Back to Business Lending in Canada

“There’s a need for products and services like ours across all cycles,” said Cato Pastoll, CEO of Loop, on the small business lending panel held at the Lenders Summit this week in Toronto.

It’s unclear what cycle the industry is in exactly. The Lenders Summit, put on every year by the Canadian Lenders Association, was not only sold out but packed wall to wall with more than 500 attendees. The tone was relatively upbeat despite Canada’s key interest rate holding steady at 5% and economic headwinds blowing in the background.

OnDeck Canada COO Harley Greenspoon said that his company just had their best October in four years and that they’ve returned back to pre-pandemic growth. “Demand is actually not the issue at all,” Greenspoon said.

Not only is the demand for business loans there but OnDeck Canada has not had to pass on the rising costs of capital thanks to greater efficiencies unlocked by reducing headcount and increasing automation.

Lauren Thompson, VP of Specialty Finance for Peoples Group, whose organization partners with fintechs and lenders, said that from a bird’s-eye view banks would probably continue to restrict capital being loaned to small businesses for the foreseeable future. “I don’t think that small businesses are best served through the traditional banking system,” said Thompson.

Pastoll of Loop pointed out an irony with this, that banks tend to under serve the underserved when they actually need it most. “90% of the private sector workforce is employed by small businesses so if you want to stimulate the economy, we as fintechs can do it faster…” Pastoll said.

Thompson explained that the traditional financial system can be hamstrung by reviewing data that is already stale such as financial reports that reflect a moment in time six months ago while a fintech lender has more of a live pulse on what’s going on.

Greenspoon of OnDeck Canada, for example, could rattle off the top of his head industries that are experiencing challenges, the most notable being transportation.

Finally, Pastoll was asked if Loop had contemplated ever having to deal with a high interest rate environment back when he founded the company almost nine years ago. Pastoll explained that his whole inspiration for founding Loop in the first place was to help small business owners precisely during difficult times. Both of his parents were small business owners and he had watched firsthand how hard it was to find financing.

“Again, I just think about what my parents had to go through,” he said.

Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.