The Canadian Lenders Association, a group that includes FinTech and alternative lenders, is calling on the federal government to extend its current economic stimulus plan to include alternative lending options.

“Fintech companies represented by the CLA are uniquely positioned to be able to reach those most in need.”

An open letter was sent to Prime Minister Justin Trudeau and various ministers including Finance Minister Bill Morneau, Deputy Prime Minister Chrystia Freeland, and Minister of Industry Navdeep Bains, on Tuesday. In the letter, the Canadian Lenders Association (CLA) highlighted the need to offer alternative lending options, promoting them as a way to support small businesses not covered by the current stimulus package.

“The CLA members strongly support the Government of Canada’s $10 billion capital allocation to BDC/EDC,” the letter reads. “However, tens of thousands of truly small businesses, such as restaurants, retail stores, and auto repair shops, may not be adequately served.”

“As a result, Canadians may be faced with the prospect of leaving behind those truly small businesses which are most affected by this crisis, and are most likely to fail,” the open letter states.

The CLA is not asking the government to add additional capital to its loan program, rather, it is calling on the federal government to leverage digital platforms to help ensure that its stimulus package reaches the small businesses that are in need.

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David Gens, director of the CLA, explained to BetaKit its member companies are eager to offer their platforms as either a service for traditional lenders or a way to work together to distribute capital.

CLA member companies include Lendified, Goeasy, and Lending Loop, among others. It operates as an aggregated voice of the SME and B2C lending industry, supporting innovative lending nationally.

The CLA pointed to three reasons why small businesses will not be adequately served by the federal government’s current $10 billion loan plan, emphasizing that many small businesses do not meet the requirements of traditional financial institutions.

The organization warned that the loan amounts required by these businesses are typically relatively small, which could lead to them being placed at a lower priority by the financial firms tasked with deploying capital. It also raised concerns over the volume of “time-sensitive credit requests” from small businesses coming in amid COVID-19, noting that they are likely to overwhelm the traditional financial institutions and underwriting processes.

“These local businesses are currently being serviced extensively by the non-bank, financial technology (Fintech) sector,” the CLA states in its letter. “Fintech companies represented by the CLA are uniquely positioned to be able to reach those most in need as a result of advancements in automation and speed of credit approval. Fintech companies deploy capital, quickly and efficiently to customers that are largely underserved by the traditional banking sector.”

The economic effects of COVID-19 have already been seen across Canada. A survey conducted by CLA member Lending Loop found that a majority of Canadian small businesses were already seeing a revenue decline of more than 50 percent, even in just the first week of self-isolation being implemented. Those surveyed also expressed concerns over having to make layoffs.

Canadian tech CEOs have also expressed concern over the government’s $10 billion loan package, noting that tech startups in early stages of revenue and growth traditionally have not qualified for such programs.

Gens noted that – in line with the government program – CLA members would focus more on providing funding to brick-and-mortar businesses, which he said have seen the biggest hit amid COVID-19.

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“Fintech lenders act as efficient distribution points for capital because of their extensive small
business customer databases and existing relationships, as well as their automated approaches to application processing, underwriting, and direct deposit capabilities,” the CLA letter states.

The organization noted that its member companies have made over $2 billion available in the past several years, primarily to local storefront businesses. It also estimated that under a government-backed loan program its members could quickly reach and provide credit to over 100,000 small businesses that may not be served by traditional financial institutions.

The CLA expressed openness to working with the government, BDC, or any other financial entity, to allow them to leverage its member companies’ platforms in deploying government-backed funding. Gens told BetaKit that the CLA has already been in talks with BDC, which has not traditionally been open to financing alternative, digital lenders, but has expressed an openness to collaborate given the current financial crisis. Gens noted that the CLA has also been in talks with federal ministries, including Minister Morneau, which have expressed willingness to find solutions that help small businesses in need.

The CLA’s plea to the government is similar to the urging of FinTechs in the United States, which are lobbying their government to allow tech-focused lenders to be part of any stimulus plan. The group, Financial Innovation Now, is an alliance of technology leaders that offer alternative lending, including Square, Intuit, Stripe, Apple, Amazon, and Google. The Canadian organization noted that similar programs are being put in place between governments and Fintech companies in countries like the United Kingdom and Australia.

“With support of the BDC, Canadian banks, and the Fintech community, the Government of Canada has the best chance to reach the largest number of businesses and ensure that the most vulnerable businesses in our economy survive,” the CLA stated.

StartUp HERE Toronto is a publishing partner of Betakit and this article was originally published on their site.