US Marketplace Lender Lands In Canada

By Guglielmo de Stefano on Thursday 3 March 2016

Alternative Lending

InvestNextDoor opens a new platform in Canada, capitalizing on new national regulations.


Small business crowd-lending marketplace InvestNextDoor has announced its expansion to Canada. The move follows on from a recent update to local regulation, which allows Canadians to participate in investing and capital raising for small businesses.


Founded in 2013 in Seattle by two Canadian entrepreneurs (Tabitha Creighton and Lisa Ohman), the platform listed over 50 applications for small business loans a little over 6 weeks removed from inception. The company employs a model that is designed to reduce investment risk, focusing on above average fixed-income returns for retail and institutional investors.


Tabitha Creighton, CEO and co-founder of InvestNextDoor, commented:


"Small businesses deserve to have access to the same financing options available to their large corporate counterparts. Our platform does just that, using a securities-based lending model that allows business owners to conveniently apply online and use the power of their community relationships. This is a long overdue opportunity for retail and institutional investors, as well as the small business owners who can now access new sources of borrowed capital at competitive rates never available to them before."


The company created a patent-pending benchmark-rating model that fosters transparency and is aligned with global securities indices. Using data from several US and Canadian credit agencies, InvestNextDoor applies an algorithm - described by the company itself as the first one of its kind - for evaluating publicly accessible small business debt securities.


InvestNextDoor is not the only US platform to target the Canadian market. Further examples are offered by OnDeck, which expanded to Canada last April, and Avant, which went north last September. According to InvestNextDoor, small business debt-financing needs in Canada are increasing. Big banks appear to be pulling back from small business lending, leaving a credit gap of at least $3bn annually. On the other hand, a grand total of $75bn in consumer cash is reportedly available to be invested in high yielding opportunities.


In order to penetrate the Canadian market, InvestNextDoor has partnered with Meridian, the largest credit union in Ontario. "By working with InvestNextDoor, Meridian is able to support our small business Members with access to additional capital, and investors with unique opportunities that support their communities,” said Bill Whyte, SVP and Chief of Member Services with Meridian.  According to Mr. Whyte, small businesses account for more than 90 per cent of companies in Canada and play a significant role in job creation.


Tabitha concluded:


"Our business is evolving both investment models and small business lending, by taking a page from Bay Street and making it applicable and accessible to small businesses. This solves the issue of access and supply, using technology as an efficient way to transform lending. It's a win-win-win situation because when businesses prosper, so do investors and the communities."

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