The alternative lending space in the US has been flourishing for years. There are hundreds of companies that have popped up in the last few years. There are ones that lend based on assets, on cash flow of businesses, on incoming account receivables and peer-to-peer lending. In Canada there are only a handful of such companies.
A few years ago, Michael Garrity tried to operate a P2P lending company, CommunityLend, in Canada, but due to the regulatory red tape, he suspended operations and instead formed FinanceIt, a point-of-sales lender. The company allows small to medium size businesses to offer financing to their customers for more expensive items.
Analogous with the banking systems, in Canada we are much more conservative than the US. So while we are exposed to less risk, we have less choices here. In the US they are flooded with choices, but it is consumers beware. The interest rate can be as high as 50%. And there are origination fees and prepayment fees, which will increase the cost of the loan. And loan length and compounding periods can be used to confuse consumers of the actual rate they are charged.
While it safer to see what works and what doesn’t from this side of the border, this also means we are giving up the first-mover advantage. We will be playing catch up or worse being dominated by US based lenders.
It is exciting watching this non-bank alternative lending space evolve in Canada and the US. I look forward to sharing more information on this quickly developing space. I plan to cover new alternative lenders in future posts.
Alternative lending.ca help people with difficult situations get financing and people in good financial situations get better financing through non-bank lenders. We operate out of Vancouver, BC, but can assist people in all of BC and selected locations in Alberta, Manitoba and Saskatchewan.
