquely positioned because we
deal with these small businesses on a day in and day out basis,
we're talking to them, they're calling us. And we have the
mechanisms and the technology to get the money to them within a
period of time. That's extremely reasonable. So we're hoping that
we can be a big player in this, in all this. That being said,
this is about helping Canadian small businesses. And we believe
that the answer is technology. Really, the answer is processes
that go between 48 and 72 hours from application through
disbursement of funds, we want to make sure that we're a
solution that the government could utilize the agencies can
utilize to get the monies to the right people at the right time,
isn't going to happen, we're hoping, we're definitely gonna
be there for the recovery. But we'd like to be there during the
storm as well.
Vlad Sherbatov: I think that's really great. And I get to see
the letter that you did with the OnDeck. And, and I think that
common goal that we have for the entire end for the entire
economy to really be bound is how all the different even
competitors are rallying together. And because we all
have that common objective, and I think that was really, really
great to see, I'm actually very proud of the way that our
industry has responded so far, overall. And they're in a very
proactive way, not just human on the business lending side. But
even on the consumer lending side. There's so much great
information that you've shared, I want to really, really thank
you for your time. And for these insights.
Mario Bottone: Thank you for this. Well, I think we need to
be confident that the economy will get back on its feet one
day, we just need to figure out, you know, who will be best
suited to kind of take advantage of these new dynamics that we're
going to have to face. And that's, I think, the goal of
this, of this financing community now, look at the world
a little bit differently than we did before.
Vlad Sherbatov: Thank you so much for your time, Mario once
again, and I hope you have a great rest of the day.