1st Quarter 2024 Report
Good morning Lenders!
As you enjoy your morning coffee, we are excited to share with you our business hi-lites for the start of 2024. We hope you enjoy.
A. Corporate Branding
We are delighted to launch our new branding!
As we make our way towards moving our operations into the Union Bank building, we concluded that it was time to bring our businesses together under the “Union” banner.
As reported in our business updates in 2023, we have applied to become a portfolio manager, fund manager, and exempt market dealer (discussed below). In late March 2024, we had a final call with the Alberta Securities Commission regarding our application and expect our final approval in May. That business will be called Union Wealth Management Corporation.
In December 2023, David Hawreluk studied to become a life insurance broker and completed all of his provincial examinations in January/February 2024. Starting in May, David will be licensed and we will start selling a variety of life insurance products (discussed below). That business will be called Union Insurance Brokerage Corporation.
Finally, we have decided to rebrand Grow Lending Group Inc. to Union Lending Corporation. We now have a collection of businesses, all under the Union Financial tradename. The structure looks as follows:
B. New Website
Associated with our rebrand, and the launch of our new businesses, we will have a new website: unionfinancialcorp.ca. Construction of the website is underway and will be completed by the end of May. The website will contain the following features:
Union Lending Corporation – the website will continue to contain all of the great content currently found on the website for Grow Lending Group Inc.;
Union Wealth Management Corporation – the website will contain a client portal for our portfolio management clients that will provide access to all of their investments with us and customized portfolio statements; and
Union Insurance Corporation – the website will contain a summary of the life insurance products that are available and describe certain insurance structures and ideas for you with respect to how to use life insurance.
C. Grow Lending Group Inc. (Union Lending Corporation) – Q1 2024 Loan Update
To the end of the 4th quarter 2023, the team at Grow reviewed over 280 loan opportunities. Given our tight due diligence and selection process, only 28 (10%) were considered worthy of being sent for consideration to our Lenders. We continue to see very quick responses from our Lenders to many of our loans, particularly when the loan amounts are under $2 million. While larger loans sometimes take longer to fill due to the need for syndication, we have been able to fill some loans in excess of $10 million within 4 days or less. Again, we believe this speaks to the quality of the loans, our ability to assess and mitigate risk, the careful creation of the security packages, and the trust of our Lenders.
We continue to make it a policy to send out all of our loan opportunities to everyone on our lender list.
An update regarding some of our unique loan opportunities is discussed below.
D. Union Wealth Management Corporation
Why did we incorporate Union Wealth Management Corporation?
As you know, two of the virtues of investing in Union Lending Corporation’s loan investments is the high yield (usually 12% per annum or higher) and the regular monthly income, which is an excellent income supplement to investors. Relative to the short amount of time and effort that it takes to review our Lender Sheets and make an investment decision, investing in our loans can be some of the most financially productive time spent by our Lenders. For example, investing $1 million with Union Lending Corporation after taking 20 minutes to review a Lender Sheet can generate $120,000, or more, at loan maturity. That is a pretty good return for 20 minutes of time. Most of the loans originated by Union Lending Corporation have terms of approximately 1 year. When the loans mature, most of our lenders do not want their money back. They want to invest their funds and maintain returns. Unfortunately, Union Lending Corporation does not always have another loan ready for funding, or that may be suitable for each Lender whose loan has matured. While a Lender enjoys earning, for example, 12% per annum on a Union Lending Corporation loan, the annualized rate of return is diminished if their invested funds are returned and deposited into a bank account. In order to maximize returns for our investors, and to allocate resources between investment opportunities in the most efficient manner possible, becoming a portfolio manager will enable us to invest our Lender’s funds constructively while waiting for the next Union Lending Corporation deal;
Some of our Lenders have their funds invested with a wide variety of banks and investment advisors, which can make it difficult or cumbersome to unwind, liquidate and/or transfer money back and forth from their current bank or investment advisor to fund one of our loans. By becoming a portfolio manager, we are able to provide all investment services to our Lenders including the ability to invest in stocks, bonds, fixed income, and alternative lending/investments, and to move money between these investments in a more efficient, cost-effective, and seamless manner;
If your investment advisor is with a bank, your advisor is not permitted to provide you with advice regarding investments that are not endorsed by the bank or that are not products of the bank. Your advisor, for instance, would not be able to advise you about or recommend a Union Lending Corporation loan. And they would not be motivated to liquidate any of your assets under management in order to invest in a Union Lending Corporation loan (as that would result in your advisor earning less fees). In our view, that does not provide you with the best advice, service, or awareness of your options. It also does not ensure that you are seeing or getting access to all of the best potential investment opportunities in the market to maximize your wealth and meet your investment objectives. As Union Wealth Management Corporation is not affiliated with a bank, it will not have any of these restrictions. One of our goals at Union Wealth Management Corporation is to provide our investors with awareness and knowledge of the broadest range of investments in the market to ensure that you can make the best choices to meet your financial objectives.
In order to execute trading of stocks, bonds, and fixed income products, we have entered into an agreement with Fidelity Clearing Canada (“FCC”). FCC is the Canadian subsidiary of Fidelity Investments. Fidelity Investments is a privately-owned investment firm headquartered in Boston, Massachusetts.
FCC’s platform is one of the best financial digitized platforms and outperforms the infrastructure of legacy Canadian financial institutions. In addition to the FCC platform, Union Wealth Management Corporation has entered into license agreements with some of the best complementary financial software in the market to ensure our clients receive an exceptional customer service experience.
Being associated with FCC provides multiple benefits to you, including:
FCC and Union Wealth Management Corporation are private and independent. Unlike bank-affiliated advisor, there will be no restriction on Union Wealth Management Corporation sourcing and offering you virtually unlimited investment opportunities to ensure that you see, and can choose from, what is available in the market to better maximize your returns and meet your financial objectives.
FCC will be able to offer margin (borrowing against your portfolio) at or around the same rates as the banks. That means that if, for instance, you own $1 million of Canadian National Railway (“CN”) stock and wanted to invest $500,000 in a Union Lending Corporation deal (or some other investment), you would not need to sell your CN stock and incur a capital gain or loss. Instead, you could margin (borrow) against your CN stock and invest the $500,000 in a Union Lending Corporation deal earning, for instance, 13% per annum return. When the Union Lending Corporation loan matures, you would simply repay the margin loan and benefit from the income differential between the return from Union Lending Corporation investment, the return as a result of maintaining the investment in the CN stock, and the interest paid on the FCC margin loan.
Or, if you had invested $500,000 in cash in a Union Lending Corporation loan, Union Wealth Management Corporation would be able to manage your funds while you wait for the Union Lending Corporation deal that is right for you.
Our unique ability to seamlessly pursue a variety of investment opportunities is designed to keep your money working and earn you the best returns possible.
The Union Wealth Management Corporation website will aggregate information and enable you to review all of your investments, whether it is your stocks, bonds, fixed income (statement summaries provided by FCC), MIC, or other funds investments (see below) that you have with us, anywhere in the world. Further, the system will ultimately allow us to securely store all of your important documents on-line such as your Will, income tax returns, financial statements, personal net worth statements, etc. so that you can easily locate and retrieve them when and as needed.
E. Grow Capital One Inc. (“GC1”) – Mortgage Investment Corporation (“MIC”)
While working on our application with the ASC, we also began working with BLG on the preparation of our Offering Memorandum, which will be required for our MIC. Our first MIC will be called Grow Capital One Inc., which is wholly owned and managed by Union Wealth Management Corporation.
As some of you may know, a MIC is a fund that invests in a diversified portfolio of mortgage loans. In the case of GC1, the MIC will invest in a diversified portfolio of residential mortgages. Once the MIC is created, our Union Wealth Management Corporation clients will be able to invest initial amounts as little as $25,000, including registered accounts, and continue to invest as frequently thereafter as they wish. We anticipate that the fund will generate net annual returns in the range of 8 to 9% per annum. Interest will be paid monthly and can either be distributed to the investor by ETF or reinvested back into the fund (so that interest can be earned on interest for even greater returns).
Over the past several years, we have developed an outstanding relationship with the largest private residential mortgage broker in Canada. Once created, we will be receiving an excellent source of fully reviewed and packaged residential mortgage loan opportunities for investment in our MIC, including the occasional loan sourced by Union Lending Corporation. As the MIC will be invested in a large number of mortgages, the MIC will provide broad security diversification for our investors.
Our MIC is another example of an alternative investment product that you would not be made aware of by your investment advisor if they are associated with a bank.
We will update you when we are ready to launch our MIC, which is expected to occur in the third quarter.
F. Cash Today Inc (“Cash Today”) and Grow Capital Two Inc. (“GC2”)
In August 2023, we sent out our Lender Sheet for the Cash Today deal. As you may recall, Cash Today asked Grow to raise $12 million. We have now raised over $25 million. The funds are used by Cash Today to finance acquisitions of smaller competitors and for growth in their lending business.
Cash Today is an asset lender that lends to people requiring smaller amounts of money (averaging approximately $6,000). As security for the loan, Cash Today obtains a first charge on a car, truck, boat, RV, or some other recreational toy. Cash Today will only loan up to 50% of wholesale value of the asset and will only accept the asset as security if there is no existing financing or other charge registered against it. If money is loaned against a recreational vehicle or toy, Cash Today maintains possession of the asset in their warehouse or yard. If money is loaned against a vehicle, Cash Today installs a GPS module that tracks the location of the vehicle (in the event it needs to be seized) and has the ability to remotely disable the ignition.
In November 2023, Cash Today launched a new lending program with Canadian Tire that provides financing for automotive repairs.
In structuring the loan for Cash Today, we incorporated GC2. All Lenders loan their money to GC2, which then loans the money to Cash Today. GC2 acts as an administrator for the loans, collects the monthly interest payments from Cash Today, and distributes the interest payments each month to the Lenders via ETF.
As at December 31, 2023, Cash Today’s loan receivables were $127 million. This represents the amount of money loaned by Cash Today and owing to Cash Today by its borrowers. As against the $127 million of loan receivables (secured by over $250 million in assets), GC2 has the only general security against the receivables, including an assignment of the receivables in the event of default. In other words, GC2’s loans totalling $25 million are secured in first place by loan receivables totaling over $127 million, which is further secured by $250 million in assets. We believe this provides excellent security for our Lenders.
As you are aware, the GC2 loan pays our Lenders 18% per annum, on a monthly basis. To date, all payments by Cash Today to GC2, and GC2 to the Lenders, have been made on time and in strict accordance with the Financing Agreement. No Lenders have requested any redemptions to date.
Given the high demand for Cash Today’s products, they are seeking a further capital of approximately $3 million per month. If you would like to increase your current position, or become a Lender with GC2, please contact our office at (780) 244-4769 or email Andrew Hunka at ahunka@growlending.ca.
G. Sandfield Capital Limited (“Sandfield” and Grow Capital Three Inc. (“GC3”)
Sandfield is a capital lender to law firms in the United Kingdom. Our team traveled to London in December 2023 and February 2024 to perform due diligence on this lending opportunity.
Sandfield lends money to law firms in the UK to pay for legal disbursements incurred to pursue certain litigation matters. This deal is particularly interesting to us (and we think to our Lenders) for several reasons:
The vast majority of the cases (tens of thousands in number) relate to social house disrepair claims. Approximately 17% of the population in the UK live in social housing. Over the years, these houses have fallen into various states of terrible disrepair resulting in tenants bringing claims against government housing authorities. To date, thousands of cases have been filed, with a +/- 95% success rate and average settlement times of approximately 9 months. These cases are essentially “processed” with almost none of them proceeding to trial. A second category of cases is against financial institutions for failing to disclose commissions paid to brokers, as is required by law in the UK. This was a practice that was followed by a number of financial institutions a few years ago and has now resulted in thousands of cases (not as many as the housing disrepair claims) with similar rates of success, but with average settlement timelines of approximately 24 months;
There are several law firms in the UK that handle these claims (we met with a law firm called Claimsmiths). As the law firms have a high degree of confidence with respect to the likelihood of success, they take all cases on a contingency basis (ie. they are not paid their fees unless they are successful). The law firms, however, require capital to pay for the disbursements incurred to pursue the cases (eg. experts, investigation reports, etc). The lending provided by Sandfield to the law firms is only to pay for the disbursements;
The law firms pay Sandfield interest at 25% to 30%. Sandfield is willing to pay our Lenders 14% per annum. Payments are made monthly to the Lenders by ETF. The Lenders have redemption rights;
Sandfield has virtually unlimited need for funds. It is challenging for Sandfield to raise capital in the UK capital market as part of the litigation funding is to pursue cases against financial institutions;
Any foreign currency exchange risk (between the Canadian dollar and the pound) is borne by Sandfield. Our Lenders would loan in Canadian dollars and be paid in Canadian dollars;
There are various layers of security available to our Lenders including:
the payments are owed and paid by the law firms;
the Lenders receive security and an assignment against the receivables created
against all of the legal cases for which loans are made to pay the disbursements. These cases are specifically segregated out for our Lenders;
the Lenders are first loss payees on all cases as against the full recovery of the legal fees, damage awards, and disbursements (even though they are lending only against the disbursements);
most importantly, the collection of the disbursements are fully insured by an insurance company called Accelerant, an A- rated insurer in the UK. In addition to an insurance policy, Accelerant has also provided a Deed of Indemnity which requires them to pay out the disbursement claim regardless of the event that causes the disbursement not to be collectable (eg. the case is unsuccessful, the Plaintiff does not want to pursue the claim, etc);
all security documents is prepared for us by Druces LLP in London;
GC3 is going to administer this loan in a similar manner as GC2 does for Cash Today. David Hawreluk is going to be a Lender in this deal.
This deal closed on April 29, 2024, with Grow raising over $10 million from its lenders. The funds will be deployed to Sandfield, and by Sandfield to Claimsmiths, over the next several months.
If you would like to increase your current position, or become a Lender with GC3, please contact our office at (780) 244-4769 or email Andrew Hunka at ahunka@growlending.ca.
H. Union Insurance Brokerage Corporation
Commencing May 2024, we will be selling life insurance products.
In addition to offering term insurance, one of out most important offerings will be whole life insurance. As you know, there is a risk that term insurance will expire before you die, and/or the cost of the annual premium will become prohibitively expensive as you get older (when you become more likely to need it). Whole life insurance, on the other hand, will remain in place until you die, at whatever age. The disadvantage of permanent insurance is the cost of the premiums compared to term insurance, particularly at any early age.
We have many creative life insurance ideas. Some things you may want to consider include:
Estate planning, including protecting your estate from paying tax, passing wealth to family, and charitable giving;
Term policies to supplement your current life insurance and/or to supplement the insurance available through your group plan to ensure that you will have life insurance in the event you leave your employment;
Buy/sell insurance to cover the cost of buying out a shareholder in the event of death;
Key man insurance to protect your business in the event a key shareholder dies;
Borrowing the full amount to pay for insurance premiums, including the possibility of making the loan payments tax deductible, in order to enhance your death benefit;
Split dollar insurance (which is a very interesting concept/product);
Obtaining permanent/whole life insurance for your children to ensure they will be insurable and to build up cash values that will benefit them later in life (this is a great idea if you have young children or grandchildren); and
Critical accident insurance.
If you have been thinking about life insurance, or would like to have a consultation with David regarding your planning, please contact him at (780) 902-6169 or dhawreluk@growlending.ca.
I. Lending Against Farmland
For many years, we have considered farmland to be an excellent class of real estate, both for producers (farmers) and investors. Land values across the country have increased steadily over the past decade. In some years, those increases have been dramatic. According to Farm Credit Canada (“FCC”), the annual increase in farmland values for the past 10 years are as follows:
As farmers require farmland for their livelihood, they take excellent care of their land and are highly motivated to ensure debt on their land is paid.
In the event you receive a deal from us that involves farmland, we hope that you will consider its historical appreciation in value and the virtues it provides as security for your loan.
J. Lender Guarantee and Default Insurance
We take all your capital investments seriously.
For the past several months, we have been working with insurance brokers in London and Zurich to create a bespoke loan default insurance for our lenders.
In addition, we are working on creating a loan guarantee business, which would provide guarantees to protect any capital loss in loans that you invest in through Union Lending Corporation.
Our objective is to create an insurance and/or guarantee product that indemnifies/insures our Lenders for any capital losses in the event they loan money to a borrower, secured by real estate, and the real estate sells for less than the principal loan amount. The expectation is that the borrower would pay the premium for the insurance coverage. In exchange, the borrower’s interest rate would be less as the lender is insured against any capital loss.
We will continue to work on these products and provide you with updates regarding our progress.
From all of us at Union Lending Corporation, Union Wealth Management Corporation, Union Insurance Brokerage Corporation, Grow Capital One Inc., Grow Capital Two Inc., and Grow Capital Three Inc., thank you your continued support and trust. We will continue to work hard to earn it.