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Ottawa, May 4 (Canadian-Media): A pilot project, Lending Loop, a peer-to-peer online lending platform for small-business loans, which will lend loans by 10 percent was announced May 2 in partnership with Ontario will that will provide $3-million of loans to businesses across Ontario, over the next two years, media reports said.
According to official reports, full re-payment of the loan plus interest will be received by the government at the end of the loan terms, .
“This pilot program is important as it will significantly benefit small businesses, accelerate Fintech adoption, and provide new opportunities for financial institutions,” Jeff Leal, Minister Responsible for Small Business, said in a statement.
People who need to borrow for their small-businesses by fintech start-ups face challenges usually face challenges while accessing financing from traditional sources – such as Canada’s five big banks.
Other challenges faced by the small business while borrowing are annual interest rates between 8 percent to 40 percent due to several factors such a lack of operating and credit history, unaudited financial information or an absence of steady cash inflows.
As part of Ontario’s strategy to support small businesses, the 2017 Fall Economic Statement included a commitment to establish a pilot project to address small-business financing challenges.
Following a number of consultations with representatives of lending platforms, credit unions and large financial institutions held early 2018 by the ministry to determine the best approach, it was found that many businesses struggle when it comes to securing loans between $500,000 and $1-million.
“The new lending commitment from the province recognizes the contribution that non-traditional channels can play in improving businesses’ access to capital,” says Cato Pastoll, co-founder and CEO of Lending Loop. “This partnership is a major step forward for peer-to-peer lending in Canada. Globally, over $40-billion has been lent to businesses through the peer-to-peer model, and we are incredibly excited to see the Ontario government involved in helping support the growth of businesses across the province.”
This partnership is a major step forward for peer-to-peer lending in Canada,' says Mr. Pastoll.
“Peer-to-peer lending platforms play an important role because they increase the amount of capital for small businesses by creating new sources of loan capital, more sophisticated credit models, and efficient access,” said a spokesperson for Mr. Leal’s office. “Platforms in other markets have proven that lending to small businesses with affordable, long-term capital not only benefits the small businesses but is also a highly attractive investment for investors.”
To promote awareness of alternative forms and sources of lending programs available to small businesses, the pilot program is committed to provide a grant of up to $750,000 to the Toronto Financial Services Alliance.
A second grant of $1.75-million was also announced by credit unions to support the adoption of fintech technology to increase the loans being made to small businesses.
Online provider Lendified has been outsourcing its technology platform to credit unions since early 2017 and currently is in discussions with two Ontario Credit unions to implement its software for in-house financing.
"We want to help provide the credit unions with the tools to efficiently underwrite and get more credit into the marketplace by using the advanced technology that we offer,” said Kevin Clark, president of Lendified.
As a peer to peer lender, Lending Loop’s model allows individual retail investors to invest as little as $25.
These investors then peruse an online marketplace of small businesses and select the companies they think should be financed.
Lending Loop, registered as a market dealer, allows small businesses to apply online for business loans up to $500,000.
(Reporting by Asha Bajaj)