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Fintech Impact
Lending Loop with Cato Pastoll (CEO)| EP5
Summary:
In this 5th episode of the Fintech Impact podcast, Jason Pereira, award-winning financial planner, university lecturer, writer, and host interviews Cato Pastoll, the Co-Founder and CEO of Lending Loop – an alternative lending source. Lending Loop mixes peer-to-peer lending with crowdsourcing along with artificial intelligence. Find out the story from Cato Pastoll about how in 15 months Lending Loop has managed to give out over $16 million in loans – and has an average monthly business growth of 20%.
Show Notes:
● 01:02 – Lending Loop is an online lending marketplace. They connect
Canadian investors that are looking for more attractive returns on their
savings with small businesses that are looking for a more affordable source
of financing.
● 01:34 – Both of Cato’s parents were small business owners, which taught him the
difficulties in finding financing. These lending platforms have been popular
in the UK since 2005 and since 2008 in the US, but not in Canada. Lending
Loop started in 2016.
● 04:00 – Marketplaces aren’t easy to start or scale – and it has been hard to do in
Canada because of the regulatory hurdles.
● 05:14 – Lending Loop lets you sign up as a lender or a borrower. They curate
applications, review them, and make sure they are credit-worthy. Only 10%
approval rate, over $16 million lent and about $2 million per month with a
20% monthly growth rate.
● 06:24 – Loans are crowdsourced, you can pledge as little as $25 towards a loan.
You can build a portfolio with $2,500 across 100 different companies if you
wanted to.
● 07:44 – You are able to establish the criteria for the types of businesses you lend
to. Their auto-lend platform will allocate your money for you. Regular bank
deposits into Lending Loop are possible.
● 08:45 – The rates range from 5.9% to the mid-20%.
● 10:46 – QuickBooks is integrated with Lending Loop.
● 13:12 – Lending Loop makes money from an origination fee of between 2.5 to 6.5%
of the loan as a one-time fee, as well as a spread of a 1.5% annual fee
on every repayment.
● 14:20 – Businesses are given a letter grade based on the risk of repaying their
loans – which also determines their interest rate, with worst percentage
being only about 10% risk of default.
● 16:33 – All of their success and all of their failures are posted directly on their
website for full transparency. The largest loan to date has been about
$200,000.
● 17:44 – The main focus is to scale the platform.
● 19:04 – The market reception and demand has been great. There has been
skepticism from the more traditional members of the industry.
● 20:38 – Low investments have allowed people to try it out to make sure it is real –
then invest more later.
● 22:05 – Businesses provides a summary of what they are looking to use
the money for, what the business does, why they are safe to lend to, a little
bit about their financial performance.
● 24:26 – The challenges have included: general awareness, and providing financial
literacy for people.
● 26:42 – Lending Loop currently has a team of 20.
● 30:47 – The demographics of the borrowers: no industry makes up more than 9%
of the portfolio and lenders have been coast to coast.
● 35:00 – After building it out, seed capital came from family and friend – then a first
round of funding.
3 Key Points:
1 Only 10% approval rate, over $16 million lent and about $2 million per month with a
20% monthly growth rate.
2. You can set the criteria for the types of businesses you lend to. Their auto-lend platform will allocate your money for you.
3. All successes and failures are posted on the Lending Loop website for full transparency.
Tweetable Quotes:
- “We actually only approve about 10% of the businesses that are applying for
financing with us .“ – Cato Pastoll
- “You can set the criteria for the types of businesses you want to lend to .“ – Cato Pastoll
- “So the business provides a write-up and a summary of what they are looking to use
the money for, what the business does, why they are safe to lend to, a little bit
about their financial performance.“ – Cato Pastoll
Resources Mentioned:
● LinkedIn – Jason Pereira’s LinkedIn
● Facebook – Jason Pereira’s Facebook
● Woodgate Financial – Website for Woodgate Financial
● Lending Loop – Jason Pereira’s Facebook
● Cato Pastoll – LinkedIn page for Cato Pastoll
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