The recently published “Breaking New Ground: The Americas Alternative Finance Benchmarking Report” – spearheaded by the Cambridge Centre for Alternative Finance – explores a market which produced $36.49 billion in funding volume in 2015. Of that total, Canada generated $206.96 million, up 240% from the $60.81 million that was recorded in 2014. The Cambridge report focused solely on the exchange-based platforms, i.e. marketplace lenders and a range of crowdfunders. Despite the somewhat limited scope of this report, it’s clear that Canada’s alternative finance space – while growing – is at an earlier stage in its growth trajectory than its neighbour the US (which has produced c. 99% of the funding that has to date been delivered by alternative financiers in the Americas).
The online lending space in Canada is now beginning to heat up, with a number of marketplace and balance sheet lending models emerging. But one such lender – Thinking Capital – has in fact been in business since 2006. The platform specialises in lending to small businesses, and is solely focused on the Canadian market. Thinking Capital has always been “non-bank”, but is now transitioning into a fully-fledged FinTech lender.
I caught up with Chief Strategy Officer Anthony Lipschitz to talk through this transition, and to get a better handle on the company’s activities. Part of Anthony’s role is to manage Thinking Capital’s transformation into a digital business. It’s a role that encompasses everything form strategic partnerships to customer experience.
Thinking Capital offers two core products: a term loan and a merchant cash advance. The former of these is an unsecured, fixed daily instalment loan, of between $40,000 and $300,000, with interest rates starting at 10%. The latter is another short term funding solution, of between $5,000 and $300,000, with repayments deducted on a daily basis as a set proportion of daily debit/credit card sales.
Thinking Capital lists speed and convenience as key benefits for its community of business borrowers. Indeed, customer experience as a whole – including transparency around costs and processes – is an important part of the offering. As one customer noted:
“Thinking Capital were fast, honest, and bring exactly what no bank was ready to offer us: quick funds for seasonal purchase.”
Also important as a factor for consideration is the company’s track record; there are not many alternative lenders that have been around for a decade. UK-based Zopa – the world’s first peer-to-peer lender – launched only a year before Thinking Capital in 2005.
Thinking Capital has to date lent over $400M to more than 15,000 Canadian SMBs – representing over 3 million transactions. It has serviced 300 different industries. The company employs around 200 people across two offices in Montreal and Toronto.
Thinking Capital has also established a number of strategic partnerships, which serve as a powerful form of validation for the company and its processes. The platform has partnered with Moneris – Canada’s largest payment processor – in order to offer access to capital solutions to the network’s small business customers. Moneris is not only a useful source of origination for Thinking Capital, but also a powerful source of credit data. Thinking Capital is also allied with the office supply giant Staples, again collaborating to facilitate small business lending within an established customer base. These sorts of deals are all about removing friction from the lending process.
Perhaps most interesting among such partnerships is Thinking Capital’s tie-up with CIBC – one of Canada’s “big five” banks. CIBC may refer a business to Thinking Capital when unable to cater to that business’s funding requirements itself. As Anthony explained, the big Canadian banks fared relatively well during the 2008 financial crisis. For that and other reasons, Canadians do not generally have “adversarial” relationships with the banks in quite the same way that people often do in other countries. That’s why Thinking Capital has chosen to align itself with the likes of CIBC, in the interest of servicing mutual customers in a fairer and more efficient way. As Anthony put it:
“We are really proud of the relationships we have with our banking partners, such as CIBC. Ultimately – it’s all about our customers! We want to leverage innovation to provide faster and easier access to funding for more small businesses. Working collaboratively with banks helps us do that. It sets us apart from our competitors. CIBC has opted to partner with Thinking Capital.”