Small and medium-sized businesses (SMBs) are the lifeblood of any economy. They generate jobs, cater to local and global market needs, and collaborate with larger companies to drive innovation.

Lendified is a lending technology company that focuses on helping underserved Canadian small businesses realize their potential. Before founding Lendified with his partners in early 2015, Troy Wright (CEO and Founder) enjoyed a very successful career in Canadian and international banking, running some of the largest business units of Canada's Scotiabank. We asked Wright, a seasoned financial services professional, about the insights he has gained in building Lendified, and the opportunities available for fintech organizations to make an impact in the financial services industry.

Lendified's co-founders

Question: What inspired to you to start building Lendified?

Answer: I spent a lot time travelling across Canada meeting business owners from all walks of life. This gave me the opportunity to gain a deep understanding of their challenges. One thing I saw was that the banks didn't really serve the small business sector in the way that I thought they could. If the [credit granting] process is too expensive for the bank, then profits can be wiped out just in the decision-making process.

Roughly one out of every five loan applications made by small businesses are declined. In part, this happens because analyzing a small business is a highly complex, low scalability business. It is just not cost effective for banks to do an analysis for [business] loans of less than $250,000, so they rely on the traditional consumer report. My motivation was to find a way to do this better, faster and cheaper.

Question: Lendified is a relatively young business. Describe Lendified's early development and any challenges along the way.

Answer: The founders of Lendified all share a common passion for empowering small businesses and solving their funding challenges.

In January 2016, we pivoted and added a software (SaaS) as a service business that focuses on developing a credit adjudication engine that can be licensed to other financial services businesses that require a credit risk review on small businesses: banks, credit unions, leasing companies, insurance underwriters and even our own peers. We realized that we had built something that could be used beyond our own lending business and could add huge value to others. Making SaaS a top priority for us significantly increased the work we are doing. We roughly doubled our head count, adding really good people and a lot of technology.

Question: Banks often perceive fintech companies as both a necessary partner and a threat. How do you navigate this situation?

Answer: The big banks have a lot of capital and large customer bases. As a fintech company, we have neither of these, but we do have a best-in-class customer solution. Previously it took a small business owner 25 to 30 hours to gather the information required by banks [for loan applications]. We have turned this into a 10-minute process by connecting various data sources to get a more predictable risk picture of a business and its borrowing capacity.

Financial institutions have the opportunity to partner or license with us to accelerate improvements in their [small business lending] products, service and customer experience. None of the things we do are things the banks couldn't do themselves – their challenge is numerous priorities for the limited resources available internally.

dollar sign

Question: Were there any aspects of the small business lending market that you may have underestimated?

Answer: To build a good model to make [lending] decisions, you need good data. There is so much data out there, but most of it is privately held and not accessible.

We purchased Mentio earlier this year as a way to move our credit decision engine forward, faster. Mentio software connects to a small business' online accounting system to produce financial statements, financial ratios, and forward-looking cash flow statements that are important inputs into our credit adjudication process.

Question: What are your thoughts on the growth, opportunities and support for financial services in Ontario, especially for fintech companies such as Lendified?

Answer: Ontario has an impressive ecosystem of fintech companies. We tend to seek each other out, compare notes and help each other. [They] are facing the same challenges we are as they scale up, access capital and gain customers. There are lots of good opportunities to compare, contrast, and learn from each other's successes.

We see opportunities in our ecosystem, such as through MaRS, to work with newer companies that have better processes and ways of analysis or decision-making that can help us improve. We use digital marketing channels to grab the attention of local business owners. We want to be leaders in driving the adoption of these new ideas and technologies to be more responsive, and the good thing about being Ontario-based is that we don't have to go far to discover and learn of new initiatives.

Ontario offers advantages in terms of its people. We have a well-respected banking system and very experienced people who understand technology, data and data science. A key piece of our success to date in developing our business, our partnerships and customers are the people we interface with in this incredible fintech ecosystem.

Question: How do you feel about Lendified's accomplishments so far, and will you expand globally?

Answer: We feel proud of what we have been able to accomplish. In our first year we processed close to $50 million in loan applications. But as an entrepreneur, you feel like you are not moving fast enough. We spend a lot of time looking at potential partnerships to drive customers to us. So far we have built some very strong ties with [several] chambers of commerce and other large corporate entities. We are taking the steps necessary to work closer with the banks here in Toronto. There is also plenty of opportunity to take what we have done in Canada and build it elsewhere. The opportunities to export our product into the U.S. and beyond are clearly there for us.

Sector/subsector: 

October 11, 2016

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