Financing on the spot
The financial crisis of 2008 left behind many fiscal casualties, from governments to pensioners and businesses.
Michael Garrity, co-founder and chief executive of Financeit Canada Inc., said his company is succeeding because of its focus on overlooked victims of the crisis: owners of small and mediumsized businesses who want to provide customers with payment plans.
After the 2008 meltdown, lending markets dried up, he said. “The only folks left with financing solutions were the big-box stores, who had negotiated macro contracts with [big banks] or one of the credit card companies.
“Who really lost out in the collapse? Small and medium-sized businesses. When the market retreated, they were essentially left without an effective financing solution,” he said.
Financeit (formerly Community Lend) acts as a bridge between lenders and businesses wanting to provide credit to their customers. The Toronto-based company also manages loans on behalf of the financial lender.
Launched in 2011, Financeit has helped process $500-million in loan applications, while nearly 3,000 merchants have used the service. Mr. Garrity attributes those figures, in part, to Financeit’s focus on companies not traditionally associated with payment plans, particularly those “in the field,” including contractors and roofers.
Financeit targets those businesses with its mobile app. When used with a smartphone or tablet, the app can glean all necessary credit information by taking a picture of the customer’s driver’s licence. Mr. Garrity said “Main Street merchants” can boost sales by offering financing options at the point of sale, regardless of where the business is located.
“That’s a part of the market that was never serviced by the big guys,” he said.
Financeit has seen 20% monthover-month growth since 2011, Mr. Garrity said. “And we don’t see it giving up any time soon,” he added. “I would be surprised if we don’t see upward of a billion dollars in loan applications in 2014.”
That figure, however, is dependent on the success of the company’s U.S. expansion, which is expected in mid-2014.
Point-of-sale financing is a $500-billion market in North American, Mr. Garrity said, but only $50-billion of that is located in Canada. The rest is up for grabs in the United States.
Yet there are clear challenges, including competitors such as GreenSky, an Atlanta-based company that helps with home improvement financing, and Sheffield Financial, which specializes in loans and financing for power equipment. As well, big banks such as Citigroup Inc. and Bank of America Corp. are moving back into the point-of-sale lending space, Mr. Garrity said.
Despite that, he is undeterred. “We don’t see anyone in the U.S. so far with either a dominant position or with the type of technology platform we’ve got,” he said. “Over time, we expect 80% of our revenue will come from the United States.”
Mr. Garrity is also encouraged by the company’s recent US$13million funding round, which in- cluded money from U.S. venture capital firms. “Canadian companies are often at a disadvantage because we’re always undercapitalized versus our U.S. competitors,” he said. “We’ve resolved that challenge.”
“We saw it as a big win for small to mid-sized businesses,” said Mark Johnson, a partner at Atlanta-based venture capital firm TTV Capital, which invests solely in technology focused financial services companies and is one of Financeit’s investors.
Mr. Johnson said Financeit will also appeal to the many consumers who want to avoid using credit cards for purchases that are more than $500.
While he acknowledges “larger players,” including banks, are moving back into the point-of-sale lending business, he noted: “The difference is that Financeit is a smaller, technology-driven company that can be quick and nimble. It’s able to respond to the needs of the marketplace.”
Eric Mattson, chief executive of Finovate Group Inc., is also bullish on Financeit’s prospects. Financeit has paid to have a presence at Finovate conferences, which showcase the latest ideas and products in the financial services and banking technology sectors, so Mr. Mattson admits he might be biased. Still, he said it’s clear Financeit is bringing new technology to a sector known for its stodgy attitude to new methods.
“It’s a space that’s just ripe for innovation,” he said, noting Financeit is part of a “massive wave” of new technologies aimed at the financial sector. “It’s dragging the banking and financial industries, kicking and screaming, into the future.”