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Before online lenders arrived on the scene, Canadian small businesses often found themselves running into the same roadblock.

 A typical Canadian entrepreneur establishes a company with their own savings, or using small loans from friends and family. Within two to three years they typically have a 3-4 employees and are seeing between $30,000 and $40,000 in monthly sales. Suddenly their growth slows down, and they realize that they need an injection of capital to reach the next level, typically through investing in new equipment, inventory or staff.

 “They’re looking for growth capital, they go to the bank, and they probably can’t even get an appointment,” said Bruce Marshall, the vice president of Company Capital, an online small business lender based in Victoria, B.C. “In order for a bank to talk to you, you need to have a five year track record of profit.”

 The small businesses that are fortunate enough to land a meeting with one of Canada’s traditional lenders are typically required to bring a mountain of paper work, including up to five years of financial reporting, business plans and personal tax returns. Then, after several rounds of meetings they wait up to six weeks to find out if they’ve been approved.

 The process was so cumbersome that many Canadian small businesses avoided it altogether, even though they were still in need of growth capital. According to a 2013 study by the Canadian Federation of Independent Businesses, 12% of respondents didn’t bother going to the bank for financing, even though their business was in need of a loan, because they believed they were bound to be rejected. “That’s a big number, and that translates to a lot of growth across the country, if people could have access to that capital,” adds Marshall.

 Today, independent online lenders like Company Capital are filling in a major gap in the financing ecosystem. According to the latest statistics from Innovation, Science and Economic Development Canada, 86% of Canada’s 1.17 million registered employer businesses have less than 20 employees. Furthermore, less than half of Canadian small businesses survive beyond their fifth year in operation, meaning that a majority are young companies.

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Article written by Jared Lindzon – a regular contributor to top tier publications around the world, including Fortune Magazine, Fast Company, the Guardian, Rolling Stone, the Globe and Mail, and many more.

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