French giant sees value in OnDeck
Crédit Agricole provides $50M credit facility
It may not be a first for the domestic fintech industry but it is a first for a U.S. fintech company that’s been operating in Canada for the past four years.
OnDeck Canada, the local online arm of the U.S. headquartered OnDeck now has a $50 million asset-backed credit facility, provided by Crédit Agricole, to fund its loans. According to a recent ranking of assets, the French bank is the world’s ninth largest. It’s Montreal office offers commercial and investment banking services.
This is the first time that OnDeck Canada — which has originated $180 million in small business loans since 2014, all made using a “wide spectrum of data, technology and analytics” — has arranged funding from a source other than its parent.
“We are very excited that Credit Agricole sees a lot of value in the Canadian economy, in Canadian small business and finds our mission attractive enough for them to participate in,” said Amar Ahluwalia, OnDeck’s VP Partnerships & Capital Markets. We were unable to reach Credit Agricole for comment.
There are two parts to the three-year facility that will finance loan originations created by OnDeck Canada: a $25 million committed facility and an extra $25 million that can be drawn if needed. OnDeck provides term loans up to $250,000 and revolving lines of credit of up to $50,000, to small business
The credit facility organized for its Canadian unit coincided with an A$75 million facility for its Australian unit. (Credit Suisse is providing that facility.) Both facilities come with a floating rate and a 5.6 per cent interest rate handle.
But the unsecured loans made to OnDeck’s small business clients, don’t come cheap with interest rates above those applying to credit cards. Ahluwalia wouldn’t provide a number but said it’s based on the “credit profile of the borrower. We are looking to serve the underserved.”
Colin Kilgour one of the principals behind the $30 million KiWi credit fund, said the “challenge” in pricing such loans is “not putting your customers out of business (by charging too high rates) and putting yourself out of business (by charging too low rates given the defaults.)”
Other Canadian fintech companies have benefitted from links with a financial partner. In March, Purpose Financial (in which OMERS has a stake) acquired Thinking Capital Financial.
And there’s talk a large Canadian bank is set to sign a joint venture with an online lender that focuses on venture debt lending.
GOING GREEN
The City of Toronto’s 30-year, $300 million inaugural green bond financing that’s set to close on Aug. 1 brought three additional thoughts to mind:
Dark vs. Light: This distinction refers to the degree of greenness of the investors with dark green being those institutions that have set up a mandate that allows them to only invest in green bonds. Light green is used to define investors who have signed the United Nationssupported Principles for Responsible Investment (or UNPRI.)
But according to Oslobased CICERO, the Centre for International Research, there are two other categories of green: medium and brown (for projects that don’t meet the wider goal of a low-carbon future)
Term: Toronto borrowed for 30 years the same as the City of Ottawa, a reflection of the infrastructure projects (subways and light rail) that will receive the proceeds. A 30-year borrowing is considerably longer than the term of a green bond issued by either a corporate or a government.
Lookback: While all the proceeds are invested in projects that meet the issuer’s debenture framework, in some cases the issuer is also allowed to apply permanent financing to green projects that are being built. Known as a lookback, this arrangement allows the issuer to put green money into green projects. Normally there is a time limit on how far the issuer can do a lookback.