4th Quarter 2024 Report
STATE OF THE UNION
Happy New Year!
We hope you enjoy our 2024 year-end State of the Union report.
A. Year in Review
2024 has been a transformative year for Union Financial.
Including the advent of Cash Today in late 2023, Sandfield in April 2024, and our portfolio management business in July 2024, we ended 2024 with over $175 million in assets under management. By the end of 2025, we forecast that our assets under management will exceed $300 million.
Additional hi-lites for 2024 include:
we completed our rebranding from Grow Lending Group Inc. to Union Lending Corporation, and created our new logo;
we built our new website;
we received approval from the Alberta Securities Commission, and subsequently launched,
our portfolio management business, Union Wealth Management Corporation (“UWMC”),
which is registered in Alberta, Saskatchewan, and British Columbia;
we obtained our license to sell life insurance, and subsequently launched our life insurance
brokerage, Union Insurance Brokerage Corporation;
we revised and updated our Financing Agreement with Cash Today to increase our lending
limit (discussed below);
we hired 7 new staff and several new contractors;
we began regular investor presentations in Edmonton, Calgary, and Kelowna;
we purchased commercial space in Kelowna to prepare for our expansion in that market;
we created a referral relationship with Acera Insurance Services Ltd., a property and casualty insurance brokerage (in the event that you are looking for a new auto or property insurance policy, please contact Jay Mondor in our office at (587) 635-5573, and he will refer you to the correct department);
we have developed a relationship with the University of Alberta, Faculty of Business, and we are engaging students within the Prime program to work on projects for our business; and
we commenced our renovation of the Union Bank building.
In 2025, we will continue to work on:
launching our foreign currency trading platform, UnionFX, which is now live on our website (further details below);
launching our Mortgage Investment Corporation, Grow Capital One Inc., which is scheduled for February 2025 (further details below);
revising and updating our Financing Agreement with Sandfield;
completing our work on a loan default insurance program;
completing, or close to completing, our office renovation, and commencing the renovation of the Roca (Sabor) restaurant in the Union Bank building;
planning our new office space in Kelowna;
substantially growing our lending brokerage, portfolio management, MIC, and life insurance business, in our relentless march to become market leaders in Canada; and
hitting our target of over $300 million in assets under management.
B. Union Lending Corporation – 2024 Loan Update
In 2024, Union Lending Corporation reviewed over 356 loan opportunities. Given our tight due diligence and selection process, only 19 were considered investment quality and worthy of being sent to our lenders for their consideration.
Since inception of our business in 2021, we have brokered over $207 million in loans, with an average lender return of 16.56% including Cash Today and Sandfield, and 13.47% excluding Cash Today and Sandfield. Our total loan loss rate is only 0.15%.
As our business matures and becomes increasingly known in the market, and as the interest-rate and business environment continues to improve in 2025 (subject to the potential impact risks of tariffs now imposed by Trump), we anticipate seeing greater volumes of lending opportunities in 2025 (we have already seen 20% more lending opportunities in January 2025 over January 2024). On the other hand, the lower interest rate environment may see our average interest rate returns to investors drop from the current 13.5%.
Given the continued expansion of our business, we are delighted to advise that Cam Bergt will be returning to Union Lending Corporation in February 2025, following his 14-month sojourn to work for TBSM (Treasury and Balance Sheet Management), which provides treasury and finance consulting to banks, trust companies, credit unions, private lenders and leasing companies. Cam’s return will add further bench strength to our already first-class underwriting group.
Our lender pool now consists of over 300 private lenders and growing. We are now active in Edmonton, Calgary, and Kelowna, and looking to establish new relationships in each market. If you know anyone looking for new financing and/or investors that are interested in our deals (particularly given the regular monthly income that our loans provide), we would be delighted to receive an introduction.
C. Grow Capital One Inc. (“GC1”) – Mortgage Investment Corporation (“MIC”)
Our new Mortgage Investment Corporation, called Grow Capital One Inc. (“GC1”), is ready to roll and will launch in February 2025. GC1 is managed by UWMC.
GC1 will pool capital from our investors to invest in a diversified portfolio of residential mortgages. The collective investment model reduces the risk associated with any single loan defaulting as the impact of a default is spread across the entire portfolio of cross-collateralized mortgages.
Investors can invest in GC1 with initial amounts as little as $25,000 (or less on an exceptional basis) 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 to buy more shares of GC1 to create returns on returns (and maximize the building of wealth). We anticipate that the fund will initially generate net annual returns to investors in the range of 8 to 9% per annum. Given the annual rate of return, and diversification created by the number of mortgages held by GC1, we believe GC1 offers a very attractive alternative to other fixed income products (e.g. GICs, term deposits, money market funds) and an easy “fund it and forget it” approach to investing.
Investors will be able to invest funds in the MIC on a registered or non-registered basis.
We remind investors that the RRSP contribution limit for 2025 is 18% of earned income up to $180,500, or $32,490, and the TFSA contribution limit is $7,000.
If you would like to invest with GC1, please contact our office at (780) 244-4769 or email Jay Mondor at jmondor@unionfinancialcorp.com.
D. UnionFX – Foreign Currency Trading
We are also excited to announce the launch of UnionFX!
UnionFX allows you to access a wide range of forex and global payment services ranging from foreign currency trades to multi-currency accounts.
The UnionFX operational infrastructure is expertly managed by Shift Connect Ltd., a leading global payment and foreign exchange firm based in Calgary with over 40 years of expertise in foreign exchange and global payments. Shift Connect serves both corporate clients and individuals, offering a wide range of solutions from global payments and multi-currency accounts to hedging strategies and treasury management, along with exceptional customer service.
The UnionFX platform allows our clients to transact in over 130 currencies, hold balances in 60 currencies, and make payments in 30 countries. Whether you are an international business owner, traveller, investor, snowbird, or anyone needing to transact across borders, Union FX offers a smarter way to handle global payments without the delays, fees, or hassles of traditional methods.
UnionFX is another step forward in our mission to offer comprehensive family office wealth management services to high net-worth individuals and families.
To trade currency using UnionFX, please go to our website at www.unionfinancialcorp.com and click on the UnionFX button to sign up as a new client.
E. Cash Today Inc. (“Cash Today”) and Grow Capital Two Inc. (“GC2”)
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 a major Canadian retailer 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.
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.
Cash Today uses the loan funds to finance organic growth in their business, to finance acquisitions of smaller competitors, and to fund their lending with their Canadian retailer partner. The current lending to the Canadian retailer customers now exceeds $2.5 million per month. Accordingly, Cash Today is seeking, on an ongoing basis, $3 to $5 million per month.
Updates
We have successfully negotiated and executed the Revised Financing Agreement. Among other changes, our funding limit has now been increased from $50 million (which we have now surpassed) to 50% of Cash Today’s outstanding loan receivables. As at September 2024, that would mean that our funding limit would be $80 million ($160 million x 50%);
We assisted Cash Today in negotiating a sponsorship agreement with the Edmonton Elks. For the 2025 season, Cash Today has an exciting marketing and advertising program with the Elks that will include Cash Today signage around Commonwealth Stadium, decked out Ford F350 trucks with body wraps displaying the “EE” with “Cash Today”, and a one-year lease on two trucks that will be drawn during the 2025 season. We think this is an excellent marketing opportunity directed at the right customer base for Cash Today. Most importantly, more business for Cash Today means more investment opportunities for our lenders;
We recently negotiated an investment of $10 million into Cash Today from a large family office, and an additional $5 million from one of our existing lenders (both in January 2025), which will result in an increase in our total funding to Cash Today to over $65 million; and
Cash Today is planning to launch funding of loans for customers purchasing equipment at heavy equipment auctions, which is, in part, designed to offset the impact of the new criminal interest rate legislation, discussed below.
New Criminal Interest Rate Legislation
Effective January 1, 2025, new criminal interest rate laws came into effect. The new laws will have the following impact on loans:
loans in the amount of $10,000 and below will be subject to the new criminal interest rate of 35% APR (annualized percentage rate);
commercial loans between $10,000 and $500,000 will be subject to the rate of 48% APR, which is similar to the current rate of 60% EAR (effective annual rate); and
commercial loans above $500,000 will not be subject to any interest rate cap.
Commercial loans are defined as loans made where:
the borrower is not a natural person;
the borrower is using the arrangements for a business or commercial purpose; and
either:
the amount advanced is between $10,000 and $500,000 and the APR of interest does not exceed 48%; or
the amount advanced is over $500,000.
EAR is the “effective annual rate”. The effective annual rate is the true interest rate on a loan that accounts for the effects of compounding. The more frequent the compounding periods, the higher the rate.
APR is the “annualized percentage rate”. The annualized percentage rate is the yearly rate charged for a loan and includes interest and fees.
Cash Today was aware that the new legislation was going to come into effect on January 1. While the legislation will have some impact on profitability, it will be modest. Efforts will be made to increase loans to amounts over $10,000 (when appropriate), and to focus more on commercial loans, including lending to corporate customers at auctions (as described above). Importantly, there will be no impact on the interest rate paid to our lenders pursuant to the Revised Financing Agreement.
If you would like to become a lender with GC2, or increase your current loan amount, please contact our office at (780) 244-4769 or email Andrew Hunka at ahunka@unionfinancialcorp.com.
F. 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 types of 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 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 (i.e. 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 (e.g. 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 significant needs 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 loan in Canadian dollars and are 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 (e.g. 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.
This deal originally closed on April 29, 2024. 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. Sandfield is now accepting new funds from investors.
Updates
As at November 2024, we had fully deployed our initial $10,425,000 raise for Sandfield. In order to deploy more capital, and faster, Sandfield requested that they be permitted to increase the percentage of undisclosed commissions cases that they fund relative to number of housing disrepair cases. Sandfield also raised capital from another lender who wanted security over the legal cases that it was going to fund. The latter matter required permission from our lenders for Sandfield to enter into an Intercreditor Agreement. As we believe that both of these requests strengthen Sandfield and benefit our lenders, we have drafted a Revised Financing Agreement and Intercreditor Agreement that is currently being reviewed by Sandfield and will be sent to our current lenders shortly.
We have raised a further $6.5 million in additional lending that will start being deployed in $1 million tranches in February 2025, and we are accepting new lending from our lenders.
Finally, we have attracted the attention of a very large and prominent fund and pension management entity that has expressed an interest in Sandfield. In late February 2025, we will be meeting with this entity and the Sandfield group (i.e. Sandfield, Claimsmiths, Sophro and Accelerant) in London to discuss a possible investment.
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.
G. Union Wealth Management Corporation
In mid-2024, we launched our portfolio management business, led by our portfolio manager, Michael Bishop.
During the second half of 2024, we transitioned Michael’s clients from CIBC Wood Gundy and have added a number of new investors from within and beyond our lender pool. As our offerings continue to grow, Union Financial has become ideally suited to provide comprehensive family office wealth management services for our clients. As discussed herein, we now offer private lending investments, portfolio management, a MIC, foreign currency trading, a referral network for property, casualty, and group benefits, and life insurance (from simple term insurance to more complex structures involving premium financing and split dollar structures). We are not aware of any other financial institution that offers the breadth of products and services that we do. And soon, we will be doing all of this within the historical grandeur of the Union Bank building. Very exciting times ahead indeed.
If you would like to become a portfolio management client of UWMC, please contact Michael Bishop at (587) 635-5572 or by email at mbishop@unionfinancialcorp.com.
H. Union Insurance Brokerage Corporation
As mentioned, as part of our full compliment of wealth management products and services, we also sell life insurance.
Our life insurance business has received incredible response from our clients and has become, by far, one of our most successful business units. While we have many creative life insurance plans and ideas, the ones that have generated the most interest are the financing of premiums for whole life policies, borrowing against the Cash Surrender Value of whole life policies for investment purposes, and split dollar insurance structures.
Some other 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 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;
Devising plans that involve purchasing annuities for dependent children that will require income for the rest of your life after you die; and
Obtaining permanent/whole life insurance for your children or grandchildren to ensure they will be insurable and to build up cash values that will benefit them later in life.
If you would like to learn more about these and other life insurance structures and planning ideas, please contact Daniel Roberts at droberts@unionfinancialcorp.com or David Hawreluk at (780) 902-6169 or dhawreluk@unionfinancialcorp.com.
I.Anti-Money Laundering and Anti-Terrorism Financing – Important Update
In late 2024, significant changes occurred to Canada's anti-money laundering and anti-terrorist financing regime insofar as they relate to mortgage lending. These regulatory changes affect all mortgage professionals, including investors, who are mortgage lenders.
As at October 11, 2024, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) classifies mortgage brokers, lenders (investors), and administrators as "reporting entities." A “mortgage lender” is a person or entity, other than a financial entity, engaged in the business of providing loans secured by mortgages on real property.
If you are a mortgage lender, you are subject to compliance with rigorous regulations and reporting standards under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The key requirements include:
Compliance Program: A requirement to develop and implement comprehensive compliance policies, appoint a compliance officer, conduct regular training, and perform risk assessments;
Transaction Reporting: A requirement to report all suspicious transactions, large cash or virtual currency transactions, and suspected sanction evasions to FINTRAC;
Record Keeping: A requirement to maintain extensive records of all transactions and client identification, which must be kept for five years;
Know Your Client (KYC): A requirement to verify the identity of all clients, understand their business relationships and monitor ongoing transactions, determine where there may be third party involvement, and identify politically exposed persons; and
Apply Ministerial Directives: A requirement to follow any specific directives issued by the Canadian government.
Union Lending Corporation has proactively built an Anti-Money Laundering (AML) framework, which includes detailed policies, procedures, and a compliance framework to meet the requirements for a reporting entity.
With respect to the mortgage loans that you do with us, we will, if you choose, act as your administrative agent and manage these new regulatory responsibilities on your behalf. This support means that you will not have to worry about the complexities and obligations of these new regulations. In order for us to act in that capacity on your behalf, we will ask that you sign our Anti-Money Laundering Services Agreement.
If you have any questions regarding the new Anti-Money Laundering and Anti-Terrorism Financing requirements, please contact Andrew Hunka at (780) 244-4769 or ahunka@unionfinancialcorp.com or visit https://fintrac-canafe.canada.ca/re-ed/mortgage- hypotheque-eng
J. Union Bank Building Renovation
We have commenced renovations of the Union Bank building, starting with repointing of the exterior brick, window replacement, and repainting of an old advertising sign. We expect that the interior office renovation will start around March and be completed around January 2026. We further anticipate that renovation of the new Roca restaurant will commence in the fall of 2025 and be completed by summer 2026. The new spaces will be a true showpiece and an excellent reflection of the businesses and brand that we are building. We are looking forward to welcoming you in our new space.
From all of us at Union Lending Corporation, Union Wealth Management Corporation, Union Insurance Brokerage Corporation, UnionFX, Grow Capital One Inc., Grow Capital Two Inc., and Grow Capital Three Inc., thank you for your continued support and trust.
Per Unitatem, Prosperita
Through Unity, Prosperity