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Ian Mac: Thanks very much. So
good morning, everyone. Welcome

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to the 1045 session. My name is
Ian Mac. I'm a partner with

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McCarthy Tetro. We're a full
service law firm, with offices

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across Canada and also New York
and London. I'll be your

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moderator for this panel. And
the topic for this morning

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lending to lenders, strategies
and insights for alternative

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lenders to consider when raising
capital to fund their book and

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we've assembled a very excellent
and knowledgeable panel from the

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industry with tremendous
knowledge. So I think it'll be a

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very insightful discussion. So
some very quick introductions of

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our panelists, starting on my
right, Lyla Kanji head of

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specialty finance with BMO
Financial Group. Next we have

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Kevin Westfall, Vice President
Accord Financial, we have Wayne

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Pommen, President and CEO of
Paybright. And last but not

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least, we have Tyler Meyrick,
Vice President corporate

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strategy for Purpose Financial.
So I'm gonna throw it over to

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our panelists to give a brief
overview discussion about their

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organization and how they're
involved with specialty finance.

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So we'll start with Lyla.

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Lyla Kanji: Thank you, Ian. So
one of the key strategies that's

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been driving growth for our
commercial banking platform over

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the last few years has been
industry specializations. So as

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part of that initiative, we
rolled out a specialty finance

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dedicated team early on in the
year to focus on this important

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important and growing segment.
And while the launch has been

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this year, as an institution,
BMO has been lending, Hannah has

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been active in the space for
over 10 years, through our BMO

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Harris platform. So we were
actually very fortunate to

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leverage their skill set and
their knowledge base when we

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rolled it out here in Canada.
But we do recognize that Canada

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and US are two different
markets, especially in terms of

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scale of the borrowers and
maturity of the segment. So as

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we are rolling out our vertical
here, we are taking into account

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those those no answers. So so
yes, we're now ready in the

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market actively speaking to
borrowers and doing

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Kevin Westfall: We were
established in 1978. And then

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transactions.

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listed on the TSX, originally as
asset based lenders, so kind of

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just providing our own capital
to mid market companies, and

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really about 15 years ago
started to grow in the lender

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space. So kind of understanding
from ourselves as lenders, how

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do we kind of accommodate and
lend to other financial

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institutions, we've worked with
merchant cash advance

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businesses, those in the kind of
small loan space, subprime auto

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loans, personal loans, so we've
got about 15, 20 years of

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experience kind of lending to
other lenders.

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Wayne Pommen: So Paybright is a
so called buy now pay later

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company, we run the point of
sale financing model, which

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means we partner with merchants
and retailers of various kinds,

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and allow them to offer
installment payments to their

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consumers at the point of sale.
We work with about 5000

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different retailers across the
country. Some of the bigger ones

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tend to be in the E commerce
space, like a Wayfair, or

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Samsung or eBay or some of our
partners. And we're a team of

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about 110 in downtown Toronto.
And I'll stop there.

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Tyler Meyrick: Purpose
Financial, you may know us from

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our mutual fund and ETF business
are ads on Air Canada, but we

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also run a large small business
lending business under the

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thinking capital brand. So we
lend up to 500,000 to two small

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business borrowers across the
country. We've deployed about a

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billion dollars to Canadian
entrepreneurs since 2006.

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Ian Mac: Excellent, thank you
very much. So we'll kick off the

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discussion to talk about how to
attract funding. So what do you

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need to look like in order to
attract funding? And what are

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some important factors to
consider in that vein? And I'll,

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I'll throw it over to Wayne to
kick off the discussion.

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Wayne Pommen: Sure. So I think
one of the main things in our

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industry is when you're a small
company or a startup, you need

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to attract so much more capital
than a small company of the same

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size in another industry,
because you have to fund the

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portfolio. And what that means,
I think is you kind of need to

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have your act together in a
whole bunch of ways, much

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earlier than you otherwise would
have. Before I was was with

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paybright. I was with a private
equity firm. And we spent a

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bunch of time looking at
specialty finance companies from

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an equity standpoint. And there
were many, many times where we

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go into a meeting and we would
know in about 10 minutes that it

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was never going to happen
because the company didn't have

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a handle on, you know their
data, their loan tape. They

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didn't have Paula Cs written
down that were in good shape,

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they couldn't articulate
different aspects of how their

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book was performing, they didn't
have the right metrics,

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financial reporting wasn't
there. At an early stage, you

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really have to have all this
stuff locked down. Because if a,

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if a lender or an equity
provider comes in and feels like

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they need to teach you this
stuff, that's really bad. I

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would also make a pitch, for
example, that it makes sense to

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get your statements audited
almost right from the get go,

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and just start building that
rigorous track record. And if

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you're at an early stage, and
you, you don't have these things

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in place, you want to find
someone who's been there and

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done it before to help you put
those things in place. That's

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really what separates the good
from the great at the early

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stage.

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Ian Mac: Tyler, any thoughts on
that?

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Tyler Meyrick: Yeah, I think
that's absolutely right. I

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think, you know, in the FinTech
side, there's a tendency to

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focus on the fin, or rather, on
the tech, not the fin. And in

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sourcing capital, they care much
more about the fin. So as Wayne

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said, you know, having policies,
procedures and the data so that

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when when a lender walks in,
you're able to provide them with

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a pretty robust set of
procedures that you're

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following. They care much more
about that than they do about

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your growth trajectory over the
next little while, you know,

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obviously, every lender would
like to grow with you and wants

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to see your growth, but being
able to demonstrate robust

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internal policies and
procedures, being able to show

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that you know how to service
loans, you know how to collect

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on loans, not just how to grow
volume is, is really critical.

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And so I think what what we've
found is having all of that in

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written documents, and in kind
of institutionalized form, as

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opposed to trying to explain it
every time on a one off basis.

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One, make sure that you're
you're actually adhering to them

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internally. And that, that, you
know, you've got kind of robust

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policies that are being
followed. And to it simplifies

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your life when you're trying to
deal with a whole bunch of

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different lenders, which is
typically how you source

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capital, because you're just
able to send them a bunch of

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documents.

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Ian Mac: Kevin, any from the
perspective of a lender or

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funder, any any thoughts on
those comments?

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Kevin Westfall: Yeah, I agree
with all of the above. I mean,

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we're kind of at the earlier
stage, guys. So we talked

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earlier about barriers to entry,
and how to, again, financing and

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so on. And so we work with kind
of a lot of earlier stage

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companies and kind of to Wayne
and Tyler's points of, you know,

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first and foremost, who are we
learning to? Do you understand

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your processes, procedures, and
again, us being you know,

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lenders by background, we know
what we would like and how we

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would underwrite deals, and so
not necessarily in the same

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aspects as what an MCA or small
business loan provider might be

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providin, but what you know, who
is it that we're lending to? And

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then kind of, for our
perspective, is the company

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trading profitably? So we can
kind of take a look at those

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kind of couple of aspects on who
are we lending to? Is there some

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profitability? You know, we
provide some pretty significant

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leverage. So we're kind of at
the earlier stage, guys, so it's

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not always cut and dry. You
know, I've got this process

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nailed down, I've got this
procedure nailed down. There

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should be something you know, in
writing, key process controls,

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management controls, and so on
how you're managing cash and,

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and kind of dealing with loans
and adjudications. But aside

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from that, we can be pretty
flexible in providing solutions.

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Ian Mac: And Lyla, I think,
perhaps, your BMO is a bit more

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focused on later stage funding.
So any comments from from that

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perspective, or anything else
that was said?

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Lyla Kanji: Sure. So for more
established borrowers, there are

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a couple of things that we look
at. And the first and the most

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important thing and wouldn't
come as a surprise is a track

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record and the ability to
demonstrate a track record track

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record of not just financial
profitability, but being able to

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grow and sustain a business that
is at a certain scale, and then

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the track record of navigating
through economic cycles. And

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then that's becoming harder and
harder to test given that we've

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been in such a bull market over
the last few years. But, but

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that, to me, is probably the
most fundamental thing.

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Secondly, a defined product or a
market niche, because as lending

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to as lenders to lenders, we
really relying on your

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underwriting standards. And for
us, we place a strong emphasis

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on the consistency of that, and
then the resulting portfolio

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that data. And lastly, I would
say, stable and tenured

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management teams, who don't just
have financial services

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experience, but really
experience with the asset class,

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because when the downturn does
happen, we are really relying on

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these management teams to just
steer the ship and protect our

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collateral. So that's, that's
yeah, that's the perspective

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from our end.

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Ian Mac: Excellent. Let's get a
little more granular on the

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actual portfolio mix. How did
the considerations change based

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on the asset class? So if we're
talking about consumer loans,

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versus auto loans, consumer
finance, how does that inform

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where you seek sources of
capital and I'll throw that one

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out to Wayne as well that to
kick it off.

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Wayne Pommen: I think our
observation has been that

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different lenders have different
preferences and different asset

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classes and different experience
based on what's worked for them

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in the past or how they they
structure their deals, I think

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one of the biggest
considerations that would affect

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more folks in this room is the
distinction between prime and

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non prime, whether that's
consumer or commercial. And

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there are, frankly, just a bunch
of lenders who have trouble

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getting their head around the
non prime side. And so if you're

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a non prime lender, you tend to
have a smaller number of

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options, or at least a different
type of potential lenders to

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your business, or at least that
will give you capital at a

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reasonable scale at a reasonable
price. So that's always

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something to keep in mind. And
you have to kind of pound the

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pavement harder sooner to fund a
non prime book than a prime

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book. That's just one, one
dimension.

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Tyler Meyrick: Yeah, I would
echo that for sure. The other

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thing I would add, that I think
informs what type of lender you

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talk to is, is your track record
in the asset. And we see this

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all the time where, you know,
we're looking to add a product

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in an adjacent vertical or, or
that even just looks slightly

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different than what we do today.
And quite often, that informs

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who we go to, you know, we've
got good relations with some of

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the banks, but they're often not
your first call on a new

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product. You know, I think a lot
of people in this room will

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understand that, that the
Canadian banks have a great

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appetite for mortgages, for
credit cards, and for auto

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loans, because they've got very
well established securitization

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conduits for those. You know,
when it comes to small business,

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particularly non prime small
business, you sometimes talk to

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alternative lenders first, and
as you build a track record,

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then you can, you can educate
the banks a little bit more,

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maybe start with a smaller bank,
and then move to to the vimos of

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the world. Once you've you've
got a track record, because I

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think, you know, every bank is
looking for something different.

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There is capital out there for
all different types of assets.

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And for all different types of
track records, I think it's

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really just a question of where
you start and having realistic

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expectations. I think if you're
a FinTech, that's built a

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business case on having a scat,
one bank, lend you at a 90%

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advance rate from from day one,
but your your business plan, you

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know, may need a little bit of
refinement. But I think if

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you've got reasonable
expectations of equity

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contribution, sort of, of taking
time to build a track record,

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there is capital out there, I
think you just need to

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understand the landscape and
understand to Wayne's point, you

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know, who's got interest in
what.

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Kevin Westfall: Our focus is
primarily kind of a subprime

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space, but we're fairly
agnostic, loan wise, and again,

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to kind of underwriting to the
management team and kind of the

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acumen of the business as long
as you're kind of strong and

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your asset class and got it, you
know, built your team and your

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management systems and so on and
reporting around those circles

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and cycles, we'd be fairly
agnostic and an industry.

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Lyla Kanji: Yeah, I would just
add, when we're looking at

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consumer finance company, the
additional diligence that we

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would do is, is the framework or
the controls that these

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companies have over all the
regulatory stuff, right, like

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stuff on the consumer
protection. And we do place a

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ton of emphasis on that, as well
as looking at the AML KYC. That

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will be the key difference when
we look at these different asset

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classes. In terms of sourcing
capital from different sources,

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I personally think it's more
driven by scale, a smaller

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company, that's a plus or minus
50 million of assets, what we're

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seeing, they are initially
relying on alternative lenders,

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and as the scale happens, then
that's where the commercial

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banks should step in, or if it's
a new product, it does take

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time, and I will completely
agree it does take time for the

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commercial banks to understand,
but it helps when there's enough

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diversification in the
portfolio.

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Ian Mac: Excellent. Now, sort of
continuing on this theme of

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evolution of the life cycle when
when a boar scales when their

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book scales, how do the loan
terms actually changed? Just

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getting a bit more granular on
on types of terms of the loans,

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covenants, etc. Once the bore
scales, how do you see that

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changing? Maybe I'll I'll ask
Lyla first on that one.

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Lyla Kanji: Sure. So so what
we've seen as a fast growing

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originator, or as a start up,
companies are really relying on

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asset specific financing or what
we call SBB, bankruptcy remote

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kind of financings. And that
doesn't make a ton of sense from

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a borrower perspective, because
there's not much equity

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requirements there. But those do
come with additional cost of

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capital and very restrictive
performance governance, because

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of lenders are really relying on
the recourse against those

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assets. As the company does grow
in scale it there's definitely

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an advantage in looking at more
corporate style financing, more

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borrowing, base balance sheet
financing, because there's

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enough equity buffer for the for
the lenders to to get

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comfortable, because at that
point in time, we're really

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relying on and we look we do
have performance governance as

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as the company scales, but we
are really relying on the

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financial wherewithal of the
company. And we're also looking

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at their ability to attract more
institutional type of capital or

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more private equity or public
equity type of capital, as well

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as looking at the business as a
going concern. So so it's more

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movement from an acid pure acid
lender to a more corporate

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facility.

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Ian Mac: Sure.

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Kevin Westfall: Yeah, we're kind
of that that initial layer. So

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we're, you're generally the
first step provider, after that

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layer of equity, business starts
building some scale and kind of

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started to burn through some of
that equity and are hindered by

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growth. So we're generally in
there on the earlier stages,

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providing higher leverage, you
know, less covenants, a little

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bit more flexibility. And as as
they start to scale and so on.

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That's generally where they kind
of exit from us and more

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introductions to Lyla and her
group and at the bank, and it's

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just, it's like anything, it's
kind of at that cycle, that

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lifecycle that we play in and
more alternative space than the

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more traditional space.

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Ian Mac: Any comments from from
Wayne, from a perspective of an

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originator on the actual loan
terms?

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Wayne Pommen: Well, I think just
generally, if you're scaling,

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that means you're probably doing
reasonably well, you're you're

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building the track record, you
have larger amounts of assets

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and add all of that means you
can bring more potential vendors

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to the table as you grow into
their size range. As you prove

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that you maybe know what you're
doing, you can tend to get sort

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of schedule one, you know,
balance sheets, or large

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institutions involved. And all
of that tends to improve most of

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the terms, particularly the cost
of capital, yes, there may be

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trade offs with advanced rates
and other and other covenants.

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But you should be able to, if
everything's going well optimize

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your, your sort of capital
structure over time, based on

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your scale and your track
record. And so we've we've been

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able to sort of move down that
path in our business over the

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past few years.

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Tyler Meyrick: Yeah, and I would
even add to what Lyla said, I

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think you can start with with
asset specific facilities that

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you don't have uptight
performance covenants on on the

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assets, because you've got, you
know, less equity or less

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earnings built up in your
corporate business, you then

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moved to the corporate
facilities, as was noted, and I

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think, you know, at some point,
you can actually look to make a

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transition back, where you start
doing public securitizations,

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and you start building kind of a
more robust diversified

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financial structure like like
what was talked about with Go

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Easy, and, and some of the
OnDeck US business as well,

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where you actually eventually
pretty much fully off balance

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sheet into only asset specific
facilities, which is, which is

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sort of the kind of end state
for most specialty finance

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00:17:15.110 --> 00:17:17.930
companies, many years down the
road once they've scaled.

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Ian Mac: Excellent. So maybe
just getting a little bit more.

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And I think I heard you, you
actually said KYC, Lyla earlier,

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but just on due diligence around
structuring, especially finance

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transaction, what are some
thoughts on common pitfalls that

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you might think about at the
outset of a transaction that you

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think both borrowers and funders
should be aware of any thoughts

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from the panel on that question?
Sure. Lyla.

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Lyla Kanji: So I think when we
do our due diligence, we really

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get deep into the portfolio. And
I think that is essentially key

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to to specialty finance lending
is slicing and dicing the the

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00:18:01.730 --> 00:18:06.800
loan data across so many
different levels. Because at the

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end of the day, when we do end
up lending, we always have

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certain advanced rates, which
are fairly common across the

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industry. But we we do a lot of
work in our stress case

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scenarios, to make sure that the
business and our loan is

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protected in that sense.

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Ian Mac: Sure.

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Kevin Westfall: I think kind of
leveraging off of some of

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Wayne's earlier comments on
being organized and having

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access to information. And
again, I mean, we're happy to

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lend against, you know, certain
businesses and different asset

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00:18:33.560 --> 00:18:36.530
classes, kind of, you know, make
the joke about inventory, we're

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00:18:36.530 --> 00:18:38.300
happy to lend against inventory,
you don't have to tell us what

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00:18:38.300 --> 00:18:43.280
it is. So, again, access to the
data and information is, is

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00:18:43.280 --> 00:18:45.320
really kind of key for us. And
again, we kind of come in on the

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early stages. So we see all
kinds of different venues,

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things like, you know, review
engagement, or audited financial

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statements are a huge plus. And
we know kind of in small or

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medium sized businesses that
want to avoid the cost for the

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00:18:58.940 --> 00:19:01.040
initial couple of years. But,
you know, from a lender's

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00:19:01.040 --> 00:19:04.400
perspective, incurring that cost
early on, just kind of show us,

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00:19:04.430 --> 00:19:07.220
you know, that organization and
commitment to the business sort

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of thing. So and again, we're
probably similar to live is that

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we're slicing and dicing the the
the loan data and information

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and, you know, it's access to
that information. That's the

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00:19:14.810 --> 00:19:15.110
key.

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00:19:17.750 --> 00:19:20.300
Wayne Pommen: And I think maybe
just on a slightly different but

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00:19:20.300 --> 00:19:24.410
related topic. The one thing
that I've seen over the years is

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00:19:25.790 --> 00:19:28.850
people getting tripped up on the
relationship of equity and debt,

355
00:19:28.940 --> 00:19:31.970
right, the equity side of the
portfolio side, and thinking

356
00:19:31.970 --> 00:19:35.510
about what has to be in place
when you guys probably see this

357
00:19:35.510 --> 00:19:39.620
all the time. And so, you know,
what are the our thought process

358
00:19:39.620 --> 00:19:43.370
at paybright is, if we're going
quickly, we need to have the

359
00:19:43.370 --> 00:19:46.310
portfolio funding in place now
for the volumes we want to have

360
00:19:46.310 --> 00:19:50.090
a year from now. And we probably
needed to have our equity in

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00:19:50.090 --> 00:19:53.330
good shape like six months ago.
So yeah, we always try to have

362
00:19:53.330 --> 00:19:55.790
the equity running like 18
months so ahead of where it

363
00:19:55.790 --> 00:19:58.760
needs to be and the portfolio
funding a year ahead ahead of

364
00:19:58.760 --> 00:20:01.730
where it needs to be and It's
very easy to kind of get the

365
00:20:01.730 --> 00:20:05.570
order backwards and then
everything gets stalled. And

366
00:20:05.570 --> 00:20:08.660
that it's up, it's obviously
challenging to execute. But it's

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00:20:08.690 --> 00:20:12.110
it's important not to have a
situation where, you know, the

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00:20:12.140 --> 00:20:14.480
the portfolio funders say, okay,
where's the equity? And then the

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00:20:14.480 --> 00:20:16.460
equity guys say, okay, well, you
know, how are you going to fund

370
00:20:16.460 --> 00:20:19.520
all this? And so there's kind of
a dance that goes on. And I

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00:20:19.520 --> 00:20:22.640
think a lot of small originators
over the years have been had

372
00:20:22.640 --> 00:20:25.010
their growth slowed by trying to
figure that out sort of in a

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00:20:25.010 --> 00:20:26.120
timely way.

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Tyler Meyrick: Yeah, I would
absolutely agree. I think that

375
00:20:29.060 --> 00:20:31.880
that's probably the most common
downfall for lenders in this

376
00:20:31.880 --> 00:20:35.750
space, you know, because Because
alternative lenders typically

377
00:20:35.750 --> 00:20:38.240
are not regulated by OSPI, or
someone that forces you to hold

378
00:20:38.240 --> 00:20:42.050
regulatory capital, you the
equity, debt balance can be

379
00:20:42.050 --> 00:20:46.460
sometimes more more subjective.
And I think, you know, you're

380
00:20:46.460 --> 00:20:50.480
prudent to carry as much equity
as you can afford. Because it

381
00:20:50.480 --> 00:20:53.000
allows you to plan for losses
that may be higher than you

382
00:20:53.000 --> 00:20:56.780
might expect. You know, whereas
in a Saskatchewan bank, they're,

383
00:20:56.810 --> 00:20:59.150
they're regulated, and they're
told how much equity they need

384
00:20:59.150 --> 00:21:03.170
to hold, we're really not. So
making sure that you've got that

385
00:21:03.170 --> 00:21:05.600
that dance right, as Wayne said,
and that your equity is probably

386
00:21:05.600 --> 00:21:09.200
planned in advance that the debt
will allow you to better manage

387
00:21:09.200 --> 00:21:12.350
for credit downturns, it'll
allow you to better manage for

388
00:21:12.350 --> 00:21:17.270
surprises. And to the point,
it's generally harder to find

389
00:21:17.270 --> 00:21:19.460
that equity when you need it,
than it will be to find the debt

390
00:21:19.460 --> 00:21:20.840
that you need to grow and good
times.

391
00:21:23.090 --> 00:21:26.360
Ian Mac: Excellent. And just on,
maybe this one's for both Kevin

392
00:21:26.419 --> 00:21:29.570
and Lila, on the actual
investment guidelines for the

393
00:21:29.630 --> 00:21:33.138
investment criteria of that
particular portfolio. So you're

394
00:21:33.197 --> 00:21:36.943
looking at a MIC, what is, walk
us through or talk a little bit

395
00:21:37.003 --> 00:21:40.332
about how critically you're
looking at that and what the

396
00:21:40.392 --> 00:21:43.840
process looks like, from a
lender perspective, when you're

397
00:21:43.900 --> 00:21:46.100
looking at the investment guidelines.

398
00:21:46.170 --> 00:21:48.221
Kevin Westfall: I'll kick it
off, because I'm sure there's

399
00:21:48.270 --> 00:21:51.299
going to be a little bit lighter
than than Leila. Really, it's

400
00:21:51.348 --> 00:21:54.181
it, we're kind of storybook
lenders, it's, you know, Where

401
00:21:54.230 --> 00:21:57.307
could the business be with the
right capital. So again, kind of

402
00:21:57.356 --> 00:22:00.385
that that probably initial debt
and early stage kind of coming

403
00:22:00.434 --> 00:22:03.511
to a business after that layer
of equity. It really is kind of,

404
00:22:03.560 --> 00:22:06.442
you know, covenant light, and,
and a lot going on. So it's,

405
00:22:06.491 --> 00:22:09.276
it's fairly simple for us to
provide kind of that initial

406
00:22:09.325 --> 00:22:12.256
facility, as long as we've got
that management team, and the

407
00:22:12.304 --> 00:22:14.747
company has achieved
profitability, we can provide

408
00:22:14.796 --> 00:22:17.190
the capital in a lot of
instances and situations.

409
00:22:17.669 --> 00:22:17.999
Ian Mac: Sure.

410
00:22:17.999 --> 00:22:20.986
Lyla Kanji: Ours is a bit more
structured, to that. So we will

411
00:22:21.046 --> 00:22:23.855
look at a couple of years of
positive operating

412
00:22:23.914 --> 00:22:27.679
profitability, we will look at a
level of equity base, and then

413
00:22:27.739 --> 00:22:31.205
underwrite to that equity base.
And in terms of the of the

414
00:22:31.264 --> 00:22:34.909
structure, the covenant packages
are very standard, but there

415
00:22:34.969 --> 00:22:38.614
will be around debt to equity,
there'll be loan to value that

416
00:22:38.674 --> 00:22:42.259
we will look at. So it's those
critical things. And again, I

417
00:22:42.319 --> 00:22:45.187
think one point is of critical
importance is the

418
00:22:45.247 --> 00:22:49.012
diversification in the book. I
can't stress enough, how much do

419
00:22:49.071 --> 00:22:52.298
we look at diversification on
the book in terms of the

420
00:22:52.358 --> 00:22:54.450
underlying loans or the borrower's?

421
00:22:55.920 --> 00:22:59.987
Ian Mac: No, that's helpful. So
we had an entire panel earlier

422
00:23:00.064 --> 00:23:04.132
this morning on market
readiness. So we have a little

423
00:23:04.209 --> 00:23:09.121
bit of time left. So maybe just
from the where we are in the the

424
00:23:09.197 --> 00:23:13.726
economic cycle, a lot of people
using the R word recession,

425
00:23:13.802 --> 00:23:18.024
where we are in terms of
specialty finance itself, just

426
00:23:18.101 --> 00:23:22.859
from the panelists, where do you
see the industry going in the

427
00:23:22.936 --> 00:23:27.464
medium term in terms in the
context of of of this impending

428
00:23:27.541 --> 00:23:32.453
downturn that everybody seems to
be talking about? How does that

429
00:23:32.530 --> 00:23:36.981
are there particular asset
classes that might be relevant,

430
00:23:37.058 --> 00:23:41.279
or from an underwriting
perspective is getting tighter?

431
00:23:41.356 --> 00:23:46.268
So any thoughts on the trend as
we move forward in the next part

432
00:23:46.345 --> 00:23:50.490
of the cycle? And I'll invite
anybody to start. Wayne?

433
00:23:50.520 --> 00:23:52.938
Wayne Pommen: Yeah, I think
it's, it's gonna be really

434
00:23:52.999 --> 00:23:56.687
interesting, because this has
been such a long expansion. And

435
00:23:56.747 --> 00:24:00.436
we have had such a long, benign
credit cycle now. And so many

436
00:24:00.496 --> 00:24:04.185
specialty finance companies,
FinTech lenders, etc. in Canada,

437
00:24:04.245 --> 00:24:07.813
but especially the US and other
countries have all grown up

438
00:24:07.873 --> 00:24:11.743
since the last credit cycle. And
probably 85% of their employees

439
00:24:11.803 --> 00:24:15.552
weren't even in the workforce
during the credit crisis. And so

440
00:24:15.613 --> 00:24:18.999
it will be really, really
interesting to see who's got a

441
00:24:19.059 --> 00:24:22.687
bunch of this stuff figured out
and are ready for it and who

442
00:24:22.748 --> 00:24:26.376
isn't. And so I've always been
predicting a big washout. But

443
00:24:26.436 --> 00:24:29.943
we'll see. I can just tell you
that a paybright. We are at

444
00:24:30.003 --> 00:24:33.571
paybright. We're just watching
very closely sort of week to

445
00:24:33.631 --> 00:24:37.562
week to see what's changing. And
what we're absolutely trying not

446
00:24:37.622 --> 00:24:41.008
to do is create is repeat the
classic mistake of chasing

447
00:24:41.069 --> 00:24:44.213
growth late in the cycle by
loosening various credit

448
00:24:44.273 --> 00:24:47.780
parameters, well, convincing
ourselves the whole time that

449
00:24:47.841 --> 00:24:51.469
it's actually fine. So we're
trying not to repeat that cycle

450
00:24:51.529 --> 00:24:55.097
and we're trying to be ready to
respond to going to Jason's

451
00:24:55.157 --> 00:24:58.966
comments in the earlier panel to
respond if we need to, to sort

452
00:24:59.027 --> 00:25:00.660
of protect the performance?

453
00:25:01.650 --> 00:25:03.810
Tyler Meyrick: Yeah, I would
absolutely echo that. I think,

454
00:25:04.320 --> 00:25:07.050
you know, as much as we'd like
to think the growth will sustain

455
00:25:07.050 --> 00:25:10.500
forever, I think, you know, we
all know it won't. The small

456
00:25:10.500 --> 00:25:13.590
business space has gotten quite
a bit more competitive, since

457
00:25:13.590 --> 00:25:16.440
thinking capital was was founded
in 2006, is basically the only

458
00:25:16.440 --> 00:25:21.180
one. And so I think we see the
market getting competitive, we

459
00:25:21.180 --> 00:25:24.060
see people chasing growth. And I
think it's important to want to

460
00:25:24.060 --> 00:25:26.160
make sure you've got a
diversified portfolio, as we

461
00:25:26.160 --> 00:25:28.740
said earlier, to as, as we just
talked about, make sure you've

462
00:25:28.740 --> 00:25:33.270
got that that kind of financial
dry powder in case you need it,

463
00:25:33.390 --> 00:25:35.520
and three to make sure that you
stay disciplined around your

464
00:25:35.520 --> 00:25:38.460
credit policies, and that you're
not chasing growth that at the

465
00:25:38.460 --> 00:25:40.950
expense of potential long term
profitability.

466
00:25:41.550 --> 00:25:43.860
Kevin Westfall: I think that'll
be the key I think, for most in

467
00:25:43.860 --> 00:25:48.180
this room, we'll call it, it may
be a little downturn, more than

468
00:25:48.240 --> 00:25:51.180
than a recession, because we're
not really from our perspective,

469
00:25:51.180 --> 00:25:54.930
not expecting recession, but we
see a lot of opportunity opening

470
00:25:54.930 --> 00:25:56.820
up. So for a lot of the
alternative lenders in this

471
00:25:56.820 --> 00:25:59.340
space, I think the opportunities
that you will start to see will

472
00:25:59.340 --> 00:26:01.560
actually improve, you'll get
some of the more traditionals

473
00:26:01.560 --> 00:26:04.380
that will kind of start to move
up market a little bit, making

474
00:26:04.410 --> 00:26:07.590
more room for for better credits
and availability in the

475
00:26:07.590 --> 00:26:10.140
alternative side. So as long as
you've kind of stayed true to

476
00:26:10.140 --> 00:26:12.570
your practice and your process,
you know, what is your existing

477
00:26:12.570 --> 00:26:15.360
portfolio look like today? So
it's not necessarily a matter of

478
00:26:15.360 --> 00:26:17.670
we're gonna get a what's your,
your prospect for new business

479
00:26:17.820 --> 00:26:20.010
going to be because I think it's
gonna be excellent. As long as

480
00:26:20.010 --> 00:26:22.950
you stay true to your process
and your procedures and kind of

481
00:26:22.950 --> 00:26:26.340
you got your existing book
intact, then you can kind of be

482
00:26:26.340 --> 00:26:28.500
successful through the through
transition.

483
00:26:28.620 --> 00:26:31.242
Lyla Kanji: Yeah, similar to
Kevin's point at BMO, not just

484
00:26:31.298 --> 00:26:34.591
with specialty finance, we are
very patient lenders, we are

485
00:26:34.646 --> 00:26:38.162
relationship based lenders. So I
think that will follow through

486
00:26:38.218 --> 00:26:41.399
to the cycle. But when we are
getting into each and every

487
00:26:41.455 --> 00:26:44.859
transaction, what we do is we do
doomsday scenarios, if let's

488
00:26:44.915 --> 00:26:48.375
say, the borrower defaults, the
credit cycle completely turns,

489
00:26:48.430 --> 00:26:51.834
we do those scenarios, and we
see how long will it take us to

490
00:26:51.890 --> 00:26:55.406
get out. So we're already doing
all the work on on that when we

491
00:26:55.462 --> 00:26:58.922
get into the transaction. On the
other side, we are looking at

492
00:26:58.978 --> 00:27:02.103
the portfolio data and the
reporting. at a very granular

493
00:27:02.158 --> 00:27:05.786
level, we've got triggers, we've
got played a covenant structures

494
00:27:05.842 --> 00:27:09.078
in place that should give us an
early warning, and help us

495
00:27:09.134 --> 00:27:12.594
modify the structure if needed.
So we are getting prepared for

496
00:27:12.650 --> 00:27:13.320
it for sure.

497
00:27:14.100 --> 00:27:16.590
Tyler Meyrick: Excellent. And I
think for for those that are

498
00:27:16.620 --> 00:27:19.260
well prepared, there will be
huge opportunity, you know, to

499
00:27:19.320 --> 00:27:23.400
Kevin's point, I think for those
that can can handle the downturn

500
00:27:23.400 --> 00:27:25.860
well and can can maintain the
quality of their book through

501
00:27:25.860 --> 00:27:27.690
it, though, there'll be those
that won't. And I think that

502
00:27:27.690 --> 00:27:29.820
there'll be a lot of business to
pick up for those that are well

503
00:27:29.820 --> 00:27:32.610
prepared. That'll look a lot
better than the business that's

504
00:27:32.610 --> 00:27:35.160
that's probably being chased
around the margins today toward

505
00:27:35.160 --> 00:27:37.320
the end of the cycle in a more
competitive market.

506
00:27:39.300 --> 00:27:41.700
Ian Mac: That's great. Thank you
very much. Now, we have one

507
00:27:41.700 --> 00:27:44.760
minute and I wanted to throw to
the audience for one question,

508
00:27:44.760 --> 00:27:50.070
but it better not. But thank you
very much to our panelists for

509
00:27:50.310 --> 00:27:53.220
sharing their insights today
that I think that's very

510
00:27:53.220 --> 00:27:55.500
helpful. And I'm sure a lot of
the the audience members got a

511
00:27:55.500 --> 00:27:59.430
lot out of that. And we probably
scratched the surface on a lot

512
00:27:59.430 --> 00:28:01.800
of the things we were talking
about. So that probably bodes

513
00:28:01.800 --> 00:28:06.390
well for the the networking and
reception of that's later on

514
00:28:06.390 --> 00:28:08.100
today. And thank you very much