US Online Lender Avant Backed By PayPal Founder Is Latest To Enter Canada

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A Chicago-based company uses data and technology to assess borrowers seeking between $ 2,000 and $ 15,000 who are not eligible for traditional bank loans.

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TORONTO • Before, a fast-growing US online lender whose investors include one of the founders of the ubiquitous Internet payment service PayPal, entered the increasingly crowded Canadian market for non-bank loan arrangers.

Chicago based Before targets the “near prime” segment of the market which lost suppliers when non-privileged lenders such as US giant Wells Fargo pulled out of Canada following the 2008 financial crisis.

“Canadian consumers in the near-prime space have few credit options and traditionally there has been little innovation,” said Al Goldstein, CEO of Avant. This created “an opportunity” for his business, he said in an emailed statement.

The lender initially targets consumers in Ontario and British Columbia seeking personal loans between $ 2,000 and $ 15,000, with terms of one to five years.

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Like other foreign and domestic online lenders already operating in the Canadian version of the market or peer-to-peer lending, including Grouplend, Borrowell, OnDeck, and FundThrough, Avant uses swathes of data and technology, including algorithms, to assess the risk of loans.

The pitch of non-bank lenders is that they can make lending decisions faster, and the combination of technology and data filtering gives them the confidence to lend to borrowers that traditional banks wouldn’t touch.

They target different segments of the market, from commercial loans to personal loans, and “prime” clients with credit profiles closest to borrowers targeted by traditional banks to borrowers close to prime or subprime who tend to pay debts. higher interest based on perceived risk. of their credit profiles. Lenders also use different methods to finance loans.

Avant, the newest player in Canada, “is growing rapidly and is quickly becoming one of the biggest players in the industry,” said Kevin Sandhu, managing director of Canadian online lender Grouplend.

But Vancouver-based Grouplend, which focuses on Canada’s major borrowers, is unlikely to experience much direct competition, he said.

“Given Avant’s focus on blue chip customers with [a] typical interest rate in the order of 20%, I would rank their main competitors in Canada to include businesses [such as] Mogo and easyfinancial, ”Sandhu said.

These companies are attracting borrowers who might otherwise turn to higher-interest payday loans, he said, adding that Avant’s arrival should provide “even more reason to stick around. away from predatory payday loans and other risky lenders.

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David Ingram, managing director of easyfinancial’s parent company, goeasy, said his business had advantages over strictly online lenders, such as a network of more than 200 branches across Canada, the recognition of the brand and experience with the nuances of the market after nearly 10 years of activity. .

Still, he said he was not surprised that online lenders who target non-senior borrowers were showing an interest in Canada. Demand remained in the market for unsecured installment loans, valued at $ 2 billion, even as most non-senior lenders pulled out and left a vacuum in the wake of the financial crisis, Ingram said.

“The only significant participants in this market are CitiFinancial and ourselves, which has made it attractive for many US online players to now consider entering this space,” he said.

Avant, founded at the end of 2012, is shaping up to be a formidable player. The firm counts Peter Thiel, co-founder of PayPay, among its investors. Another is New York-based private equity firm Kohlberg Kravis Roberts.

Over 300,000 loans have been made in the US and UK, where Avant has already grown, and the company has raised $ 1.4 billion in funding.

Prior to Avant’s arrival, Canada had already attracted the attention of a non-traditional US-based lender. New York-based small business lender OnDeck expanded into Canada in April.

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