August 18, 2026 | NCFA Insight | Capital Markets And Market Infrastructure, SME Finance And Business Banking, Competition And Market Structure
Canadian Capital Embraces Private Credit Abroad While Domestic Business Lending Remains Bank Led
On August 2026, the Bank of Canada mapped Canada's private credit market and exposed an unusual divide. Private credit remains a relatively small source of financing for Canadian businesses, yet Canadian pension funds, insurers, investment funds and banks have built approximately C$500 billion of exposure to the asset class, much of it outside Canada.
Non-bank loans have accounted for about 15% of external funding for Canadian non-financial businesses for roughly a decade. Banks and public debt markets still provide about three-quarters of external business financing. By contrast, private credit has become a much larger alternative to traditional lending in parts of the United States.
The interesting question for Canada isn't whether private credit exists. It clearly does. It is why Canadian institutional capital has embraced the asset class globally while Canadian businesses continue to use it relatively little at home.
Canadian Capital Is Already Deep Into Private Credit
The C$500 billion estimate shows that Canadian exposure to private credit is already material even though the domestic borrowing market remains comparatively small.
Canada's large pension funds held an estimated C$215 billion in private credit at the end of 2025, equal to roughly 9% of their invested assets
The three largest Canadian life insurers held just over C$200 billion in the first quarter of 2026, or about 22% of their invested assets
Canadian investment funds held another C$54 billion in 2025, up more than 60% since 2020
Canadian banks also had at least C$40 billion of loans outstanding to asset managers operating private-credit funds, most of them in the United States
Those aren't small exposures. Canadian institutions clearly know how to price and allocate private credit, yet much of that capital is being deployed outside Canada. The implication is harder to ignore at a time when Canadian businesses need more financing options to invest, scale and compete. If domestic firms remain heavily dependent on banks while Canadian institutional capital finds private-credit opportunities elsewhere, Canada may be leaving a financing gap at home precisely when productive domestic investment matters most.
That doesn't mean pension funds or insurers should redirect capital for patriotic reasons. Their mandates require them to pursue risk-adjusted returns. But it does raise a structural question about why Canada's financial system is better at exporting private-credit capital than building comparable opportunities for Canadian businesses.
The geographic split is what deserves more attention. Canadian capital is participating in a global private-credit market that domestic businesses have not adopted to the same degree. That makes this partly a capital-allocation story. Canadian institutions appear willing to accept private-credit risk, but much of the opportunity they are finding is elsewhere.
Canada's Business Credit Market Still Favours Incumbents
The Bank's 15% figure fits a wider pattern in Canadian business financing.
Statistics Canada's 2023 SME financing data showed that chartered banks supplied 68.5% of SME debt financing. Credit unions accounted for another 20.6%, government-backed lenders 9.4%, and online alternative lenders only 2.2%.
That doesn't mean Canadian businesses lack alternatives. It means alternative credit has yet to displace the established banking structure at meaningful scale.
Several explanations are possible. Canada's concentrated banking system gives incumbent lenders large customer bases, deposits, underwriting data and distribution. Many SMEs also maintain long-standing banking relationships, reducing the incentive to switch unless conventional credit becomes unavailable or too restrictive.
Private credit may also be more attractive in markets where borrowers are larger, transactions are more complex, or bank lending leaves wider financing gaps. The Bank notes that in the United States, private credit has become a primary financing source in some segments.
But the Canadian data raises the possibility that domestic private credit may still be underdeveloped relative to the amount of institutional capital and underwriting expertise available here.
That possibility becomes more relevant as fintech platforms improve access to business cash-flow, accounting, invoice and payment data. Better information doesn't eliminate credit risk, but it can make smaller and more customized financing economically viable.
The C$500B Exposure Creates Both Opportunity And Risk
The Bank of Canada's focus is financial stability, and the exposure numbers explain why.
Private credit can diversify portfolios and produce attractive returns, but transparency remains limited. Leverage can be difficult to measure, valuations are less observable than in public markets, and the connections between private-credit funds, banks and institutional investors are still being mapped.
The Bank sees Canadian pension funds and life insurers as relatively well positioned to manage these risks because they generally have long investment horizons and limited reliance on short-term funding. The three largest insurers also hold predominantly investment-grade private credit, with less than 1% classified as higher risk.
Canadian banks' direct exposure appears comparatively contained. At least C$40 billion of lending to private-credit managers represents only about 1% of overall Canadian bank lending, and these loans are typically secured by investors' committed capital.
The vulnerability is therefore less about one large domestic private-credit bubble and more about interconnected exposure to global markets.
A severe deterioration in U.S. or other foreign private-credit portfolios could affect Canadian institutions, asset values and potentially the availability of credit at home. The Bank's 2026 Financial Stability Report reinforces the concern. Rapid global growth, limited transparency and tighter links across the financial system make private credit harder to assess under stress.
Canada May Have More Private Credit Capacity Than Domestic Supply
For NCFA, the most interesting gap is between institutional capability and domestic deployment. Canadian pension funds and insurers already allocate hundreds of billions of dollars to private lending, while Canadian banks finance private-credit managers. Yet Canada's domestic business-financing structure remains heavily concentrated around banks and other established lenders.
Canadian fintech lenders are building alternatives around business data. JUDI.AI uses transaction and cash-flow data to support SME underwriting, while Clearco uses ecommerce performance data to fund qualified brands. These aren't the same as institutional middle-market private credit, but they show how non-bank financing can reach businesses through different underwriting and distribution models.
That doesn't mean Canada should recreate the U.S. private-credit market. More private credit can also bring more leverage, weaker transparency and new channels for financial stress. The better question is whether Canada can develop more domestic non-bank business financing while preserving underwriting discipline, transparency and financial stability.
The opportunity is therefore less about importing the U.S. model and more about closing the gap between Canadian capital and Canadian business demand.
If institutions here are already comfortable allocating substantial capital to private credit abroad, Canada should be asking what market structure, origination capacity and financing infrastructure are still missing at home.
Talking Point
If Canadian institutions are already comfortable allocating hundreds of billions of dollars to private credit abroad, what is preventing more of that lending capacity from developing for Canadian businesses at home?
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
August 18, 2026 | NCFA Market Activity | SME Finance And Business Banking, Banking And Credit, Capital Markets And Market Infrastructure
US$100M Macquarie Facility Tests Clearco’s Rebuilt Ecommerce Funding Model
On August 18, 2026, Toronto-based Clearco secured a US$100 million Macquarie asset-backed facility that it expects will support approximately US$900 million in funding to ecommerce brands over the next two years. Macquarie's New York Fixed Income and Currencies team provided the financing.
The facility expands Clearco's capacity to provide qualified brands with up to US$10 million and estimated terms of four to 12 months. Clearco says the funding can support inventory, marketing, major purchase orders and expansion across direct-to-consumer, wholesale, retail, marketplaces and social commerce.
The US$900 million target is a scaling opportunity now, meaning Clearco has to convert institutional funding capacity into sustained customer financing while controlling credit performance and capital costs.
US$100M Facility Sets A US$900M Funding Test
The two headline numbers measure different things. The US$100 million is the size of the Macquarie asset-backed facility. The US$900 million is Clearco's expected customer funding over two years.
That expected funding volume is nine times the facility's headline size. The announcement doesn't disclose the borrowing base, advance rate, asset eligibility, covenants, loss-sharing structure or how much Clearco capital will support customer advances. It also doesn't specify how much of the US$900 million depends on repayment and redeployment of facility capital versus other funding sources.
Those missing terms are important because Clearco's own financing cost and asset performance affect how economically it can fund merchants. More capacity helps only if customer advances generate enough return after financing costs, operating expenses and credit losses.
Clearco has been in a similar position before. Its 2023 recapitalization included a Pollen Street Capital asset-backed facility with up to US$100 million of capacity. Clearco expected that structure to support approximately US$850 million of originations over two years.
That comparison is especially relevant because the earlier reset followed a period when Clearco reduced international operations, tightened underwriting and faced rising capital costs. The new facility arrives after the company has narrowed its operating focus and rebuilt its funding products.
The stated two-year funding target is now US$50 million higher than the 2023 target. It's also not clear whether the Macquarie facility carries a lower funding cost or materially different risk structure than the Pollen Street arrangement.
Clearco Competes On Funding Flexibility And Capital Access
Clearco's current ecommerce financing model gives merchants two choices over funding structure and two ways to deploy the capital. Fixed and Rolling Funding Capacity determine whether a business receives defined one-time capacity or access that replenishes as principal is repaid. Cash Advance deposits funds into the business account, while Invoice Funding supports supplier payments.
That structure gives Clearco several ways to fund inventory, advertising and supplier obligations without requiring a separate product for each use case. Rolling Funding also reduces the need for repeat applications because available capacity replenishes as payments are made.
The competitive market has also developed. Wayflyer provides performance-based ecommerce financing and currently advertises funding up to US$20 million, while Shopify Capital offers embedded merchant financing directly through the Shopify platform.
Those models compete from different business approaches. Wayflyer is another specialist financing provider using merchant performance data. Shopify can originate funding inside the commerce platform where merchants already operate. Clearco's current proposition combines ecommerce specialization, multiple capital structures and external institutional funding capacity.
Clearco reports more than US$3.3 billion provided to over 11,000 businesses historically. That record establishes substantial lifetime deployment, but it doesn't answer how much financing the current version of Clearco is originating or how the rebuilt portfolio is performing.
Originations And Credit Performance Will Test The Rebuild
Clearco's US$900 million expectation implies average customer funding of approximately US$37.5 million per month over two years if volume were evenly distributed. Ecommerce funding won't arrive evenly, but the average provides a useful scale for evaluating future disclosures.
The strongest evidence will be originations, repeat use, facility utilization, repayment performance and credit losses. Pricing and funding costs would show whether additional volume also improves Clearco's economics.
The new facility could also let Clearco serve larger ecommerce operators. The announced maximum of US$10 million places it above the smaller working-capital advances often associated with revenue-based financing and gives the company more capacity for inventory commitments, major purchase orders and multi-channel expansion.
If Clearco approaches the funding target while maintaining credit quality, the company will have stronger evidence that its post-restructuring model can support another period of scale. If utilization or credit performance weakens, the headline facility size will matter much less.
Talking Point
Can Clearco convert its new institutional funding capacity into approximately US$900 million of ecommerce financing while maintaining the credit performance and capital economics needed to make that scale durable?
NCFA Company Intelligence Snapshot
Clearco
Non-dilutive revenue-based funding for U.S. DTC ecommerce brands
Founded 2015 as Clearbanc by Andrew D'Souza and Michele Romanow
Legal Entity Clear Finance Technology Corporation
Headquarters Toronto, Canada
Leadership Andrew Curtis, Chief Executive Officer
Business Model Non-dilutive revenue-based funding for ecommerce businesses
Core Products Fixed Funding Capacity, Rolling Funding Capacity, Cash Advance and Invoice Funding
Current Market U.S.-incorporated DTC ecommerce businesses with a U.S. business bank account
Current Eligibility 6+ months of consistent revenue and more than US$100,000 in monthly revenue
Historic Funding More than US$3.3B to 11,000+ businesses
Funding Capacity Up to US$10M for qualified brands with estimated terms of 4 to 12 months
Current Trigger US$100M Macquarie asset-backed facility announced Aug 18, 2026
Forward Funding Target Approximately US$900M to ecommerce brands over two years
Milestones
Select a milestone to follow
Clearco's
development
1 Launch 2015
2 Venture Scale 2018–2019
3 Clearco Rebrand Apr 2021
4 Recapitalization Oct 2023
5 Product Rebuild 2024–2025
6 Macquarie Facility Aug 2026
Milestone
1
Clearbanc Launches Its Ecommerce Funding Model (2015)
Andrew D'Souza and Michele Romanow founded Clearbanc in Toronto in 2015. The company developed a data-driven alternative to conventional equity funding for digital businesses.
Company
Clearbanc Toronto company founded by Andrew D'Souza and Michele Romanow
Stage
Launch Early non-dilutive financing model for online businesses
Capital
Revenue Based Funding is tied to business performance rather than founder equity
Markets
Digital Commerce Online businesses become the initial operating focus
Customers
Founders Growth-oriented online businesses seeking capital without selling ownership
Competition
Equity And Business Credit Clearbanc offers another funding route between venture equity and conventional borrowing
Additional Company Data
Clearbanc was founded in Toronto in 2015
Business operating data becomes central to funding decisions
The ecommerce specialization developed into the company's core funding market
NCFA Perspective
Clearco's original operating idea remains visible in the company today. Business data supports funding decisions while founders retain their equity. The products and capital structure change substantially over the following decade.
Milestone
2
Institutional Venture Capital Supports Expansion (2018–2019)
Clearbanc raised institutional venture capital as it expanded the ecommerce funding model and increased the amount of capital available to digital businesses.
Company
Clearbanc Ecommerce financing becomes the company's defining business
Stage
Venture Scale Institutional investors support platform expansion
Capital
Series A And B Equity capital supports company growth while separate funding capacity supports merchant advances
Markets
Ecommerce Digital merchant financing becomes a repeatable operating category
Customers
Online Businesses Funding is directed toward measurable growth spending and working capital
Competition
Alternative Growth Capital Clearbanc competes with equity, bank credit and other working-capital providers
Funding decisions rely increasingly on merchant and ecommerce performance data
Customer activity builds a larger underwriting dataset
NCFA Perspective
The venture-backed expansion proves there is substantial demand for ecommerce growth capital. It also makes Clearbanc increasingly dependent on disciplined underwriting and reliable access to capital for customer advances.
Milestone
3
Clearbanc Becomes Clearco At Nearly US$2B Valuation (Apr 2021)
Clearbanc rebranded as Clearco in April 2021 and announced US$100 million of Series C equity financing plus US$250 million of debt. The transaction valued the company at nearly US$2 billion.
Company
Clearco Clearbanc adopts the Clearco name
Stage
Rapid Expansion Product and international ambitions expand
Capital
US$350M US$100M Series C equity plus US$250M of debt announced
Markets
International Clearco pursues a wider geographic and product strategy
Customers
Ecommerce Founders The company expands its founder proposition beyond a single financing product
Competition
Growth Capital Platform Clearco attempts to compete across funding and additional founder services
Additional Company Data
Oak HC/FT led the US$100M Series C equity round
The April 2021 financing included US$250M of debt
The announced valuation was nearly US$2B
The rebrand accompanied a wider company and product strategy
NCFA Perspective
The 2021 financing marks Clearco's high-growth period. Equity, debt capacity, valuation and operating ambition all increase at the same time. The later contraction shows why a specialty finance company cannot be judged by valuation or lifetime deployments alone.
Milestone
4
Clearco Recapitalizes Around A New Funding Structure (Oct 2023)
Clearco completed a recapitalization in October 2023 that included a US$60 million Series D and a Pollen Street Capital asset-backed facility providing up to US$100 million of financing capacity.
Company
Clearco The company operates under CEO Andrew Curtis following a difficult period of contraction
Stage
Recapitalization Capital structure and operating model are reset
Capital
US$60M + US$100M Series D equity plus asset-backed financing capacity
Markets
Ecommerce Focus The company concentrates on its core ecommerce financing business
Specialty Finance Capital cost and underwriting performance become central competitive variables
Additional Company Data
Inovia Capital and Founders Circle Capital led the US$60M Series D
Pollen Street supplied up to US$100M in asset-backed financing capacity
Clearco expected the facility to support US$850M of originations over two years
The transaction was explicitly described as a recapitalization
NCFA Perspective
The 2023 transaction is more important than another venture round because it resets how Clearco finances the business. Dedicated asset-backed capital reconnects customer growth with funding capacity. The operating test becomes whether Clearco can grow without recreating the cost structure that contributed to its earlier contraction.
Milestone
5
Clearco Rebuilds Its Ecommerce Funding Suite (2024–2025)
Clearco expanded its funding products during 2024 and 2025. Rolling Funding launched in 2025 and replenishes available capacity as customers make payments. The company later combined Fixed Funding Capacity, Rolling Funding Capacity, Cash Advance and Invoice Funding into a broader ecommerce funding suite.
Company
Clearco The company operates with a narrower ecommerce focus and rebuilt product set
Stage
Product Rebuild Capital products expand after the recapitalization
Capital
Fixed And Rolling Customers can use one-time capacity or replenishing funding capacity
Markets
U.S. Ecommerce Current products focus on U.S. ecommerce brands
Customers
Established DTC Brands Current qualification focuses on businesses with meaningful recurring revenue
Competition
Flexible Working Capital Funding structure, pricing, capacity, speed and lien requirements become key points of comparison
Additional Company Data
Rolling Funding launched in 2025 and automatically replenishes available capacity as payments are made
Cash Advance sends capital directly to the customer's bank account
Invoice Funding supports supplier and vendor payments
Clearco currently offers both Fixed Funding Capacity and Rolling Funding Capacity
NCFA Perspective
The product rebuild concentrates Clearco on serving more funding needs for the same ecommerce customer. That makes repeat use, credit performance and capital efficiency more important than returning to the wide geographic expansion strategy of 2021.
Milestone
6
Macquarie Adds US$100M Of Asset-Backed Capacity (Aug 2026)
Clearco announced a US$100 million asset-backed financing facility from Macquarie Group on August 18, 2026. Clearco expects the facility to support approximately US$900 million in funding to ecommerce brands over the next two years.
Company
Clearco Toronto-headquartered ecommerce funding company led by Andrew Curtis
Stage
Funding Expansion Institutional capital increases customer funding capacity
U.S. Ecommerce Funding supports brands operating across DTC, wholesale, retail, marketplaces and social commerce
Customers
Up To US$10M Qualified brands can access funding with estimated terms of four to 12 months
Competition
Institutional Funding Economics Capital cost and asset performance influence Clearco's ability to price and expand funding
Additional Company Data
Macquarie's New York Fixed Income and Currencies team provided the financing
The new facility provides US$100M of asset-backed financing capacity
Clearco expects it to support approximately US$900M of ecommerce funding over two years
Clearco currently reports more than US$3.3B provided to 11,000+ businesses historically
The US$900M figure is a forward company expectation, not capital already deployed or Clearco revenue
NCFA Perspective
The Macquarie facility gives Clearco another institutional funding base after several years spent rebuilding the business. The next test is measurable. Clearco has to convert that capacity into sustained ecommerce financing while maintaining underwriting discipline and asset performance. The US$900 million target defines the scale of the opportunity, but it does not establish that the volume will be reached.
Clearco Macquarie Funding FAQs
How much financing did Macquarie provide to Clearco?
Macquarie Group provided Clearco with a US$100 million asset-backed financing facility announced on August 18, 2026.
How much ecommerce funding does Clearco expect the facility to support?
Clearco expects the facility to support approximately US$900 million in funding to ecommerce brands over the next two years. That is a company expectation for customer funding, not US$900 million of capital supplied by Macquarie.
How much funding can an ecommerce business get from Clearco?
Clearco says qualified brands can access up to US$10 million, with estimated terms of four to 12 months.
What can Clearco funding be used for?
Clearco says businesses can use its funding for inventory, marketing, large purchase orders and growth across direct-to-consumer, wholesale, retail, marketplaces and social commerce.
Is Clearco's Macquarie facility the same as its 2023 Pollen Street financing?
No. Clearco's 2023 recapitalization included a separate asset-backed facility from Pollen Street Capital with up to US$100 million of capacity. The August 2026 Macquarie transaction is a new US$100 million facility.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
August 17, 2026 | NCFA Market Activity | Lending Consumer Credit And BNPL, Digital Assets, Competition And Market Structure
Shakepay Launches Bitcoin-Backed Line Of Credit In Canada
On August 13, 2026, Montreal-based Shakepay launched its Shakepay bitcoin-backed line of credit, BLOC, for eligible Canadian customers. Borrowers can access up to C$50,000, with rates starting at 9.5% APR, using eligible bitcoin held with Shakepay as collateral.
BLOC is offered by Shakepay Credit Inc., an affiliated entity that received securities law exemptive relief to offer bitcoin-backed credit to eligible customers.
Shakepay retains more of the lending operation inside affiliated entities rather than relying on an outside lender to run the credit product.
BLOC is a revolving line of credit available within Shakepay. Eligible customers can draw against available credit, monitor balances and loan-to-value, make payments and adjust eligible collateral subject to their agreement.
Bitcoin volatility is still paramount. If collateral values fall, borrowers may have to add bitcoin or repay part of the balance. Some or all of the collateral can ultimately be liquidated.
The CSA list of authorized crypto platforms includes Shakepay Inc. as a crypto asset trading platform and Shakepay Credit Inc. separately as a crypto-backed lending platform.
Customers use BLOC through Shakepay, but the loan itself is provided by a separate Shakepay company, Shakepay Credit Inc.
Shakepay Adds More Financial Services Around Crypto
BLOC follows several additions around the same customer relationship.
In July, Shakepay became a direct Interac e-Transfer participant. Customers already had access to e-Transfers, but direct participation gives Shakepay more control over how the service connects to its platform. NCFA's Shakepay Company Intelligence Snapshot tracks its expansion from bitcoin trading into payments, cards and business accounts.
On August 11, Shakepay launched Shakepay savings for cash and bitcoin. Two days later, BLOC added secured credit.
The legal entities and protections differ. Shakepay Inc. operates the regulated crypto platform. Cash savings are offered by Shakepay Financial Inc. Bitcoin savings remain with Shakepay Inc. BLOC is offered by Shakepay Credit Inc.
For customers, those expanding services are part of a common Shakepay experience.
Shakepay says more than 1.5 million Canadians have used the platform. Adding payments, savings and credit gives those customers more reasons to use Shakepay between crypto trades.
Competition therefore extends beyond trading fees and asset listings. Crypto platforms can also compete for payments, balances and borrowing.
Two Crypto Lending Models Are Emerging In Canada
Shakepay Credit and APX show two ways Canadian crypto platforms can add secured lending.
Shakepay and Netcoins take different approaches. Shakepay uses a separate company within its own group to provide the loan. Netcoins keeps the customer relationship, while APX handles the lending behind the scenes.
For customers, the practical questions are simpler. Who is actually lending the money? Where is the bitcoin held? What happens if its value falls? How much does the loan cost?
For the platforms, the choice comes down to control. Shakepay keeps more of the lending business inside its own group. Netcoins relies on a specialist provider.
Talking Point
Will Canada's larger crypto platforms keep more regulated financial functions inside affiliated entities, or will specialist providers become the infrastructure behind multiple consumer brands?
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
August 10, 2026 | NCFA Fintech Intelligence Question | Capital Markets And Market Infrastructure, Digital Assets Blockchain And Tokenization, Treasury Liquidity
Can Gold Move From The Vault Into Wholesale Finance?
Last Updated: August 10, 2026 Status: Emerging
Organizations: UK Financial Conduct Authority (FCA), Bank of England, Prudential Regulation Authority, World Gold Council, London Bullion Market Association (LBMA)
On August 10, 2026, the Financial Times reported that the UK FCA is talking with banks and market participants about how tokenized gold could fit within the regulatory framework, including its possible use as collateral in wholesale markets.
The FCA declined to comment to the FT and hasn't published a gold specific framework, consultation or rule. But the discussion connects two developments already under way. UK authorities are working on tokenized collateral for wholesale markets, while the gold industry is trying to make physical bullion easier to own, transfer and pledge.
So can tokenized gold actually become collateral in wholesale markets?
Possibly, but creating the token is the easy part. A bank or market operator still has to trust the ownership claim, know where the bullion sits, value it quickly and take control if the borrower fails. Its own rules also have to permit gold as collateral.
That last hurdle matters. The UK is building infrastructure for tokenized collateral, but the Bank of England's current work focuses on tokenized versions of assets that already qualify. Gold isn't currently eligible collateral under the Bank's Sterling Monetary Framework.
Private markets could get there sooner. Banks and other wholesale counterparties have more room to agree on collateral terms between themselves. Acceptance by a clearing house would be a bigger step. Central bank eligibility would go further again.
This is why tokenized gold is different from simply launching another real world asset product. NCFA's analysis of tokenization in collateral and cash shows that institutional adoption is strongest where digital assets solve a real operating problem. Gold now has to pass that test.
Strategic Takeaway Tokenized gold becomes useful collateral when institutions can trust the claim, control the asset and sell it quickly if something goes wrong. Better technology helps, but it can't grant collateral status on its own.
Evidence
Click each item to expand
1. Gold Enters The UK Tokenization Discussion August 2026, United Kingdomⓘ
The Financial Times reports that the FCA has been discussing tokenized gold with major banks and other market participants, including whether it could be used as collateral in wholesale markets.
The discussions concern the regulatory treatment of tokenized gold.
Wholesale collateral is one of the potential uses being considered.
The FCA declined to comment to the FT.
No gold specific FCA proposal or rule has been published.
That makes this credible early evidence of regulatory interest, not a policy decision. What happens next depends on whether the industry can show that tokenized ownership works inside existing market controls.
2. UK Authorities Are Already Working On Tokenized Collateral May 2026, United Kingdomⓘ
The FCA and Bank of England set out a joint vision for UK wholesale tokenization in May. Collateral is one of the areas where firms have asked for clearer rules and infrastructure.
The programme covers prudential treatment, tokenized collateral and settlement instruments.
Sixteen firms are working through the Digital Securities Sandbox toward live issuance and settlement.
The Bank is targeting a live synchronisation service for 2028.
It is also working toward accepting tokenized versions of assets that are already eligible collateral at central counterparties and in its own operations.
The distinction is important. The programme can help an eligible security retain its collateral role when it is tokenized. It doesn't make a new asset eligible simply because someone puts it on a digital ledger.
Europe is dealing with the same operating challenge from another direction. The ECB roadmap for tokenized finance infrastructure focuses on connecting digital wholesale markets with central bank settlement rather than treating tokenization as a standalone product.
3. The Gold Industry Is Changing The Ownership Model 2025 To 2026, United Kingdomⓘ
The World Gold Council is tackling a problem that exists before the token arrives.
Allocated gold gives an investor ownership of specific physical bars, but that precision adds operating friction. Unallocated gold trades more easily, but the investor holds a claim against an institution rather than title to specific bullion.
The proposed Pooled Gold Interest is designed to sit between those structures.
Investors would hold a beneficial interest in a pool of vaulted physical gold.
The model allows fractional ownership rather than requiring whole bars.
Linklaters developed a legal framework for issuing and transferring the interests.
Easier use of gold as collateral is one of the stated goals.
That legal structure is central to the question. A collateral taker needs more than proof that a token exists. It needs an enforceable claim on the gold if the borrower fails.
4. Shared Infrastructure Is Being Built Around The Bullion March 2026, Globalⓘ
The World Gold Council's proposed Gold as a Service platform addresses the operating layer. A gold token is only as reliable as the records connecting it to the bullion in the vault.
The proposed platform connects physical custody with digital issuance.
It would standardize reconciliation, compliance and redemption.
Token supply could be kept aligned with physical inventory records.
The World Gold Council identifies collateralized borrowing as a possible use, subject to legal enforceability, custody and market infrastructure.
That qualification does a lot of work. Digital infrastructure may make gold easier to lock, transfer and release. The lender still needs a reliable right to the asset and a practical way to turn it into cash.
5. Gold Already Has The Market Depth 2026, Globalⓘ
Gold doesn't need a token to become a liquid asset. It already trades at enormous scale.
The World Gold Council estimates roughly US$31 trillion of gold exists above ground.
More than US$15 trillion is considered investable gold across private holdings, official holdings and derivatives.
Global gold trading averaged about US$361 billion per day in 2025.
Average daily trading reached about US$488 billion in the first half of 2026.
That gives gold an advantage over many tokenized assets. There is already a deep market and established pricing. The challenge is connecting that liquidity to a digital claim that collateral takers can actually use.
6. Physical Gold Still Faces An Eligibility Gap June 2026, United Kingdomⓘ
The London Bullion Market Association is separately asking UK authorities to reconsider how gold fits within the liquidity framework.
LBMA says allocated gold held at the Bank of England can be transferred and monetized quickly.
It argues that current regulatory treatment doesn't fully reflect that practical liquidity.
LBMA wants greater recognition of gold in firms' liquidity assessments.
It also asks regulators to consider whether gold could eventually become eligible collateral for Bank of England facilities.
That exposes the biggest gap. If physical allocated gold isn't currently eligible Bank collateral, tokenizing it won't remove the policy decision that comes first.
7. Tokenized Gold Products Are Arriving Before Collateral Acceptance 2025 To 2026, Globalⓘ
Institutions are already proving that physical gold can be represented and distributed digitally. HSBC has offered tokenized gold, DBS plans tokenized physical gold for customers in Singapore, and other issuers are expanding digital bullion products and infrastructure.
NCFA's evidence base also includes Tether's US$150 million investment in Gold.com, NatGold reporting more than US$469 million in premarket token demand, the DBS initiative and a bullion platform venture between AGTech and the Hong Kong Gold Exchange.
Together, those developments show growing demand, distribution and infrastructure. They don't show that the tokens are being posted as margin to clearing houses or widely accepted under institutional financing agreements.
The next proof is a financing transaction. A regulated bank accepting tokenized gold against a real loan, credit line or margin obligation would show that the ownership structure works beyond issuance. The terms would tell us even more. Who holds the bullion? How much of its value can be borrowed against? What happens if the borrower defaults? Can the lender take control immediately?
Those are ordinary collateral questions. Tokenization changes how the asset is recorded and transferred, but it doesn't make them disappear.
This is also where gold separates from tokenized Treasuries. Government securities already function inside mature repo, margin and central bank collateral systems. Their digital versions are trying to preserve an existing function while changing how the asset moves.
Gold has deep liquidity and established institutional ownership, but a more limited role inside regulated collateral frameworks. Private banks could accept tokenized gold first, particularly where they already understand bullion custody and financing. Wider dealer use would be stronger evidence. Acceptance by a central counterparty would show that the asset can meet tougher rules for valuation, control and liquidation.
The Bank of England is another threshold entirely. LBMA is still making the case for physical gold to become eligible, so tokenized gold clearly hasn't reached that point yet.
Canada offers a useful infrastructure comparison without forcing a Canadian gold story. Project Samara tested tokenized bond issuance, trading and lifecycle management with wholesale central bank settlement. The CSA has also opened Project Tokenization to examine how tokenized products and market infrastructure fit Canadian securities law. Neither establishes tokenized gold collateral in Canada. They show the kind of coordinated legal and settlement work that has to sit underneath institutional tokenization.
Why London Has More At Stake
London isn't searching for a tokenization use case. It already is at the centre of one of the world's deepest wholesale gold markets. If the ownership, custody and regulatory pieces can be made to work together, tokenization could make existing bullion easier to move between banks, trading venues and collateral accounts. The value would come from making a large market work better, not from creating another digital asset to trade.
There is also competition. Asian financial centres are investing in bullion markets, tokenized assets and digital settlement, while major central banks are building new wholesale infrastructure. London's existing market depth is an advantage, but only if the digital version preserves the legal certainty and liquidity that made the physical market valuable in the first place.
For now, the answer remains conditional. Tokenized gold has credible building blocks and a plausible route into private wholesale collateral. What it doesn't yet have is broad institutional acceptance.
The moment to watch is not the next gold token. It is the first repeatable collateral transaction where a regulated institution is willing to rely on one.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem providing education, market intelligence, industry stewardship, networking and funding opportunities to thousands of members. NCFA works with industry, government, partners and affiliates to support a competitive and innovative fintech and funding sector in Canada. Join Canada’s Fintech and Funding Community or learn more at NCFA Canada.
August 6, 2026 | NCFA Market Activity | Wealth Investing And Trading, Banking And Credit, Capital Markets And Market Infrastructure
Marketplace Lending For Investment Portfolios
On August 6, 2026, U.S. fintech HarborLine introduced its securities-backed lending marketplace, a platform designed to help qualifying investors access loans against their investment portfolios by coordinating banks, advisers and brokerage custodians through one digital workflow.
Investors can seek borrowing capacity without selling eligible securities, while HarborLine handles portfolio eligibility checks, lender matching, loan documentation, collateral pledges and ongoing monitoring.
The company is trying to open a lending process that has traditionally been concentrated inside private banks, large brokerages and wealth firms. Its platform connects investors and advisers with banks and brokerage custodians, then coordinates the portfolio review, loan application, lender matching, collateral pledge and ongoing monitoring.
HarborLine doesn't lend the money, hold the investments or provide investment advice. Banks make the credit decisions, while custodians continue to hold the pledged assets.
HarborLine is trying to make portfolio-backed borrowing available without requiring the investor, bank, adviser and custodian to manage the process separately.
How HarborLine Turns Investments Into Borrowing Capacity
This isn't a public marketplace where fund managers list portfolios for lenders to browse. The borrower is generally an investor who owns an eligible brokerage account, either directly or through an adviser.
The investor connects the account so HarborLine can review which investments qualify as collateral and how much borrowing each one can support. Liquid, diversified securities may support more credit than concentrated positions or assets a bank considers difficult to sell.
HarborLine says it packages each verified application in a standardized format and distributes it to matched bank partners. Each bank reviews the file and decides whether to make an offer on its own terms.
If the borrower accepts, HarborLine coordinates the documents and collateral pledge with the brokerage custodian. The investments remain in the account, but the bank receives a security interest over them.
The platform also tracks eligible collateral, available credit and loan-to-value headroom after funding. If the portfolio falls far enough, the borrower may need to repay part of the balance or add more assets.
Banks Lend While Advisers Keep The Client
Securities-backed credit has traditionally been easier to obtain through private banks, large brokerages and wealth firms that already control the investment account, lending channel and customer relationship.
Wealthsimple’s portfolio line of credit is an example of that integrated model. Eligible clients can borrow through the same platform that holds their investments and manages the account experience.
HarborLine separates those roles. A bank can provide the capital without owning the brokerage relationship. The custodian keeps the assets. The adviser continues serving the client. HarborLine manages the information and handoffs between them.
That could help regional banks and independent advisers offer securities-backed lending without building the full operating process themselves. It could also give qualifying investors another route beyond a private bank or vertically integrated wealth platform.
Strong coordination is needed in making a four-party transaction feel as straightforward as borrowing from the firm that already holds the customer’s investments.
Bank Participation Will Decide Whether HarborLine Works
HarborLine explains the workflow, but it hasn't name participating banks or custodians yet. Those disclosures will determine whether HarborLine is operating as a true multi-lender marketplace or is still assembling the network needed to support one.
Borrowers need enough lender choice to improve access or terms. Banks need qualified applications and reliable collateral information. Custodians need a practical way to place, monitor and release pledges.
The technology can reduce paperwork and coordinate the process, but it cannot remove the lending risk.
HarborLine states that it isn't a bank, broker-dealer, investment adviser or custodian. That keeps the credit, custody and investment decisions with the regulated firms involved while positioning HarborLine as the operating layer between them.
Talking Point
Can HarborLine widen access to portfolio-backed credit, or will investors still prefer wealth platforms that already hold their assets and control the full lending experience?
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
July 27, 2026 | NCFA Market Activity | Capital Markets And Market Infrastructure, Wealth Investing And Trading, Banking And Credit
Ontario Teachers’ Adds Platform Economics To CLO Equity
On July 27, 2026, Ontario Teachers’ and M&G agreed to establish a European CLO joint venture. Ontario Teachers’ Pension Plan has agreed to provide up to €200 million for equity investments in future M&G Margay collateralized loan obligation issuances. It will also participate in the long term economics of M&G’s European CLO business.
The second part makes this more interesting than a pension fund buying CLO securities for its portfolio. Ontario Teachers’ is tying capital to future M&G issuances and participating in the long term economics of the platform those transactions can grow. The release doesn’t disclose an ownership stake in M&G itself, the economic formula, governance rights, return targets or the term of the joint venture.
Capital will be deployed transaction by transaction under an agreed investment framework. That gives Ontario Teachers’ room to assess each issuance instead of transferring the entire commitment at closing. For M&G, it provides an aligned source of equity capital that can help the Margay programme issue more CLOs when market conditions and available loans support them.
Why The Equity Tranche Can Pay More And Lose First
A CLO buys a diversified pool of corporate loans and finances that pool by issuing layers of debt and equity. M&G says Margay invests in European broadly syndicated loans. Those are loans arranged for larger corporate borrowers and distributed across several institutional lenders.
Cash collected from the loans pays the senior CLO tranches first. The equity tranche sits at the bottom and receives what remains after interest, expenses and required payments have been made. The European Central Bank’s CLO analysis explains the tradeoff clearly where equity has the highest potential return, but it's paid last and absorbs losses first when loans default.
Ontario Teachers’ is therefore accepting more than ordinary bond risk. Returns can benefit when loan income exceeds the cost of the CLO’s debt and credit losses remain contained. They can fall when defaults rise, recoveries disappoint, financing becomes expensive or structural tests redirect cash away from equity investors.
The pension plan says European CLO equity complements and diversifies its existing programme. Europe also gives it a different pool of borrowers, managers and issuance periods. What hasn’t been disclosed is the expected return, how much of the €200 million may be used in each Margay transaction or exactly how the platform economics will be divided.
Committed Equity Capital Can Help A CLO Manager Issue At Scale
M&G launched Margay in 2023 and reports €1.6 billion currently in issue. The programme sits inside a €10 billion loan platform, a €27 billion structured and private credit business and M&G’s €93 billion Private Markets business. M&G’s Life business has also invested more than £1 billion in structured credit strategies over time.
Equity capital is essential because every new CLO needs investors willing to take the most junior position. A dependable partner can make future issuance easier to plan, although every transaction still depends on loan availability, funding costs and investor demand for the more senior tranches.
The market is active enough however to support that ambition. European CLO issuance reached €15.9 billion in the first quarter of 2026, up from €14 billion in the previous quarter. CLOs led all placed European securitisation categories during the period.
Other managers are securing similar pools of committed equity:
Sagard | HalseyPoint launched a US$250 million target CLO equity fund for future issuances after Sagard acquired a 40% interest in the manager. Sagard, affiliates, insurers and other institutional investors had committed US$92.5 million at launch.
Oak Hill Advisors closed a US$1.1 billion CLO equity fund in September 2025 with commitments from pension funds, sovereign wealth funds and other institutions. OHA said the capital could support about US$10 billion of CLO deployment.
Columbia Threadneedle entered a multiyear agreement with a Jefferies led investor consortium to supply equity for several CLOs. The structure gave the manager repeat issuance capital rather than funding for only one transaction.
These deals are structured differently, but the managers face the same challenge in that they need investors willing to fund the riskiest part of each new CLO. A strong credit team and a supply of suitable loans aren’t enough without that equity capital. Ontario Teachers is also going a step further. Along with investing in future CLO equity, it will participate in the long term economics of M&G’s European CLO business.
The Opportunity Comes With A Harder Risk Question
If Margay issues regularly and its loan pools perform, Ontario Teachers’ could earn from both its equity positions and its negotiated participation in the platform. M&G gains a long term institutional partner without receiving the full commitment before suitable transactions are ready.
A slower issuance market may leave part of the commitment unused. Competition for loans can make assets more expensive and reduce the difference between loan income and CLO funding costs. Higher defaults or weaker recoveries reach the equity tranche first. The public announcement also leaves outsiders unable to compare the value of the platform participation with the risk Ontario Teachers’ is taking.
This transaction is aligned with a larger expansion in non bank credit, but the categories need care. Margay’s disclosed collateral consists of broadly syndicated loans, while private credit normally refers to loans negotiated privately between non bank lenders and borrowers. They can share institutional investors and leveraged corporate borrowers without being the same market.
The Bank of Canada recently issued a warning about non bank debt risk. The Bank says Canadian pension fund and insurer exposures to global private credit appear manageable, while limited transparency and growing connections across financial structures still warrant monitoring. The Ontario Teachers’ transaction isn’t evidence of distress. It does show why the ownership, funding and risk links around credit managers are becoming more important to understand.
The commercial trend is already visible across private market platforms. Large investors want more than passive fund exposure, while managers want dependable capital that can support repeat origination or issuance. The open question is whether the added platform economics compensate investors for taking concentrated, junior risk over several market cycles.
Talking Point
Will more pension funds negotiate access to both CLO equity and CLO platform economics, or will first loss risk and tighter returns keep most institutions in individual securities and diversified funds?
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
EP66: What It Takes To Build $1.5 Billion In Small Business Lending
Featured Guest:
DAVID GENS, Founder and CEO, Merchant Growth(LinkedIn)
David Gens is the Founder and CEO of Merchant Growth, a Canadian digital financing platform for small businesses. After graduating from UBC with a Bachelor of Commerce in Finance, David began his career as an analyst at private equity firm CAI Capital Partners. In 2009, at just 22 years old and in the aftermath of the global financial crisis, he founded Merchant Growth to help address the gap in access to capital for Canadian small businesses. Over the past 15 years, Merchant Growth has helped more than 15,000 businesses access over $1 billion in financing through technology enabled lending solutions. David also leads Merchant Opportunities Fund and has been recognized as a Business in Vancouver Top 40 Under 40, BC Business Top 30 Under 30, and an EY Entrepreneur Of The Year finalist.
What does it take to build a lending business that has deployed nearly $1.5 billion to small businesses over 17 years?
In episode 66 of NCFA Fintech Fridays, David Gens, Founder and CEO of Merchant Growth, shares how he built one of Canada's leading alternative small business lenders from the ground up.
We explore why many good businesses still struggle to access financing, how technology and AI are changing underwriting, what it takes to scale responsibly, and the lessons learned from serving more than 15,000 businesses. David also reflects on launching a fintech at just 22 years old, navigating changing economic cycles, building long term lending partnerships, and balancing innovation with disciplined risk management in an increasingly competitive lending market.
Whether you're building a fintech, running a growing company, investing in financial innovation, or interested in the future of small business lending, this conversation delivers practical insights on entrepreneurship, lending, risk management, AI, and long term growth. Enjoy!!
Duration: 110 mins
Subscribe and tune in each Friday to check out the latest movers and shakers in fintech. Listen to more podcasts here:
DAVID GENS, Founder and CEO, Merchant Growth(LinkedIn)
Intro: Welcome to fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners. Covering all things fintech, blockchain, AI and alternative finance.
[00:00:30] Craig Asano: Hello everyone. It's Craig Asano, the founder and CEO of NCFA Canada, welcoming you to season 4, episode 66 of Fintech Fridays. It's a weekly podcast brought to you by NCFA and our partners featuring conversations with leading voices across fintech, funding, and financial innovation. We walk and talk to all the founders who are doing incredible things. We talk to them about their journeys, new product innovations, emerging trends in their market, and what's happening in the market right now from their perspective. So, today we're super excited to have another fantastic guest with us, and I'd like to introduce you to David Gens. He's the founder and CEO of Merchant Growth, a Canadian digital financing platform for small businesses.
So after graduating from UBC with the Bachelor of Commerce and Finance, David started his career as an analyst at a private equity firm called Kai Capital Partners. And in 2009 at the young age of 22 years old, we're going to get into this a little bit. just after the after the aftermath of the global financial crisis, he founded Merchant Growth to help address the gap in access to capital for Canadian small businesses. So during the last 15 years, I guess, Merchant Growth has helped more than 15,000 businesses access over a billion dollars in financing through technology enabled lending solutions. David also leads Merchant Opportunities Fund and has been recognized as a business in Vancouver top 40 under 40 and BC business top 30 under 30 and an EY entrepreneur of the year finalist. So David, thanks so much for joining us today to share your knowledge and expertise.
[00:02:14] David Gens: It's my pleasure to be here. Thanks for having me.
[00:02:16] Craig Asano: That is a mouthful. You have a lot of accolades there. I've always read all those.
[00:02:23] David Gens: You don't have to read all you remember the 30 under 30. You've you've been you've got a hell of a story and we're going to get into her you know, right now. But just to kick things off, I think let's get in with the first question. despite you know the advancements of technology and you know more financing for small business options than ever before small businesses it seems it's it's always you know never enough capital. There's always a struggle there to get enough capital to continue to grow. But from your perspective, what why is that gap why is it so challenging and has it changed or you know how in from where you sit in the last 15 years has it changed?
[00:03:09] David Gens: Yeah, it's changed. I mean we have obviously made a bigger dent into the problem. There's also competitors that we have in a whole industry now that you know really didn't exist when I started this. So a dent has been made but that doesn't mean the problem's solved, right? It's a big problem. It affects hundreds of thousands of businesses in Canada. and the problem is just that they don't have the kind of access to credit or capital in general that a larger company does. A larger company has the resources to spend time you know, sourcing capital in its various forms with finance teams and also on the other side of the table, banks that are providing credit and institutions etc. have the you know kind of the scale in those transactions to staff them up, be creative, have professionals look them over and figure out custom structured solutions to provide that larger business with that capital. With a small business, none of that exists in that way. And so it's it's cookie cutter solutions that traditional financial institutions look mostly at assets and whether or not they can lend against those. And if you're an asset light, cash flowing small business, you're not you know, given much credit from those traditional institutions. And if you think about most small businesses are asset light, but have cash flow. they serve customers in local communities. They might have a little bit of inventory. but at the end of the day, they typically don't have a lot of hard assets. and you know, any individual small business, by definition, they're small.
But if you add them all up, they're about half the GDP. they're two-thirds of the country's employment. So, it's a massive space when you really look at it as a whole. And so, if we can make our dent in it, we think that is you know, something worth doing and can really drive successful outcomes for more small businesses. We want to see a world where there's lots of successful small businesses. We're not all just transacting with these large behemoths. we think that's just kind of a more interesting world to be a part of and so we're we're here to support it, level the playing field. and you know and build a business ourselves out of it as well.
[00:05:20] Craig Asano: Music to my ears. I mean you're fighting the David and Goliath battle sometimes, but it's the one that many of us choose to fight. small business are innovators and we sit at the heart of where that innovation is happening from the from the financial services side. So, you know, hats off to you and to making it work, to the successes that you've had. So, let's talk a little bit for those who don't know about Merchant Growth, you know, maybe introduce Merchant Growth a little bit and, you know, that backstory, that founder story. You know, how did you get into it? You know, you were working at private equity. we had that global financial crisis, but at the ripe age of 22, you decided this I'm going to have a go at this. So, illuminate us on that founder journey a little bit.
[00:06:16] David Gens: Yeah, I was always driven to do my own business. I come from a family of entrepreneurs. My dad, brother, and uncle all had their own companies. I was, you know, I was a little bit entrepreneurial in high school. my the thing that I sort of ran in an entrepreneurial way. Wasn't very profitable was my rock band. I had a band. I played the bass and I sang. but we were booking shows, getting shirts printed. We had a van. We were going around and making a go of it. And you know, that was you know, like I said, not a not a profitable venture, but nonetheless, it was you know, getting a team aligned and making something happen. So, I knew it was a matter of time. Eventually, I wanted to sort of start my own thing and you know, work hard and hopefully, you know, see the upside of having equity and something that I build.
You know, I thought that I was going to last longer in that private equity world, but it became kind of clear to me that it wasn't scratching the itch for me. I really wanted to start my own thing sooner than later. And I got advice from my older brother who, like I said, was an entrepreneur. He said, "Kind of the sooner you get going, the better. time is on your side. things take time to build. and there's always an excuse, you know, why you might want to not do it. just ignore that and get going. So, that is what I did. And I looked at this growing market in the US for non-bank small business credit and looked at Canada and recognized the huge difference between the US and Canada. There were already a few large players in non-bank small business finance in the US there. That did not exist yet in Canada. And so I did a little more research.
I talked to some small businesses saw if you know how do you finance your growth where do you get credit and basically it was clear that they had no awareness of the space there were a few player players already in non-bank small business finance at the time in Canada but they were tiny and no one had heard of them yet so I felt like I was on to something and that Canada would play catch-up to the US you also had that backdrop of the great financial crisis and this multi-decade secular trend of less small business credit being provided by the banks that only accelerating post great financial crisis So, you know, I a way I went with a business plan and started funding those first few credits. kind of word of mouth, found some small businesses with credit needs. but it was definitely very small kind of humble beginnings.
My initial goal was just to get the business to the scale where it could pay me a salary so I could, you know, pay my cost of living. and do so being my own boss. Like that was that was goal number one. And then you kind of built it from there. One thing I liked about this business plan was it was an all or nothing. You know, it's not like either, you know, you succeed and it's something huge or it's a zero. It was more like, you know, I just need to do a good job, be responsible, do a good job of underwriting, serve investors well, you know, find more and more clients over time, and, you know, I could kind of incrementally build that business over time. and so that resonated well in terms of my own kind of risk appetite because I really wanted to, you know, find something that would work and hopefully grow over time.
[00:09:24] Craig Asano: It's awesome. I in particular I like the band part. Do you do you do you ever find yourself thinking back to those days and you know what happened to the band? Have you reconnected with the band?
[00:09:38] David Gens: So I still play music. I and I continued playing in bands even when I had the business. you know, in 2013, for example, I was 3 years into this business and I was touring with a couple different bands that year. so I Yeah. Yeah. So, I was I was I took it pretty seriously. you know, this is obviously not the topic of the podcast, but one of them had a had a had a rock radio number one in Canada, and so we opened for Guns N' Roses and Alice in Chains and a whole bunch of rock bands. So, I got to like bucket list. I was able to play on some big stages for a bit which was just so fun. but terrible way to make money. I mean horrible. those especially those bigger shows where we were opening for bigger acts. Those were also the worst paying shows we ever had because you're kind of being paid in exposure in instead of cash. So in any case, it was a lot of fun but also not profitable.
I continue to play music. I still do. Obviously it's just for fun these days. but yeah you know there is a lot of parallels for sure. you know it is a team sport you know playing in a band. and the same way that team sports you know help teach leadership and confidence and also how to kind of collaborate and have you know a team dynamic. bands certainly have all of those same elements. and you know it's yes I've got business partners in what I do today too. So equity partners, people who are like in it and on the roller coaster ride with me day-to-day the same way as back when we had the band. So you know you kind of if you want to do anything big most of the time it does take a team to do it right.
[00:11:17] Craig Asano: Well I mean you've got an appetite for some risk. Not everybody's willing to get in front of the crowd to open up for Alice in Chains and rip on a guitar.
[00:11:25] David Gens: I you know I was I was on I was on the drums for that one. Yeah. Yeah.
[00:11:29] Craig Asano: Yeah. I'm talking paid five till I got kicked out of the but those early well see it's interesting like to have that get up and go th there are some founder insights there I think as you were talking about team and collaboration and leadership but really the problem you know getting back to Merchant Growth that you were tackling is the one minus of more the traditional lending routes the capital raising routes through the banks and the options so building outside of traditional banking, you know, in those early days, like how did you make it work? How did you build the trust? you were saying you found the business model that didn't have, you know, excessive risk was something as long as you worked hard, it was sort of contained. But there must be some challenging stories you remember and some lessons there that maybe you'd like
[00:12:21] David Gens: Yeah, I think one thing that made the business model possible is that people were starting to get comfortable with financial services being done digitally. you know, applying on a website, talking to someone on the phone, not necessarily meeting them in person. the idea of going into the bank branch was starting to, slowly, fade away. obviously we still live in a world with bank branches, but there's a ton of stuff now you do digitally.
So that trend was helpful but you know I was young when I started and didn't have a track record and to your point you know why would people take me seriously and the truth is it was hard a lot of you know it took convincing so you know I think the one advantage was we were taking applications online and doing things over the phone so people maybe didn't necessarily know how young I was but I also had to you know get the trust of investors who actually funded these financings because you know I didn't have the my own money at the time. So we that part was you know as hard if not harder than finding interested borrowers. and so it that was really you know leaning on friends and family. It was small checks. Like I said the initial goal was just to get it to pay my salary. So, I wasn't trying to shoot for some crazy number.
But you know, I was willing to, you know, spend hours with someone who might potentially invest 5 grand into the fund right back then. And, and so I was, you know, just piecing it together bit by bit that way. And, and, you know, I feel a huge debt of gratitude today to those early investors because, you know, they were investing really in me. the idea that I would continue to work hard and figure it out even if I made mistakes. That's what they were investing in because there was no track record or platform or you know repeatable kind of process at the time. So you know today obviously investors are investing in you know portfolio credit portfolio financings that's at scale you know a statistical underwriting model that's been bu developed over a decade. We've got the largest data set on, you know, credit performance for these types of small businesses in the country. And so it's, you know, what you're investing in today is very different than what those early investors were having to trust to move their capital over my way back then.
[00:14:54] Craig Asano: There's a lot of excellent lessons in there having just you know heard he heard that approach but the gratitude really stands out to never forget who helped you in those early days and I can really respect that and the friends and families everybody needs some help and so that's on both sides of that I think but you know that's that's excellent because you know if you have the largest data set of the credit decisioning and maybe you know more for small businesses for the last 16 years in Canada here you would be at the heart of like are Canadian small businesses they're borrowing more are there more of these small businesses are we growing in the right direction these based on that data set I don't know if you've analyzing it in that context recently but I'm just curious to know
[00:15:49] David Gens: Yeah I mean we're obviously we're closest to any data that pertains to our own applicants and customers. Obviously, we do track industrywide stuff as well to understand how the market is developing, what our share of that is at and where it could go as we kind of continue to plan for the business. but you know, it's it hasn't been a fast growing economy. You know, in the last couple years, we've seen slowing growth, but still positive real growth rates. I will say that our average applicant is growing a fair bit quicker than the Canadian economy as a whole. So we're seeing kind of high singledigit even 10% kind of real growth rates at our underlying applicants because it just goes to show that it this business model self-selects for a higher growth borrower. The reason they're coming to Merchant Growth is because their businesses are growing. They're looking for credit to help them continue to grow. Most businesses have positive working capital which means that as they grow they need more capital. and so we are here to provide that.
[00:16:55] Craig Asano: So when it comes to Merchant Growth you know you talked a bit well clearly you know it's a digital model and you've been at it for many years and but what about the products like what exact financing solutions do you is there a huge range? can maybe break that down a little bit for our listeners.
[00:17:15] David Gens: Sure. Our products today are term financing, which is, you know, a lump sum up front and then we're getting, a payment, pardon me, a payment, daily or weekly that in most cases is based on the revenues of the overall business. so there's an ability to kind of reconcile and reset that payment level depending on how the revenues of the business are trending. That's called revenue based financing. So effectively, it's like a royalty. We're buying a portion of your future revenues. we also do term loans. So that's just a straight loan agreement. you know with an interest rate and a typical kind of term loan setup. also in that case it's an advertising product. so we're always getting principal back with each payment. and last but not least is line of credit. So we also do have a revolving product. you know how that's evolved over the years.
We started out just doing the revenue based financing and we were initially doing it based on credit card sales only, credit and debit card sales. That product is called a merchant cash advance. We started in that space then we went to overall revenue based financing and term loans. but really the biggest innovation I would say has is perhaps less visible to the customer but it's in that automated adjudication. It's in the statistical scoring model. It's in the risk based pricing and what that has allowed us to do is accurately price risk across a spectrum. And so we're able to, you know, win that very price sensitive, super high credit quality, larger business and provide product that's appealing to that customer, but also say yes to the risky customer who is, you know, much more likely to be declined no matter where they look.
And we do that by understanding the underlying risk in each applicant. You can only do that if you just do a ton of financings and you're able to study the history of that and then use, you know, machine learning techniques to build sophisticated models to, you know, figure out how to predict those outcomes going forward. And I think that's been key to our success. you know, our competitors were a little bit more like one-size-fits-all. You know, here's roughly the rate. and it just applies to whoever comes in their door. and again, that's just not precise enough. And I think we've been able to really refine that in a in a way that's allowed us to scale you know, more elegantly, I'd say, than other companies in the space.
[00:19:43] Craig Asano: Yeah. You often hear there's a lot of thin files or no files. but let's say it's an immigrant entrep entrepreneur, new immigrant to Canada, but they've got a ton of experience and you know, back where they came from. they get here and they don't they don't really exist on paper or is that would that be a good example? They come to you and what would their the journey like what would the customer journey be like? You've got advanced underwriting that adjudicates the risk and loans, but is it is it just a website? They come in and fill out some information. Walk us through the customer journey a little bit.
[00:20:14] David Gens: Yeah, that customer is potentially going to look slightly riskier to our algorithm. you know kind of all else equal, but not necessarily, right? Because the personal credit file of that individual is just one of many inputs into our own scoring model. we call it the merchant score. that's where we've used you know machine learning to really get a lot of predictive insights from a variety of different data sources. So to talk about the customer journey and what those data sources are one it's the application that customer fills out on Merchant Growth. com or through a partner of ours. that's going to tell us things like years in business industry location etc. the next is the personal credit file. do still look at that and there are predictive elements within that. But the next and most important is the bank transaction data.
And so we get at least 6 months of bank transaction data from the operating account for that small business and we run an algorithm that helps us figure out what the revenue of that business is. Remember not every deposit into an account is a revenue. It could just be you know the business owner putting money in or drawing on a loan or something else. so really detecting what the real revenues are, what the expenses are, whether they're variable or fixed, and then being able to run analysis on that. And then various other things that, you know, you can basically kind of cluster data between the bank data and applicant data and other things to sort of get a picture on a certain dimension, which that might sound really complicated, but that's kind of the way machine learning works is you try putting different data together and see if it's predictive.
And the algorithm learns over time and then you know you al also always do need to be able to explain it. You know why is a high value good or bad or what the case may be before you include in the model. But you know there is a lot going on there and it's too much to even be able to kind of talk about in a in a very short podcast. but also on top of those three, there's a fourth data source which is kind of a catch-all for all the other data we're able to pull which includes the business's online presence. So do they have a website? Do they have online reviews? And how good are those reviews? How recent are they? How many are there? How is that relative to the size of that business? Does that sort of jive all that kind of stuff? So, that's important in certain industries, less important in others, and our, you know, score understands that, all of that.
So, in other words, you know, if you're thin file on your personal credit, but you got a strong business, like, we're going to notice that and you're still going to get approved by us. and I think that's kind of one of the cool things about our business model is we're trying to solve for is this business you know, trending well, is it sustainable? Does it have the cash flow to service credit? And on that basis, we make credit available.
[00:23:14] Craig Asano: And so that would be sort of a snapshot of more like the a good customer, the ideal customer. They've got enough data. They're they're willing to share it. They need access to this capital and they go through the adjudication engine. How long does it take for that growth the merchant score to pop out? Is that something that the customer that goes to the website sets up an account and they don't even call in, they go right to the website. How long if they supplied that information, is it is it something that happens real time? Is it is it instant or is it like
[00:23:49] David Gens: Yeah. So, what I just described is filling out the application, connecting that bank transaction data that can all be done as part of a five-minute application and then our score automatically runs. So, there's no other human involvement required there. So, you know, within literally 1 minute of completing that 5-minute application, we have a yes or no, and here's what the offer could look like. Here are the terms available, etc. And at that point, one of our, representatives reaches out to the business, explains the different options, acts as an adviser, kind of figuring out what would fit their need best. And then once the business owner chooses what type of financing structure they're moving ahead with, then contracts go out for electronic signature and a few other documents may be requested.
If it's a smaller credit request, then frankly, they just need to verify their identity and away we go. If it's a larger credit request, we could ask for things like tax docs and financials, but it depends on the industry and the size of that credit request. but if you're you know if you're a small business owner and you're highly engaged with the process and you're looking to get it done fast then we regularly
[00:25:03] Craig Asano: You know fund businesses that apply in the morning by the time the afternoon funding goes out and what are the size of those numbers on average like the small ones versus the large credit requests? Is it that might take a little bit more due diligence? Where does that
[00:25:18] David Gens: So, you know, our funding amounts you know, range from 10,000 to a million. our we do a lot of small financing. So, you know, our average financing amounts about 50,000. those kind of like more tax docs, financials that those kind of asks tend to kick in around between 150 to 300,000
[00:25:41] Craig Asano: Depending on the industry, right? And so we have a picture of sort of the process and who might be suitable for it. Who's not suitable really for that you might think it's not you know it's not a good fit. We usually talk about I think it's a good question that we usually bring up on this podcast. It's like the ideal customer and it's also hey who's the not the ideal customer so people can you know understand that.
[00:26:12] David Gens: Yeah. One is just if it's day one funding, right? If it's a startup that's not in revenue yet, I wish we could help those businesses. I truly do. But without any history of cash flows, there's just nothing to bank on for us using our approach. and so that is that is one area we can't go into. The other one is just lumpy cash flow profiles. so if you're project based, you only get paid once every few months when you complete a big job. that's that's too lumpy of a cash flow profile. Again, we're banking on the fact that you have some consistency in your revenues and your cash flows to be able to service the credit we provide. so things like resource extraction, that's obviously a too lumpy of a business and not to mention commodity exposed, but often times it's exploration and pre-revenue too.
So you know we tend to fit best for those kind of consumer-facing small businesses you know restaurant retail health and wellness auto repair etc you know trades maintenance trades we do some B2B like wholesale distribution and manufacturing but it's it's a smaller part of the portfolio again just as long as the cash flow profiles are consistent then that means that you know more likely than that you know we are able to approve you if you also kind of meet just the minimum size and time and business requirements.
[00:27:35] Craig Asano: Perfect. That's a good answer. Do let's talk a little bit about since you've done you know over 10,000 financing so it's a big number to me in this manner with this approach and all those learnings and this massive experience what you must have seen a lot of sort of truths or misconceptions that maybe some small businesses have. So, it's a good opportunity to really dispel any myths that some small businesses might have that you've sort of seen as recurring patterns. You're like, you know, here it is again. Is there anything that you see in the data or in your experience that sort of pops up and you say, hey, I wish you know that we could advise them and tell them this is something that, you know, you need to learn, make the process easier for everybody.
[00:28:19] David Gens: Yeah. You know, it's going to sound like I'm I'm I'm kind of selling against myself with this comment, but you know, credit is a tool. It's a powerful tool. It's an important tool. It's allowed you know, frankly, like humans to just progress in a in meaningful ways by taking capital from savers and putting that capital to productive use in other parts of the economy. we've definitely you know advanced as a species as a result of credit to be not you know can't really overstate that but it's a so it's a it's an excellent tool but it can be abused just like any tool and it doesn't it's not the right tool in all circumstances. you know this doesn't apply to you know too many of these small businesses that we work with but some of them will take whatever's available to them and we're thoughtful about our offers. We always want to make sure they're sized appropriately and affordable.
But not everyone in the space is as organized and diligent about that. and so you know there are higher risk financing businesses that finance frankly the businesses that you know we wouldn't finance or perhaps we have financed but we've maxed out on what we would do. And so but you know these higher risk folks are still willing to lend them even more. and so you sometimes see small businesses carry multiple loans at the same time from you know the non-bank small business finance space and you know that's tough on cash flow. It's tough to kind of you know really make that work long term. It's not necessarily sustainable. You end up kind of on a treadmill with too much credit in your business. And so, that is one thing that I kind of, you know, the misconception I guess in that case is just like, oh, I'm I qualify for this credit. I should grab it.
I can use it and I can it's going to help me. It's only going to help you if you know the return profile on the investment on that you're able to make in your business as a result of getting that credit. If the return on that is greater than the cost on your credit, and even if it is greater than the cost on your credit, you got to look at the time horizon on that. If it's not going to produce cash quickly enough, you know, you're you're it's not really going to be positive for you cash flow-wise in the short run and it could potentially get you in a tough spot operationally if you're just really starved on liquidity. So that's one thing is just to be careful about having multiple financings at once and just making sure you have the right amount of credit that you feel comfortable with that allows you to take the risk that makes sense but not excessive risk.
[00:31:04] Craig Asano: There's a lot there's a lot there that's I mean I think a lot of small businesses get into that scenario. They've got their line of credit that's more personal I guess or maybe the business line of credit and then they get into those credit cards. How many times have we heard the stories and you know the single founder is using their credit card to launch a business and maybe they're telling it in retrospect or in hindsight after they've had a great success but risky days for sure. So I think that certainly good advice. You know moving sort of zooming out a little bit about the landscape the lending small business lending landscape have what have you seen that's been sort of developments that in the 15 17 years you've been at it? Because you know through my research for the podcast like one little breadcrumb trail is that competition bureau study. They're looking at is there enough competition in speed financing and so you know what trends or what are your thoughts on the amount of competition and is it efficient market where there's the right size types of businesses coming to apply and getting funded. And to your point earlier, it's the fact that credit exists has allowed humanity well the humanity of small businesses to do things they couldn't do without it. So it's an incredibly useful tool. But from that competition angle as well as some trends what you know what's happening in the SME lending landscape.
[00:32:36] David Gens: Yeah. I mean I think that study is looking at all of the financing options for a small business. So it's looking at it in the context of you know the banks, the equipment leasing businesses and you know government programs everything and everything anything and everything I think in terms of getting more credit flowing and encouraging more competition. I'm sure you've talked on your podcasts about open banking over time. so I won't, you know, beat a dead horse, I guess, but, you know, that would make it a lot easier for businesses like Merchant Growth to serve, those small businesses in a consistent cost-effective way and over time as opposed to you know, the connections we've we've had to rely on in the past that were less reliable than they would be under a proper open banking framework. So, that is you know it's been announced that's that's coming. so we're excited about that. You know I think that again the space has come a long way in terms of the number of players and how much of the market we've been able to assist. but there's still a lot of work left to do.
[00:33:56] Craig Asano: Absolutely. ju just curious so you're based in Vancouver. Do you're national. you can service any small business nationally.
[00:34:07] David Gens: Yeah, absolutely. Yeah. Yeah, we that's always really been the case. I mean, there was a time when we didn't have French contracts, so we couldn't do Quebec, but that was a long time ago. So, yeah, for all intents and purposes, we're were all over the country.
[00:34:20] Craig Asano: And do you find that I guess it's just a function where most of the small businesses I know in Toronto, GTA or Ontario there's there's a lot of activity. Montreal is pretty hot. Van Vancouver has always been a hot bed of startups, but they might not fit that exact profile based on you know what you're talking about. But where's the distribution? Is it is it heavy Ontario? Where is it?
[00:34:42] David Gens: We are overweight slightly relative to the population in Western Canada given our kind of roots and time zone and stuff. But a and you know we're probably a little underweight Quebec just cuz we have not as many French speakers on staff. but we do have them across all the different functions in the business. but apart from that, it really is kind of wherever the Canadian population is. Ontario is our biggest market. and you know, we look forward to actually doing more in Quebec in the near future as we plan to staff that up a little more. but yeah, that's kind of the makeup today.
[00:35:26] Craig Asano: Do you find, you know, after being in the business so long and building I'm not sure how large your team is, but as you scale, or do you do you still get excited about funding a particular business, you know, story, the customers come back and say, you know, David, I got to come back and thank you. This has been the best thing that's ever happened to our business. And does is that kind of partly what's motivating you? Is it is it the efficiency?
[00:35:51] David Gens: Yeah, I love it. I mean that feedback loop for me these days is looking at our online reviews. so I see it there. You know I myself am rarely on the phone with customers anymore. but sometimes I am. You know we had this big sales push during the repayment of the government program known as CEBA Canada Emergency Business Account which was a COVID relief program part of which was repayable all at the same time and in January 2024. And that was a huge push. We were just financing companies to take advantage of the government discounts that were offered. You pay out a lump summon in that January 2024 time frame. So we had all of us including me like with headsets talking to customers at that time getting that done which was actually a lot of fun. but yeah these days it's mostly looking at those reviews online. And we also have been using AI to study the conversations that we're having. You know, it's pretty interesting, right? You could have AI look at the transcript from, you know, 10,000 calls and help you understand your customers and their personas and that'll in turn help us serve them better. you know, and their so that's that's been fun and exciting. But yeah, no, absolutely. Like I love what we do because we're helping these small businesses. we're leveling that playing field like I talked about earlier between them and larger businesses. So big part of why we get up in the morning for sure.
[00:37:24] Craig Asano: So you know you touched upon the AI underwriting. You talked about you know other maybe creative uses for AI just being able to help maybe some of the customer journey or be interesting to match it against your Merchant Growth score to see if that could be even improved using AI or maybe that's giving too much secret sauce away to AI as it you know eats everyone's lunch. But you know I want to focus on that AI piece and sort of the modern underwriting. You've obviously seen tremendous changes from starting 17 years ago was manual. I caught earlier you were saying some of it you were still on the phone but they were on the website. The customer we really know is you doing the phone call thing on the back. but in you know maybe just add a little color to the use of AI and I'm I'm curious about the human oversight aspect. You know, where is the line drawn because everybody's getting jazzed up about AI agents and this is the whole autonomous and humans won't be involved and then there's a whole another camp and so where do you sit on that human oversight versus you know you know the AI engine that you've built and you must have some vision or interest in maybe taking it further integrating it further so what are your thoughts on sort of the modern how AI's modernized it and you know, people's involvement in the future here.
[00:38:53] David Gens: Yeah. I mean, I don't think it's completely black or white. there's no doubt in my mind that as a financial services business, we are more impacted and more frankly, we just have a lot more leverage to what AI can do. because it is an information business. It's information in, credit decision, pricing decision out. you know providing that customer service you know and providing a return to the investors and the credits on the back end. AI can help with a lot of all of what I just described. having said that I don't think it's going fully automated absolutely no humans you know not for a long time. So on the on the underwriting side that's where you see you know a lot of potential for sure. I think our merchant score you know it's it's a it's a kind of AI 1.0 which was machine learning.
Now with the language models to your point we could actually have the language models spit something back that we could then incorporate into our score. I think that's that's the way we would think about using LLMs in that context. LLMs are helping our underwriters get a complete summary on a deal in a way that just saves them a number of clicks and actions and kind of like research work they used to have to do manually. So that's awesome. so I think in terms of just kind of how much volume can be done per underwriter, that number is climbing and climbing and we'll continue to climb with AI. but I still, you know, it's still a ways away to the point that you don't use them at all. Now, we already have no underwriter on some files, right?
So, if it's a really small file and it's looks very normal, like there's nothing unusual about that file, then we have a separate model that kind of ask answers the question, is this the type of file that could be an automated funding? if it passes you know that model then we actually will put it through as an automated fund. Again, very cookie cutter simple scenario for a small amount of credit. if it's a larger amount of credit or if there's anything unusual then it kicks out to a manual review. So it's it's kind of like you know AI is like your autopilot. You know basically commercial airline pilots haven't really flown planes in many years. they just, you know, pull on the yolk or the stick just to take off and then they just pull on it one more time when they're landing and the rest is all automated.
But they're there just in case, you know, and they're there for that like those couple of really important moments. And I think that's that's how we think about AI and underwriting is, you know, you're going to you're going to have those edge cases and unusual scenarios, this or that, or just changing environments. So, you're always going to want someone kind of overseeing the whole thing, too. now on the sales front I think there's less leverage from AI. as exciting as voice AI is and the fact that you know sales is just it's just a conversation so it's just language and so you think just AI is going to take that over but I don't see that happening very quickly because you know there's a trust building that needs to occur and you want to get that commitment from the business owner and that commitment is really only felt in a human conversation as opposed to a machine conversation.
So I again though you can do more volume per salesperson and you know some of that kind of you know more prospecting type work lead nurturing type work you could have AI do some of that but I don't see this the you know death of the salesperson anytime soon as a result of AI
[00:42:35] Craig Asano: The death of a salesperson. Well, what about the like fraud? Is AI on the fraud desk, the fraud file? Can you see because you often hear that the can help maybe security as well, cyber security?
[00:42:51] David Gens: Yeah. Yeah. No, I think it can absolutely be helpful there. And that we're we're already, you know, I mentioned the AI summary for the underwriters. There's there's things that the AI, you know, being prompted to check for that can help there. and yeah, I mean, look, it's it's it's it's going to be in everything. It's already in a lot of things. so it's it's a fascinating dynamic time, especially if you run an information business.
[00:43:20] Craig Asano: Oh, that's true. As you were talking, it just a thought popped in my head. I say, hey, maybe I should run a fintech conference just for AIs. I wonder that would probably be not that interesting.
[00:43:34] David Gens: Just watch the AIs attend the conference.
[00:43:37] Craig Asano: AIs attend the conference and take it over. I don't I would have a role. so we're we're moving down our list of you know topics that I want to talk about and we're getting to the next one. You know, one thing is about Merchant Growth business and scaling it and you know, I in the research like a billion dollar is a pretty big number and 15,000 businesses. but are you like how much volume do you do a year annually? Is that something you'd be willing to share or is that
[00:44:06] David Gens: Yeah, you know, I'm I'm fine to share that. Yeah, I've posted it on LinkedIn before. and you know, we're we're I mean it's it's it's moving around. and we're, you know, growing, but we're only halfway through this year, so I can't tell you exactly what, you know, we're going to end the year at, but you know, we're we're in the sort of, you know, we're doing over 400 million a year.
[00:44:34] Craig Asano: 400 million a year right now. You're scaling. Beautiful. So that's exciting.
[00:44:39] David Gens: Yeah. Our since inception number is almost 1.5 now.
[00:44:44] Craig Asano: Yeah. Yeah. Wow. Fantastic. So can't even keep up with it. So the so during my research I came across the Merchant Opportunities Fund is something that you're you're leading. Could you talk a little bit about what that is and how it works and
[00:44:52] David Gens: Yeah, definitely. Craig Yeah, that's that's how we fund the portfolio. So Merchant Opportunities Fund and Merchant Growth are you know they work very closely together the two companies, right? Merchant Growth is the originator and servicer of these Canadian small business financings. but the actual risk sits with the fund. So the fund is the balance sheet. you know the contract that the borrower signs is you know with the fund because the fund is the actual holder of that credit. and you know we set it up that way for two reasons. One it's what I knew because I came out of that private equity world where I learned about funds fund structures.
But two is because I knew that if I was going to have to raise all this capital to do these financings, if I was just going to use a corporate balance sheet to do it all, I'd end up diluting my ownership in the business you know, considerably in order to accomplish that. and you know the valuable piece is the brand the ongoing origination the underwriting model the data the referral network etc so that's the that's where the value is the person funding the loan just wants a yield so it's a very different type of investor for a different purpose and so makes just separating those two made a lot of sense to me and so we've always funded the financings out of this credit fund and then the actual operating business as a separate entity. and so investors across Canada and frankly globally can actually invest in Merchant Opportunities Fund. We have over thousand investors.
Folks are getting you know last 3 to 5 years we've been consistently doing sort of 12 to 14% net returns to investors. So I think that's pretty good. We're pretty proud of that and investors seem pretty happy with that. and you know we're also distributed through some of the broker dealers and so wealth managers are also buying for their clients too at some in some cases.
[00:47:10] Craig Asano: Are you looking for more BDS like broker dealers and just you know there's bound to be some listening to the podcast. So I would throw it out there that if you are that they should come talk to you of course for
[00:47:20] David Gens: Yeah. Sure. Sure. I mean, yeah, we're we're we're approved at three good broker, you know, independent broker dealers. we are looking for more. We do it's one of those chicken or the egg things. You need to get some advisers that want the product and then they champion you internally with their product approval folks. and so you know that's a process and it took us a long time to get a few of the approvals that we do have. So right now we're more focused on just you know building relationships with the advisers at the shops where we already have approvals but obviously we're we're all ears to anyone who thinks this is an interesting asset class.
[00:48:02] Craig Asano: One interesting question here I've got on my hit list is the Canada's SME pipeline. You know, there's this idea right now that there's not a lot of I mean, small business is everybody knows is the backbone of many countries, including Canada. I mean, they're they're they're where all the jobs are, where all the GDP is. but there's a lot of talk about things have slowed down. Maybe they're talking about startups. Maybe they're not necessarily all SMEs consumer-facing that you might be integrating with for loans, but do you but it was an interesting question that I wanted to get your opinion on. You know, where do you see Canada's sort of entrepreneurial pipeline these days and because it feeds directly into your SME, you know, lending business. is that a concern?
[00:48:50] David Gens: Like are we drying up here or is there what's the future look like? from what I've gathered, you know, it could be better. I mean, obviously we have less immigration now than we did a number of years ago, as well. and, the economy generally just has been as a whole pretty sideways. you know, it hasn't been we haven't really been in a recession per se, although we did have hit a technical one this year for a couple quarters, but it really is just kind of like kind of sideways and sort of status quo. And I'd love to see it be better than it is. I one bullcase I have around AI is that it's going to be that much easier to be a business owner, right? in the past the intimidation factor of like incorporating and signing a lease and you know navigating insurance and certain regulations etc for whatever it is that you're doing like all of those types of activities are so much easier now with AI. I mean and so yeah the cost to get started is much lower and the intimidation factor is lower. So hopefully more people end up kind of embracing the potential that brings to be business owners.
[00:50:08] Craig Asano: Yeah, you still need the proper business plan, the underlying business case, but I guess the administrative the automation of that those workflows can be streamlined which through AI.
[00:50:20] David Gens: Yeah. I just think how many times has someone like just kind of randomly said, "Oh, this would be a business idea." Yeah. you know, but like it's almost never acted upon because like it's just so much work, you know, and it's like I'm and people don't have the confidence. It's like I have no I don't I don't know how to do that, you know, and maybe AI can just make a few more of those random idea conversations into real things.
[00:50:42] Craig Asano: The back of the napkin igniter. I like that. Yeah, it's an interesting perspective. So, we're going to talk a little bit about the future of alternative finance. though look you know looking ahead what excites you about alternative lending you know for small business financing in Canada the these are trends in industry that you've seen or you'd like to see development happen may maybe they're happening globally but why not here in Canada we
[00:51:13] David Gens: Often say what are your thoughts there yeah Merchant Growth has a mission to bring Canadian business owners the convenient, accessible, and trusted financing experience. convenience speaks to how easy it is, the speed, the algorithms, the AI, being able to kind of give business owners their time back because, you know, business owners wearing multiple hats. They're doing marketing, they're doing operations, they're doing finance. they want to get back to just, you know, working with their customers and doing what they're passionate about. So, we give them their time back. So, I see us continuing to execute on that. Accessibility speaks to that broad spectrum of risk appetite and being able to say yes more often than not. And then trust is kind of you know just continuing to build out brand and awareness of our entire space.
You know we did a survey of a thousand businesses and not of our customers but just random small businesses and to get a sense of how aware they are of not just Merchant Growth but non-bank small business finance and less than 10% of business owners were aware of it at all. So still a lot of work to be done there as you can imagine they all know the big bank brands and so forth. But our space still has work to do on that front. I think as we continue to gain scale, we're able to, you know, feasibly lower the rate to customers, because of just operational, economies of scale, but also our own cost of capital going down as we gain scale. And so that will allow us to, you know, move the business what I call up market, so into slightly larger businesses, slightly larger loan or credit amounts and at more competitive rates.
And that will really also allow our space to kind of move out of the kind of alternative kind of shadows. I don't know that's probably the wrong term. that sounds weird. But you know even the word alternative it says itself kind of makes us sound like you know these sort of the this higher cost higher risk credit offering and I don't think we have to be like I think that we can move more into the mainstream with scale. and so that's that's something that you know we're we're working on and you know it's not easy to do and you need to get scale and you need to do it incrementally and thoughtfully. you know there's there's been other small business finance platforms that have really tried to lead with a lowcost product to try and get the kind of lower mid-market business. but when you don't have that scale, it's really hard to actually execute on that plan and do it sustainably.
So yeah, I mean I see that you know, it's just it's just going to get easier and easier for businesses to get credit. and that's what we're here to do. And I think that's a very exciting future.
[00:54:03] Craig Asano: So if you if merchanting proat, you know, cumulatively that $1 billion figure is more like 1.5 billion. Where does that scale look like for you? and I mean it seems to be ramping up and you know to your point like there's going to be more access to credit and more awareness. We're only at 10% of education. and sometimes we're getting a bad rap calling it alternative lending or alternatives as you're saying you know we're the band members. Yeah. We're the alternative indie rock guitarists and singers, but really we're just trying to help and it's it's non-traditional, non-bank loan lending. But I is do you ever envision a point in the future where alternative lending or alternative finance is going to get so big that it will invert with traditional bank finding bank lending or that's you know it's not it's I mean it's look it's not impossible and
[00:54:59] David Gens: I mean at the end of the day the banks still play a meaningful role. I mean like at Merchant Opportunities Fund we get back leverage from BMO and a few other Canadian banks. So, you know, part of the capital that goes out with every single Merchant Growth financing is coming from banks. so, you know, they still play a play a role there. I do think like, you know, we can we can build better, you know, customer experiences. you I do think that playing field is leveling out. you know, traditionally the smaller kind of more startupy business who's building from scratch, not burdened by legacy systems is like in a better position to build, you know, elegant user experiences and stuff. I think that is actually leveling out where that advantage that the smaller startup has is going to become less just cuz everyone can like code things with AI and stuff.
But like in any event though, you know, there's even if banks start building better experiences and faster experiences for small business credit, I'm not I'm also just not overly worried about that from my standpoint just cuz there's such a big spectrum of risk and the banks are always only going to address a sliver of that spectrum kind of by design also due to regulations. So, yeah, I think that you know, the numbers can certainly continue growing here. but, you know, it's it's not easy and it's always changing. We've we've been traditionally kind of like a high growth business over our 17 year history, but you know, we went through a huge disruption during CO where our new volumes went, you know, basically almost down to zero for a little bit and slowly built back up.
So, there's, you never know, there's always things that can change and the economic cycle also, you know, does what it's going to do. So, it's a fun business in that, you know, you're you're having to think about a lot of different things at once, as you're, you know, trying to execute on growth in, you know, a space like our own.
[00:57:13] Craig Asano: Well, you're sitting in a pretty good spot. I' I'd say David, I'm quite impressed with the success you've had and you know quite frankly your perspective, your attitude on and you're still you know very vibrantly trying to help these small businesses and build and scale that business to what you know your success will look like. So you know as we move towards the end of the podcast I want to touch a little bit about the innovation and success for Merchant Growth. So, do you do you have any products or ideas that are coming in the pipeline that you're just super excited that you know you can you can mention it? I you know, don't give away the secret sauce, but you like what's what's what's coming out that you feel you can feel it vibing here over the next 3 to 5 years that's probably going to be an integral part of that scale, that growth.
[00:58:01] David Gens: We're like as busy as ever in our tech team despite AI being able to help you, you know, code. We're we've actually added developers even in that scenario. and we're shipping more and more stuff which is awesome. I would say not there's no single thing that I could say to you right now that you'd be like, "Wow, that's totally insane." It's more like it's it's a lot of little things getting a lot of little things right to make that you know to execute on that mission of bringing the most convenient accessible and trusted financing experience to those businesses. So you know the ability to refinance and access more credit as you've paid down your initial financing with us. you know that historically required a few manual steps. we're we're making that entirely self now.
We are you know re we're actually frankly we're rebuilding our loan management system which is huge project that's entirely back end right you know customers not even going to notice that but it's going to allow us to you know use AI in a more powerful way and scale our business and innovate on products faster than we historically be able to once we have that new infrastructure you know Yeah, we're we're we're launching a mobile app very soon. that's going to bring a lot of those self-s serve features, you know, right into your mobile phone and allow us to communicate with you through push notifications and all that good stuff. So, yeah, there's tons of stuff we're working on. No single thing is like totally earthshattering at the end of the day. You know, our product is to get credit flowing into Canadian small businesses. I will mention one other thing which is Merchants Market.
We have a marketplace of vendors and partners or that can be accessed on preferential terms if you're a Merchant Growth customer. anything from kind of payments, payroll, legal, insurance, etc., etc. you can you can see the different options that are out there and the pros and cons and like really kind of elegant product sheets and sign up right then and there with you know preferential pricing. So that's kind of we're trying to empower small businesses. You know, financing your growth is just the start and we're trying to give you the tools that you need to succeed in whatever vertical you operate in.
[01:00:38] Craig Asano: And do you which is an excellent idea. You've touched upon a few great ideas. I'm I'm wondering about going global. Do you ever think this is something that Merchant Growth like merchant global growth?
[01:00:54] David Gens: It's a debate we've had, you know, been we've been around long enough to have that debate a few times, right? Having been in business 17 years, we've we've always come back to just let's just stay focused on Canada. There's still so much work to do here. And we just don't want to drift our focus into, you know, multiple jurisdictions. You know, financial services don't export across borders super easily. You know, you got we're now going to have to train a model on new data. we're going to have to, you know, set up new infrastructure in many respects as it relates to, you know, banking, legal, etc., and regulations that you got to comply with, etc. So, it's a lot of work. but, I think that it's it's certainly not off the table. You know, it's something we could get to, over time. We do have some thoughts as to how we might do that if we were to do that. But, I would say that in the near term, we remain just really focused on Canada.
[01:01:42] Craig Asano: And last question before we get into the rapid fires here. five years from now, what do you think success for Merchant Growth and for Canada's small business community? What do you think it's going to look like for you from where you sit?
[01:02:01] David Gens: I think rather than yeah like more than any single KPI it would be you know I'd say we would have succeeded if we're more of a household name where it's like hey Merchant Growth is that platform that you know supports you and in financing and other ways if you're a small business owner just becoming a household name if we do that in the next 5 years I'd say that's success and across the whole space you know if you just have you know we survey the business all the time and it's like what are your main pain points etc like maybe access to capital could drift down on that list a little bit if we can solve that a little more you know I don't think it'll ever be completely solved and you know and of course you know this might sound harsh but not every business should be funded right you know it there is that adjudication overlay that you always need to have and that's the mechanism where you know capital actually flows to the right ideas that should be funded. But so you know that's that's all to say that there's always going to be some businesses complaining that they wish they had more access to capital. but nonetheless right now that complaint is you know way too frequent too often with pretty much every small business. Let's you know make that less of a less of a concern.
[01:03:22] Craig Asano: Yeah. here, here, here. And it's really sometimes a dagger to heart when that same question, that same company or a number of companies feel the pain so badly that they have to leave Canada and that really hurts and
[01:03:36] David Gens: None of us want that. So, I hear you and you know, good luck with Well, we see it and we've seen it. we don't like it and you know if we can have a hand in helping it I think we owe it to ourselves and
[01:03:54] Craig Asano: You know all the small businesses to do what we can for them but okay well let's get into these rapid fire questions. they're just going to be quick I'm expecting sort of quick answers here. so if you're ready I'm just gonna this is just something we do in the podcast just add a little fl little flavor little color.
[01:04:14] David Gens: So, are you ready for these quick questions? Okay.
[01:04:17] Craig Asano: So, first one, biggest myth about small business financing.
[01:04:25] David Gens: It'll take a long time to apply and figure out what you're able to get.
[01:04:32] Craig Asano: It's as quick as one minute from what I've heard.
[01:04:35] David Gens: Just a few minutes. Yeah, it's just a few minutes if you connect your bank account and you got it.
[01:04:41] Craig Asano: Next question. Rapid fire. one financing mistake founders make too often.
[01:04:52] David Gens: I'm I'm now going to talk not just about kind of like main street small businesses but also you know the more kind of venture startup ecosystem which is just picking the right capital solution depending on what it is you're investing in. you know, if it's going to produce cash flow predictably and quickly, go with credit. If it's risky, go with equity. Sometimes people just mix that up and then you get caught up in weird situations and sub-optimal.
[01:05:24] Craig Asano: Good answer. one technology that you're you're watching pretty closely.
[01:05:33] David Gens: I mean, how can I not say AI, man?
[01:05:37] Craig Asano: I you're not watching going to the moon with SpaceX or something.
[01:05:43] David Gens: I you know I'm just so focused on my business that I look forward to the live stream when someone's landing on Mars, but I'm not spending my days, you know, tracking that progress.
[01:05:56] Craig Asano: Yeah. Well, I am waiting for the nanobot to get into my clean my cholesterol out of my veins. I'm waiting for that one. Just clean me. Like, I don't need a pill. Apparently, these nanobots, they've been talking about it for years. Just go in and clean me out.
[01:06:13] Craig Asano: Next question. One lesson that you would give your 22-year-old self.
[01:06:21] David Gens: I get a shareholder agreement. My I didn't have one at first and I paid for it.
[01:06:32] Craig Asano: There you go. It's like getting a will. You need a shareholders agreement.
[01:06:35] David Gens: Yeah. Even if you it seems like you're getting ahead of yourself and it's like this isn't even a business yet. Like you know it's like you know what it's not that much money. Get that share agreement in case it becomes something.
[01:06:47] Craig Asano: Well it can always come something. So I think it's it's probably the biggest most salient piece of advice that an entrepre that might not know that absolutely get a get a shareholder screen. I mean yeah.
[01:07:01] Craig Asano: Last question. What still excites you the most after 17 years of being a digital lender?
[01:07:09] David Gens: Seeing people on my leadership team grow into bigger and bigger roles, looking after more and more things and they themselves leading larger and larger teams. It's been awesome to see people grow in the company.
[01:07:22] Craig Asano: Excellent. That's I can envision you know leadership team M&A buyout coming in 10 15 years when but you only started 22. You got a lot of years left. You got to keep some years on the back end of the runway. Get back into the band. Get back into the when you're when you're touring again. I'll I'll you we'll come out and you know, we'll we'll we'll see.
[01:07:46] David Gens: I'll let you know next time I'm playing. You're in Toronto, right, Craig?
[01:07:51] Craig Asano: Actually, I moved to Waterloo a number of years ago.
[01:07:59] David Gens: I don't have any gigs coming up there, but I'll let you know.
[01:08:07] Craig Asano: That's awesome. Maybe the Horseshoe Tavern, or an even bigger venue.
[01:08:16] Craig Asano: Okay. Well, this is you know wrapping up I guess for the for the benefit of listeners and I had a lot of fun on this chat with like the vibes. Want you to get your information out though like how do how do people contact you if they want to learn more information maybe you know the website, the email, all that good stuff. How do they
[01:08:37] David Gens: Yeah. If you're looking if you're a small business owner looking for credit, looking for capital to grow your business, then find us at merchantgrowth.com. And if you're an investor looking for income producing investments and you want to support small businesses in the process, then Merchant Opportunities Fund is something that you should look at. That's merchantopportunitiesfund.com.
[01:08:58] Craig Asano: Thanks so much David for joining us sitting down here valuable time. I've learned a lot as usual and as I mentioned it was a great conversation. So, kudos to you and wishing you and, you know, all the leadership team and Merchant Growth the success that you're you're looking for and all the all the help that you're providing to small businesses. So, it's absolutely fantastic.
[01:09:24] David Gens: Yeah, I had a lot of fun, Craig. Thanks a lot for the time and for having me on. Appreciate it.
[01:09:27] Craig Asano: Absolutely. So, if you're just, you know, to close things out here, if you're new to Fintech Fridays, please check out some of the incredible past episodes on the site. I think you'll be surprised with what you find. We look forward to seeing you next Friday for another episode of Fintech Fridays. Have a good weekend, everyone.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. 
