Entrepreneur of the Week Finance Technology

David Gens is Providing Millions in Funding for Canadian Small Businesses With Merchant Growth

Merchant Growth

At just 22 years old, David Gens took a leap of faith and started his first company. 11 years later Merchant Growth is providing millions in non-dilutive financing to small businesses across Canada. 

As a young professional, recently out of University, Gens was introduced to what was then known as ‘merchant cash advance’. Fascinated by the idea of merging technology and finance to give businesses access to money, he recognized a gap in the market and ran with it. 

“I was intrigued by the idea of using technology to provide convenient access to credit for small businesses, particularly because the traditional banks had been largely ignoring this important market segment coming out of the 2008-2009 financial crisis,” says Gens, “Back then, the market for this in Canada was nascent and there were very few companies doing this.”

Merchant Growth has now developed into a financial tech company dedicated to simplifying the financing experience for Canadian small business owners. In optimizing through technology, their loaning process has been reduced to hours from days and can be done remotely.

Recent statistics have shown that while minority owned business in Canada is growing, it is also more difficult for minority owners to acquire loans. Merchant Growth’s loan scoring algorithm overrides these biases by using proprietary credit scoring technology that relies on bank transaction data in order to analyze the business without bias, allowing small businesses access to needed resources.  

“We use big data and technology to condense the application process into minutes, and the funding process to within 24 hours. Small business owners are busy wearing multiple hats – our job is to get them the funds they need quickly, so they can get back to doing what they do best.” says Gens

At a time where all Canadian businesses are adapting daily to changing needs within the pandemic, the fin-tech company is providing solutions with ease. “You fill out our online form, connect your bank account, and our scoring algorithm can then do its job. One of our specialists will then call you to discuss a few different options in order to tailor the financing specifically to your business needs,” says Gens. 

Previously, the company had been working on creating a lending system more compatible with the needs of online businesses. With e-commerce business sales doubling overnight by 126%, Merchant Growth has now launched it’s e-commerce financing program early, making acquiring capital fast and affordable for businesses now working to meet altered demands.

“It’s more important than ever that Canada’s digital businesses have quick and easy access to funds, so they can focus on growing and adapting their businesses. The funding we’re able to provide is well suited for scaling activities such as digital marketing, customer acquisition or purchasing inventory at reduced rates,” says Gens.

In the latest addition to Bay Street Bull’s entrepreneurial spotlight, we spoke with David Gens about lessons learned in achieving success and what Canada needs to do now to manifest innovation in the financial technology field. 

Q & A

When cultivating a career there are a lot of lessons and milestones that charter your path. What is the biggest lesson you feel you have learned in business to this point and how has it influenced the way in which you manage ventures?

The biggest lesson I have learned time and time again is to manage risk through diversification. Whether we are talking about sources of customer referrals, or sources of capital, ensure that you are dealing with many parties and that you are not overly reliant on any single person or organization for your business to thrive. We have had to manage through some difficult periods where we either had too much capital invested in a single loan or advance and something went wrong, or we had sourced capital from one large investor who needed to make a reallocation, and it has taught us the value of diversification.

How has your career experience changed the way you define success?

From a personal career perspective, I think hedge fund manager Ray Dalio says it best when he says the goal is to do meaningful work and have meaningful relationships. I love what we do, I take pride in it, and I love the team I get to work with everyday. 

What makes digital business owners different from typical brick and mortar companies? What alternative supports do they need as a result of these differences?

Fundamentally, digital business owners are trying to provide something of value and get paid a margin for it, just the same as any business. The main differences are in the cost structure – particularly a lesser need to rent physical premises and potentially lower overhead expenses for digital businesses – and the method of customer acquisition. Online advertising plays a larger role for digital businesses than for brick and mortar. But the lines are blurring everyday, with more and more brick and mortar companies having a digital component (and in some cases, vice versa). 

When it comes to managing funding of e-commerce companies, based on Merchant Growth’s 11 years of research and experience, what is a common mistake you find entrepreneurs make?

One common mistake is to raise money through the issuance of equity, when a debt alternative is available. Issuing equity means selling shares in your business, to get the cash needed to grow. Selling shares should almost always be a last resort for an entrepreneur. If your business ends up succeeding, the sale of those early shares will prove to be very costly. Instead, you can use debt to fund growth, and keep a larger percentage of your business. Sometimes selling shares makes sense – and I won’t get into the specifics of when that is the case here, or else this will become an essay – but particularly if you are investing in something like inventory or advertising, where you know with a fair bit of certainty that you’ll be earning a positive return on investment, it is often best to use debt. Merchant Growth is here to provide that convenient access to credit and allow entrepreneurs to hold onto their ownership in their companies.

In what ways do you hope Merchant Growth emerges as a game changer for Canadians while businesses work to navigate through the COVID-19 pandemic?

It is a difficult environment right now for small businesses – there is no sugar coating this fact. However, in any crisis, there are opportunities. Some businesses are growing. Others are pivoting. We are all in this challenge together. If Merchant Growth can play a role in helping some entrepreneurs make the most of this challenge and emerge stronger in the long-term, I will be very proud of our impact. 

Positive mentorships can be the difference between an entrepreneur succeeding and failing. Did you have any mentoring experience and in what ways has it impacted you?

Absolutely – I have had many mentors over the years. Despite owning a majority of my company and being private, I maintain a board of directors that I formally report to. I am extremely grateful for the time they put in and consider all of them to be helpful mentors. I am also a proud member of YPO (Young Presidents Organization) and am grateful for the learning opportunities I’ve found in that organization. I know that whatever I am going through, someone else has gone through some version of the same thing and I can learn from that.

What do you feel is missing in the financial technology industry, and what do you feel needs to be done to stimulate innovation? 

In the UK, Australia, and the USA, governments have partnered with fin-tech companies to help provide stimulus and or government backed credit to COVID-19 affected businesses. Canada has yet to do that. I am hopeful that the government recognizes the important role that fin-tech’s play in the Canadian financial services landscape and puts a program together. This will help keep this innovative sector thriving on the other side of COVID-19 and will help small businesses greatly in the process.