Merchant Growth Prepares to Launch New Products in Anticipation of the End of the Crisis

It has been a difficult year for small business lenders, and like their customers, those that have survived are preparing to emerge from this crisis in a better position than when it started.

As is the case for the Alternative Lending business generally, Merchant Growth, one of the dominant players within its peer group, experienced decline in its core numbers. But the company has maintained its commitment to supporting small businesses through it all, while continuing to innovate. And as the world eagerly anticipates an end to this crisis the company is preparing to offer new and more dynamic loan products to small business customers across its Canadian marketplace.

“I’m certainly very pleased with the stability and strength of our business here at Merchant Growth,” says the company’s Chief Revenue Officer, Kevin Clark. “We’re in a good space because we have a conservative balance sheet, we’ve been a long-term provider of capital – so we have an established and significant customer base and we’ve earned our way into a position where we can withstand the challenges of a temporary strain in performance in the portfolio.”

Of course, not everyone in the small business lending business has been as fortunate. Clark explains that prior to the pandemic the industry was in growth mode, with the likely expectation of new entrants. “Then we got hit with COVID, and COVID took its toll—and has continued to take its toll—on everyone in the SME ecosystem,” he says. “For small business lenders, it was a double whammy, because the government rightly provided capital to our customers – displacing the fundamental offering of our industry and we’ve had to deal with the fall-out of managing increased delinquencies and special payment arrangements to help our customers.”

Clark explains that in the early days of the pandemic Canadian small business lenders were hit with multiple concurrent challenges all at once.

  • First, many of their small business clients defaulted on their financial obligations.
  • At the same time financial support programs were developed to support small businesses, meaning those that needed capital could apply for it through the federal government.

Furthermore, small business lenders typically make loan decisions based on historical data, but once the pandemic hit all bets were off, as many viable small business in January 2020 were in a very different financial position by April. Small business lenders were challenged to get new loans out the door – due to uncertainty in what underwriting criteria to apply, uncertain support from their funding relationships and the general prudence in the marketplace of not wanting to incure new debt obligations.

“The larger institutions can afford to turn the lending tap off, because they have other sources of income,” explains Clark. “For our industry, if we don’t lend, we don’t generate revenues—we survive by providing financing solutions, and that’s going to continue on for those of us who can do so.”

Despite the tumultuous start to the year Clark says those providers that have survived are beginning to see the light at the end of the tunnel, and are preparing to offer even more products and services once the economic uncertainly disipates.

“Every crisis comes to an end, and there will be a rebound, and the great nimbleness of FinTechs means that when it happens we will respond fast,” he says. “Our outlook for 2021 is continued growth; in fact, although we were down in April, May and June, we’ve been increasing originations ever since then, and that’s going to continue.”

While Clark won’t reveal exactly what new products and services Merchant Growth is preparing to roll out in the New Year he is able to offer a few hints. “It’s along the lines of a line-of-credit type product, sort of competing in the space of the traditional credit card environment, where you can have access to capital when you need it, and when you don’t you can control the repayment to maintain and increase availability to funds when needed,” he says. “It’s that kind of access to capital that I think is hugely valuable to the smaller-end of the SME marketplace that traditionally doesn’t see this type of product offering.”

Merchant Growth has also, on a parallel track, even through this rough economic patch, significantly enhanced its funding relationships, with a recently announced major new capital facility with the Bank of Montreal. “Such a facility now gives us broader ability to meet the needs of a wider profile of businesses than we might normally support today, should we want to seek out this opportunity, while at the same time lowering our own cost of capital ,” he says.

Though the pandemic is far from over Clark says lenders now have enough data on how their clients are faring during the crisis to provide more credit and offer additional financial products in the near future. “The small businesses that are surviving have effectively retooled and pivoted to find ways to generate revenue, and the credit review process is now wholly inclusive of the operating experience over the last six to eight months,” he says. “Given that the underwriting criteria for most small business lenders is the most recent six months of bank statement analysis, we can now more fully understand what the business looks like through the crisis.”

It’s been a tough year, both for small business lenders and their customers. Though many businesses, unfortunately, won’t survive this crisis, Clark believes those that do will emerge stronger than before. “For us as an industry, all bets are off on traditional lines of thinking; we have to ensure innovation is a part of our constant strategic discussion and we need to understand what’s going on in our marketplace to best ensure our continued and increasing market position in the broader context of small business lending,” he says. “Those challenges will continue for those of us that want to support small businesses and have a passion for enabling success in the small businesses we support, which I certainly do personally, and which I know Merchant Growth does as a company. It’s in our culture!”

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Jared Lindzon

Jared Lindzon is an experienced journalist, writer and public speaker. He specializes in Business, Technology, Lending and FinTech industries in Canada and abroad. Jared is a regular contributor to Smarter Loans and top tier publications around the World, including Fortune Magazine, Fast Company, the Guardian, Rolling Stone, the Globe and Mail, and many more.