2nd Quarter 2024 Report
Good morning lenders and investors!
We hope that you are enjoying the summer. As you lounge in the shade from the hot weather, we are delighted to present our business update for the second quarter of 2024.
A. Corporate Branding
Our rebranding efforts are almost complete. We have now transitioned to our new business cards, email, and website: www.unionfinancialcorp.com
Grow Lending Group Inc. has rebranded to Union Lending Corporation.
Our onboarding with Fidelity Clearing Canada concluded today. Our target launch date for our portfolio management business, as part of Union Wealth Management Corporation, is August 15, 2024. You will see the Union Wealth Management portion of our website once we are operational.
We are now well underway with selling life insurance products as part of Union Insurance Brokerage Corporation.
Our current collection of businesses under the Union Financial trade name is as follows:
We hope that you like our new logo, which we believe reflects our brand and our growing collection of synergistic businesses. More on that below.
B. Union Lending Corporation – Q2 2024 Loan Update
To the end of the 2nd quarter of 2024, the team at Union reviewed over 160 loan opportunities. Given our tight due diligence and selection process, only 9 were considered worthy of being sent to our lenders for their consideration. We continue to see very quick responses from our lenders to many of our loans, particularly when the loan amounts are under $2 million, and we continue to monitor how best to allocate the investment opportunities to interested lenders. It is in response to the high demand by our lenders/investors that we continue to develop new products, investment opportunities, and services through our other business lines to ensure that your money is always working for you.
C. Grow Capital One Inc. (“GC1”) – Mortgage Investment Corporation (“MIC”)
One of our new products will be our Mortgage Investment Corporation, which will be called Grow Capital One Inc. (“GC1”). GC1 is wholly owned and managed by Union Wealth Management Corporation.
As 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 $10,000, including registered accounts, and continue to invest as frequently thereafter as they wish. Investors can choose to receive their interest returns distributed to them monthly or automatically re-invested into GC1 to create returns on returns (and maximize the building of your wealth). We anticipate that the fund will initially generate net annual returns to investors in the range of 8 to 9% per annum.
Over the past several years, we have developed an outstanding relationship with the largest private residential mortgage broker in Canada. Once our MIC is created, we will be receiving an excellent source of fully reviewed and packaged residential mortgage loan opportunities for investment in the MIC, including the occasional loan sourced by Union Lending Corporation and from other mortgage brokers. As the MIC will be invested in a large number of mortgages, the MIC will provide broad security diversification for our investors.
We anticipate the MIC will be launched in the third quarter of 2024.
D. Cash Today Inc. (“Cash Today”) and Grow Capital Two Inc. (“GC2”)
In mid-2023, Cash Today approached us to initially raise $12 million. We have now raised over $30 million for Cash Today. The funds are used by Cash Today for growth in their lending business and to finance acquisitions of smaller competitors.
Cash Today is an Edmonton-based 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, or recreational vehicle. 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, 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. When a debt arises as a result of work performed on a vehicle, the lender is entitled to a lien pursuant to the Garage Keepers Lien Act, which provides a first- place payout over any existing financing lien registered against the vehicle.
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 EFT.
As at March 31, 2024, Cash Today’s loan receivables were $139 million. This represents the amount of money loaned by Cash Today and owing to Cash Today by its borrowers (which is currently over 14,000). As against the $139 million of loan receivables (secured by over $270 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 $30 million are secured in first place by loan receivables totaling over $139 million, which is further secured by $270 million in assets. We believe this provides excellent security for our lenders.
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 accordance with the Financing Agreement. No lenders have requested any redemptions to date and no amounts have otherwise been redeemed.
We fully expect that we will raise the full $50 million for Cash Today by year-end. Currently, our Financing Agreement stipulates that the facility will be limited to $50 million. As we approach the limit, we will review and determine whether the limit of the facility should be increased. Any increase will require the consent of all lenders in the deal at that time. In the meantime, you should consider the following:
If you are interested or contemplating investing in Cash Today, we would highly recommend that you do so quickly in order to secure your position. We do have larger lenders that are considering an investment which, if they invest, would significantly limit the timing and amount that others may be able to invest, or eliminate the opportunity altogether. We also expect even higher demand for our alternative investment products (like Cash Today and Sandfield) once we launch the portfolio management business in August, and as we grow our life insurance business (see below for a further explanation in that regard);
If it is determined that the facility should be increased beyond $50 million, and an existing lender/investor does not consent to the increase, it is anticipated that they will be paid out pursuant to the terms of the Financing Agreement.
If you would like to become a lender with GC2, or increase your current position, please contact our office at (780) 244-4769 or email Andrew Hunka at ahunka@unionfinancialcorp.com.
E. 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 (e.g. costs incurred to pay for expert reports, investigators, filing fees, photocopying, etc.) 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 housing 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 and currently deal 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% per annum. Sandfield pays our lenders 14% per annum. Payments are made monthly to the lenders by EFT. 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 on a case 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 were prepared for us by Druces LLP in London;
GC3 administers this loan in a similar manner as GC2 does for Cash Today. As with the Cash Today loan, David Hawreluk is a lender in this deal.
This deal closed on April 29, 2024. Union has now raised over $12 million from its lenders. The funds are being deployed to Sandfield approximately every 2 weeks and are being used by Claimsmiths to fund new cases. To date, all payments by Sandfield to GC3, and GC3 to the lenders, have been made on time and in strict accordance with the Financing Agreement. No lenders have requested any redemptions and no amounts have otherwise been redeemed to date.
If you would like to become a lender with GC3, or increase your current position, please contact our office at (780) 244-4769 or email Andrew Hunka at ahunka@unionfinancialcorp.com.
F. Union Insurance Brokerage Corporation
As part of our full compliment of wealth management products and strategies, we are now offering life insurance.
In addition to offering term insurance, one of our most important offerings is whole life insurance.
As you know, there is a risk that term insurance will expire before you die, or you may suffer from a health issue that prohibits your ability to obtain a new term policy when the policy expires, 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, and you will never need to requalify once the policy is in place. The other advantage to whole life is that it accumulates a “cash value” that you can use as security to borrow against. The disadvantage of permanent insurance is the cost of the premiums compared to term insurance, particularly at any early age. However, there are some very creative ways to pay the premiums and unlock significant financial opportunities while you are alive.
For instance:
Assume you are a male, age 45, with no insurance rating (i.e. you are healthy). A whole life policy with an annual premium of $250,000 would have a starting death benefit in the range of approximately $12,250,000. In the event the annual premium was $500,000, the starting death benefit would be in the range of approximately $22,500,000.
Here are some strategies to pay for and to profit from your whole life policy during your lifetime:
Option 1: It is possible to borrow the entire premium. In this scenario, instead of paying either $250,000 or $500,000 each year, you can borrow the money to pay for the premium and only pay the interest on the loan. The loan would be secured by the cash value created in the policy. If you have a corporation, we can also structure the borrowing so that the interest is a tax deductible expense. In other words, instead of paying $500,000 each year, you would pay only $30,000 in interest (assuming a 6% per annum interest rate), which could also be tax deductible expense.
At the time of death:
the death benefit would first pay out the loan to the bank;
part of the remainder of the death benefit would go to your company to pay for taxes and/or various other expenses that will be incurred; and
any balance of the death benefit can be provided to your family members or used for charitable purposes.
Option 2: Each year, your company could pay your insurance premium. Cash value would be created in the policy, which your company can borrow against. Each year, you could use the borrowed money to invest (for example in Sandfield or Cash Today earning 14% or 18% per annum or into a stock portfolio), invest the money right back into the company, or do a combination of investments and re-investment. As the money borrowed is for business/investment purposes, the interest on the loan is tax deductive. If the money is borrowed at, let’s say 6%, and invested at 18% (as in Cash Today), your company could make 12% net return on the investment. By your company paying the premium, you can also reduce, and unlock, your retained earnings.
Option 3: A variation on Option 2 involves purchasing whole life policy but splitting the ownership of the policy between the company (which owns the death benefit) and you or a trust (which owns the cash value). With this structure (often referred to as “split dollar”), you could personally borrow money from the company each year as opposed to paying yourself a salary. By having the company pay the premium for the death benefit portion, you can draw down, and unlock, retained earnings. If you do not personally use all of the money that you borrowed, you can inject it back into the company and create a shareholder loan, which you can draw out later tax free. The shareholder loan can increase each year that you make a premium payment and could become quite substantial over time.
The key is for you to:
obtain as much insurance as possible, as early as possible, to reflect the growth of your wealth that will occur over the remainder of your life;
ensure that you will have insurance even if you later become uninsurable at some point in your life;
ensure that you will have sufficient insurance to pay for the things that you will need to pay for in the event of death (including taxes and gifting to your family members and/or charity); and
pay for the insurance premiums in the most creative way possible to maximize your death benefit and, if desired, in a way where you can make a return on the money borrowed that will exceed your borrowing interest costs.
Option 2, in particular, provides a clear example of how you can use the same dollar and obtain multiple benefits: instead of paying $500,000 and obtaining only a large insurance policy, the same $500,000 also creates cash value in the policy that you can borrow against and invest the money to earn substantial income. This option also creates a “forced savings” mechanism whereby you pay for the life insurance policy and invest for each year for your future. In addition, and as mentioned above, you can also draw down/unlock your retained earnings, which can be of significant benefit.
These options demonstrate why we created Union Financial. Our business lines are not siloed, which is what you may experience with your current advisors. Our business lines, and the ideas and products we bring to market, are intended to work seamlessly and synergistically to provide multiple beneficial outcomes, maximize returns, and educate you on creative ways to manage and protect your wealth.
To enhance our life insurance product offering, we have added Daniel Roberts to our team. Dan is an expert in actuarial science who worked for the past decade at Targeted Strategies, one of the largest life insurance advisory companies in Canada that focuses on the life insurance structures described above. All of our clients will greatly benefit from Dan’s abundant knowledge and experience in structuring life insurance plans and products.
If you would like to learn more about these and other life insurance structures that can provide you with excellent coverage and unlock investment and/or retained earnings, please contact Dan at droberts@unionfinancialcorp.com or David Hawreluk at (780) 902-6169 or dhawreluk@unionfinancialcorp.com.
G. Lender Guarantee and Default Insurance
As discussed in prior reports, we have been working with insurance brokers in London 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. We will continue to update you on our progress.
H. Businesses Under Development
During the Second Quarter, we also brought on board Jason Matthison to head up our business development in Calgary. Jason obtained his Bachelor of Commerce, Finance, in 1997 and his CFA designation in 2001. As a forex trader for one of Canada's big five banks, Jason managed over $1B in daily spot CAD volume. He then went on to co-found one of Western Canada’s largest forex and global payments firms that processed more than $1.5B for corporate and private clients. In addition to his entrepreneurial achievements, Jason has played key leadership roles in the business community including being the president of the Calgary Entrepreneur’s Organization (EO) and the past Regional Director for EO Canada.
In our ongoing quest to create and develop business lines that provide a full spectrum of financial solutions and products for our lenders and investors, we are also working on the following:
Property and casualty insurance;
Group insurance benefits;
Foreign currency trading; and
Potential expansion into the Kelowna market.
We will provide you with updates with these products and market expansion efforts in our next report.
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 for your continued support and trust.
Enjoy the summer.
Per Unitatem, Prosperita
Through Unity, Prosperity