As Fintech continues to transform how banking is done in Canada, the traditional lenders are reaching out more and more to the industry’s new players. One such example is the growing relationship between CIBC and alternative lender Thinking Capital. Last year the two established a referral partnership where both sides could utilize the other’s strengths; namely, brand value for CIBC and digital expertise with Thinking Capital. Speaking to Wealth Professional, CEO of Thinking Capital Jeff Mitelman
reveals how Fintech is creating new business for both traditional lenders and their upstart counterparts.
“Fintech is a relatively new phenomenon in our world,” he says. “It has presented a unique opportunity because so many of the incumbent players are trying to adapt for Fintech. So rather than creating competitive tension, what we are finding is much more of a collaboration with traditional lenders.”
The alliance between Thinking Capital and CIBC is far from an anomaly. The rest of the Big Five all have Fintech firmly on their mind, and while some believe keeping everything in house is the best way to go, others such as CIBC and Scotiabank are taking the approach of reaching out to the smaller firms.
“With CIBC we are able to offer an innovative lending solution through their brand and to their customers,” says Mitelman. “That means borrowers have the comfort of knowing they are dealing with an established brand but with the robustness of an online lending solution that ensures they can access capital much faster.”
Speed has been a major factor in the growth of firms like Thinking Capital. While the economies of scale bring plenty of advantages for the Big Five in Canada, the ability to make decisions quickly is usually not one of them. That trickles down to the clients, and particularly small businesses owners, which has created an environment for alternative lenders to thrive.
“These small businesses typically don’t have the collateral or the business structure that a traditional lender would look for,” says Mitelman. “We don’t determine our loans on what a credit bureau would report on; it’s really on historical business performance. For a business applying on a Monday they will have the funds in the bank typically on a Wednesday.”
That business model has certainly proven viable, and in its 10 years of existence, Thinking Capital (formally CFC) has financed more than 10,000 unique business in Canada for a total of $400 million in loans.
Clients are generally restaurants, cafes and grocery stores that need quick access to sums ranging from $5,000 and $300,000 of working capital. Often, these loans mean the difference between a business surviving or not, so firms like Thinking Capital are clearly performing a valuable function.
“They are the heartbeat of the country,” says Mitelman. “They are the largest segment of employers but the irony is they are notoriously difficult to finance. So the opportunity to support this group is meaningful to the economy. Instead of them borrowing in a way that lenders want, this is a way for borrowers to borrow how they want.”
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