2M7 Financial Solutions and the State of Alternative Funding in Canada

“What’s a cash advance?”

This is how Avi Bernstein, CEO of 2M7 Financial Solutions, recalled a typical conversation in 2008, when his company was founded in the Canadian market. According to him, customer knowledge of alternative financing methods was dismal, partly due to a handful of homogenous banks dominating the scene as well as a void of funders in the country.

Flash forward to 2019 and 2M7 is operating within a Canadian market that is much more trusting and knowledgeable of merchant cash advances, although it is not yet at the levels witnessed in the U.S.

“Low hanging fruit,” is how Bernstein describes the industry now, as small and medium-sized businesses are flocking to 2M7 and its contemporaries, which offer higher approval ratings and faster confirmation of funding than their more traditional counterparts. In fact, according to a 2018 study conducted by Smarter Loans, 24% of those Canadians surveyed stated that they sought their first loan with an alternative lender that year. As well as this, only 29% reported that they pursued funding from more established, traditional financial institutions and 85% of those that received financing confirmed their satisfaction.

Figures like these help to explain why the Canadian market has seen a rise in interest from foreign businesses in the previous five years. Greenbox Capital, First Down Funding, and Funding Circle are examples of those companies who have successfully implanted themselves within the market, a feat that Bernstein claims isn’t easy.

“It’s a different business,” he notes when comparing the market to that of the U.S. Listing the dissimilarities in market maturity levels, sales tactics, processing channels, and collection styles, as well as the currency exchange rate that’s to be considered, Bernstein says that he’s found those American funders who come to Canada unprepared never stay long enough to become a fixture of the industry.

Warning against half measures, Bernstein explains that “You’ve gotta put boots on the ground” if you want to succeed in Canada. Giving the impression that unless you’re willing to learn the rules applied in the market, hire people, and house them in an office north of the American border, Bernstein is keen to highlight what’s required of foreign companies looking with interest at Canada.

But it’s a risk-reward situation. The market is opening up as more funders enter it, and with the arrival of larger companies, such as OnDeck Capital, more resources are being devoted to raising awareness of alternative financing amongst Canadians.

Meanwhile, homogenous firms like 2M7 are continuing to grow in this developing market. Receiving an average of 200-300 applications for funds per month, 2M7 is capitalizing off opportunities by proving themselves to be open to a wider range of applications. Bernstein asserts that “we try to fund everything,” and that they keep an “open mind to every opportunity” that lands on their desk. Perhaps this is a mindset not shared by more conservative of funders in the industry, but, as Bernstein says, “we’re here, we’re funding, and we’re ready to rock n’ roll.”

Brendan Garrett was a Reporter at deBanked.