Fintech is here to increase your cash flow
A new way to fund your small business, and banks are taking notice
Achamma Mathews divides her time between two gorgeous wine regions: the Niagara Peninsula in southern Ontario and Hunter Valley in New South Wales, Australia. The first is a half-hour’s drive from iconic Niagara Falls, the other is two hours north of Sydney.
What would be an enviable lifestyle for most is just part of the job for Mathews. As founder and CEO of Vineland, Ont.-based 360Growers Inc., she has built a company that has developed what is perhaps the first cloud-based software solution for effectively managing wineries around the world — from grape to bottle.
Opening an office in Australia — a bigger and more mature wine producing country than Canada — was critical for giving Mathews credibility as she prepared to launch her software service into a notoriously fickle industry.
Getting the necessary financing, however, was less than straightforward. It’s a familiar challenge for many small business startups like 360Growers, which have lumpy cash flow and an uncertain future.
“When you have good cash flow, all financial institutions will be after you to take their loans,” Mathews says.
“But if you are a startup struggling with cash flow, it’s another story.”
Mathews, a serial software entrepreneur, ended up obtaining a loan of less than $50,000 from Torontobased Lendified.com, a fintech company specializing in providing working capital of between $5,000 and $150,000 to small businesses in as little as 24 hours. A large portion of the credit applications it receives on its web portal come from millennial entrepreneurs, typically on their smartphone or tablet, outside banking hours.
“Software and related industries are an increasingly dominant part of the economy,” says Lendified founder and CEO Troy Wright, who was executive vice-president of retail distribution at Bank of Nova Scotia before starting Lendified with two partners. “But it’s difficult for traditional banks to lend money to them because they typically don’t have hard assets.”
Lendified is able to overcome the hurdles that prevent most borrowers from approving small business loans with an automated algorithm that delivers faster credit decisions than human adjudication. That’s because Lendified’s proprietary software utilizes powerful analytical tools that
“The domestic fintech sector has to date loaned about $1 billion to small businesses in this country.” TROY WRIGHT LENDIFIED FOUNDER
include a review of the applicant’s demographic profile, payment capacity and a deep web search to weed out money launderers and drug traffickers.
It then maps this data against hundreds of thousands of companies in the same industry to predict the chances of a favourable outcome.
Lendified has received more than $50 million in loan applications since launching in August of last year, and expects that figure to more than double in the next 12 months.
“The domestic fintech sector has to date loaned about $1 billion to small businesses in this country,” says Wright, who estimates that figure will top $2 billion by the end of 2017. “This has created tens of thousands of new jobs in Canada and contributed significantly to GDP.”
Canada’s major banks are growing increasingly interested in fintech, also known as financial technology. Earlier this year, Scotiabank partnered with Atlanta-based fintech Kabbage to give its customers in Canada and Mexico an online portal for making quick small-business loans up to $100,000.
“We continue to enhance the Kabbage offering with improvements based on feedback,” says Scotiabank’s director of communications Sean Hamilton.
“Our next phase will be to expand to more customers, both new and existing, after a pilot period of approximately six months.”
Lendified is also in discussion with financial institutions in Canada and the U.S. to license a similar solution for small-business borrowing.
“Our technology platform is essentially borderless and has wide applicability,” says Lendified president Kevin Clark. “Any financial company dealing with small businesses and credit risk, from large banks and credit unions to insurance underwriters and leasing operators, can benefit from it.”
When Cher Grant approached Lendified last winter for a loan to grow her cloud computing and online services business, she applied on her laptop in the morning and had the money she needed in her account by end of day.
“As a small business, it’s hard to find someone willing to give you a shot,” says Grant, founder and CEO of Toronto’s Wazzio Inc. “Lendified took a chance on our model, which is helping businesses grow.”
Wazzio, a company with10 employees and under $1 million in sales, caters to B2B resellers of IT equipment who want to bundle hardware with software services such as Skype for business, Office 365 and document sharing.
It needed a loan of under $50,000 to add important features to its webbased portal, including a callback button to expedite support and the ability for resellers to create their own business networks.
These improvements have opened up new conversations with technology giants Microsoft, CallTower and Tech Data, says Grant.
“Lendified was great for us,” she adds. “They were there when no one else was.”
Says Lendified’s Wright, “Providing a frictionless experience for the customer and rigorous decision-making at the back end is a winning combination for everyone.”