Toronto-based Lending Loop announced today that is once again accepting new businesses, investors, and loan requests on its platform.
It has been eight months since the FinTech startup has been able to fully operate its business. Back in March, the Lending Loop voluntarily halted new loan requests on its peer-to-peer lending service after being engaged by the Ontario Securities Commission for possibly running afoul of its P2P guidelines as per the Ontario Securities Act. Today, the company announced that it has completed registration with the OSC as an exempt market dealer.
Unlike most lending platforms in Canada, Lending Loop doesn’t target institutional or accredited investors, allowing instead any Canadians with $50 to pool money into larger loans for small businesses.
“It’s really important to Canada to have financial innovation.”
Just prior to the company’s launch in September of last year, Lending Loop CEO Cato Pastoll told The Globe and Mail that the company’s unique business model did not require it to register with the OSC; obviously, the OSC disagreed.
However, speaking with Pastoll today, the young founder stressed that the company was never looking to avoid regulation – a message Lending Loop also pushed back in March upon issuing a notice to all users on its platform.
“For us, being a regulated entity was always the end goal of what we were doing,” Pastoll said. “We always wanted to make sure we built something that was sustainable, and the only way you can build something that is truly sustainable is being completely inline with all stakeholders.”
According to Pastoll, getting inline with stakeholders required a collaborative process to ensure the square peg and round hole could change enough to meet in the middle. “We have to be flexible to fit this new framework into rules and regulations that were developed 50 or 100 years ago,” Pastoll said, noting, however, that “you’ve also got to make sure your business model is profitable and sustainable.”
Pastoll’s protectionist approach to Lending Loop’s business model is noteworthy. In 2009, a similar P2P lending model was forwarded by CommunityLend, which was deemed by the OSC to be registered as an exempt-market dealer, but able to allow only accredited investors to provide loans. The company later changed its business model, moving out of consumer lending entirely.
Citing the past history of Canadian FinTechs in the P2P space, Pastoll agreed that the company may have simply chosen to politely push at the right time (notably, years after similar adoption in the US and UK). Lending Loop is the second FinTech startup in the past month to receive an exempt market dealer license from the OSC, on the heals of its impending LaunchPad Hub to help FinTech startups navigate the provinces’ regulatory framework.
“I do think that at a high level, both government and regulators want to see innovation,” Pastoll said. “It’s really important to Canada to have financial innovation – particularly Toronto and Ontario, because so much of our economy is driven by our financial sector. I think it’s really important for government and regulators to acknowledge that.”