FinTech company Lendified Holdings announced its financial results for the first quarter of 2022, expressing doubts that it may be able to continue as a viable company.
Lendified, which provides short-term loans to small businesses in Canada, said in its SEDAR filing for the first quarter of 2022 that it is running an accumulated deficit of $52.2 million, and that at the end of December 21, 2021 its liabilities exceeded its assets by $6 million.
“These matters, in conjunction with the ongoing COVID-19 global pandemic, are material uncertainties that cast significant doubt on the company’s ability to continue as a going concern,” the filing bluntly stated.
Lendified said to move ahead would depend on its ability to obtain additional financing and achieve a profitable level of operation to provide it with sufficient funds to operate the business.
“If the company is unable to obtain additional funding and attain profitable levels of operation, the company may be unable to continue to realize on its assets and to discharge its liabilities in the normal course of business,” Lendified warned in its filing.
Lendified blamed both the pandemic and the measures the federal government put in place to fight COVID-19 for its woes. It said that the global outbreak of coronavirus “has had a significant impact on businesses through restrictions put in place by the Canadian government regarding travel, business operations and isolations/quarantine orders.”
Lendified posted a net loss of $392,442 for the first quarter compared to $538,847 for the same period in the previous year.
BetaKit contacted Lendified for comment, but had received no response at presstime.
Lendified first landed on the TSX Venture Exchange in 2020 through a reverse-takeover.
Almost immediately, the company began to show signs of internal strife. Its CFO resigned within a couple of months of Lendified going public. A week later the company issued a news release stating that COVID-19 had resulted in defaults, disruptions, and delays under its loans to Lendified borrowers.
“Lendified has a history of losses and negative operating cashflows since inception,” the company stated. “Its plans are to generate profit and positive operating cashflows; however, it has not yet done so. Lendified relies on debt to fund its ongoing operations and as a result, Lendified continues to carry significant debt. The company’s ability to operate is dependent on its ability to service that debt. The impact on revenues from the COVID-19 pandemic has had a material negative impact on Lendified’s ability to do so.”
It further noted that Lendified was in default of its credit facilities with its secured lenders, and noted that at least one paused funding new loans, indicating that it wanted to reduce its exposure to Lendified, and carry out an “orderly wind-down” of its loan collateral.
Despite complaining that the federal government’s COVID-19 policies had negatively impacted the company, Lendified received $237, 348 in Canada Emergency Wage Subsidy by the end of 2021.
Since 2020, the company has switched CEOs three times.
In spite of its ongoing troubles, Lendified manage to secure another $10 million debt facility from
Windsor Private Capital and Firepower Capital in 2021. It raised another $5 million through a private placement that same year.
Lendified’s share price sat at 10 cents down from a 50-week high of 50 cents at presstime.
Lendified is not the only FinTech startup with a model of providing loans to small businesses to run into problems during the pandemic. Lending Loop ended up pivoting its business model to cross-border payments in order to preserve itself.
During the pandemic, small businesses no longer wanted to take on new debt, while at the same time the Canadian government began providing loans to small businesses through a number of different programs.
The Canadian Lenders Association (CLA), a group that includes FinTech and alternative lenders, called on the federal government in 2020 to extend its current economic stimulus plan to include alternative lending options to small businesses.
“The CLA members strongly support the Government of Canada’s $10 billion capital allocation to BDC/EDC,” the letter read. “However, tens of thousands of truly small businesses, such as restaurants, retail stores, and auto repair shops, may not be adequately served.”
CLA member companies include Lendified, and Lending Loop, among others.
Founded in 2015, Lendified secured a $15 million Series A raise in 2019.
The FinTech previously raised $8 million in seed and follow-on funding. The company has also previously raised $80 million in senior debt funding for its lending business, to finance working capital loans underwritten by Lendified.
Lendified competed at FinTech Startup Pitch Contest, which took place during the 2018 Canada FinTech Forum in Montréal. While it didn’t win the top prizes, the company ended up receiving a surprise offer of investment of $150,000 each from Luge Capital and BDC Capital, through its Women in Technology Fund.