{"id":6726,"date":"2018-09-05T21:00:22","date_gmt":"2018-09-06T01:00:22","guid":{"rendered":"http:\/\/www.irasmithinc.com\/blog\/?p=6726"},"modified":"2018-09-13T03:35:56","modified_gmt":"2018-09-13T07:35:56","slug":"small-business-loans-canada","status":"publish","type":"post","link":"https:\/\/irasmithinc.com\/blog\/small-business-loans-canada\/","title":{"rendered":"SMALL BUSINESS LOANS CANADA CASE STUDY:  LOSING YOUR MONEY IS NOT FUNNY"},"content":{"rendered":"<div style=\"width: 1920px; max-width: 100%; margin: auto; clear: both;\">\n<div style=\"position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden;\"><iframe loading=\"lazy\" style=\"position: absolute; top: 0; left: 0; width: 100%; height: 100%; padding: 0px; margin: 0px;\" src=\"\/\/snakeplayer.com\/watch?v=aXJhX3NtaXRoLTEzNw\" width=\"1920\" height=\"1080\" frameborder=\"0\" scrolling=\"no\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/div>\n<div><img decoding=\"async\" style=\"width: 100%; height: auto; float: left; padding: 0px; margin: 0px; border: 0px;\" title=\"1st Global Capital\" src=\"http:\/\/www.irasmithinc.com\/blog\/wp-content\/uploads\/2018\/09\/320efcd005100f3ee3522fefba70f917.png\" alt=\"1st Global Capital\" \/><\/div>\n<\/div>\n<h2 id='small-business-loans-canada-introduction'  id=\"boomdevs_1\"><span style=\"color: #00ccff;\"><strong>Small business loans Canada:\u00a0 Introduction<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Today I am going to be telling you a story about a US corporate bankruptcy, and then a case study of our own.\u00a0 The purpose is to illustrate how you need to understand all the risk factors as a private small investor in making <strong>small business loans Canada<\/strong>.\u00a0 <\/span><\/p>\n<h2 id='small-business-loans-canada-1st-global-capital-bankruptcy'  id=\"boomdevs_2\"><strong><span style=\"color: #00ccff;\">Small business loans Canada:\u00a0 1st Global Capital bankruptcy<\/span><\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">A $283 million corporate US bankruptcy has derailed many retirement plans. \u00a0It has left many investors in a financial crisis. In one case, a small inheritance was invested. \u00a0In another, a cash award granted by a Court was invested. These are just two of the investor stories coming out of the US bankruptcy case of <\/span><a href=\"https:\/\/www.linkedin.com\/company\/1stglobalcapital\/?originalSubdomain=ca\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">1st Global Capital<\/span><\/a><span style=\"font-weight: 400;\"> of Hallandale Beach, Florida.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1st Global Capital describes itself this way:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201c<\/span><a href=\"https:\/\/1stglobalcapital.com\/funding-solutions\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">1st Global Capital<\/span><\/a><span style=\"font-weight: 400;\"> is an industry-leading direct funder with the professionalism, flexibility and fast turnaround you need to maximize your success. We use our years of industry experience, our funding power and our technological expertise to empower Independent Sales Organizations (ISOs) and Partner&#8217;s like you to maximize your business opportunities. Behind every 1GC deal is the expert vetting and oversight from our team of funding professionals with over 50 years of combined underwriting experience.\u201d<\/span><\/p>\n<h2 id='small-business-loans-canada-the-memorandums-of-indebtedness'  id=\"boomdevs_3\"><strong><span style=\"color: #00ccff;\">Small business loans Canada:\u00a0 The &#8220;memorandums of indebtedness&#8221;<\/span><\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">1st Global Capital was created 5 years ago to fund <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/can-you-file-personal-and-corporate-bankruptcy\/\"><span style=\"font-weight: 400;\">small companies<\/span><\/a><span style=\"font-weight: 400;\">. It funded loans to <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/small-business-loans-canada-bad-credit-need-it\/\"><span style=\"font-weight: 400;\">small businesses<\/span><\/a><span style=\"font-weight: 400;\"> throughout many states in the USA. \u00a0Examples of the types of businesses it funded are dining establishments, retail stores, construction businesses, healthcare, and e-commerce companies. \u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">They raised money by issuing \u201cmemorandums of indebtedness\u201d to people who invested with 1st Global Capital. \u00a0Many used <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/borrowing-in-retirement-borrowing-retirement-savings\/\"><span style=\"font-weight: 400;\">retirement savings<\/span><\/a><span style=\"font-weight: 400;\"> accounts to fund their investment. \u00a01st Global Capital used commissioned agents in many states to sell the 1st Global Capital investment opportunity. \u00a0These short-term deals were supposed to pay back with interest at the end of nine months.<\/span><\/p>\n<p><span style=\"color: #00ccff;\"><strong>Small business loans Canada:\u00a0 The risky loan products<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">1st Global Capital was an alternative lender. \u00a0It&#8217;s loan products included:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Merchant Cash Advances<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Specialty Funding Options<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Asset Based Lending<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Accounts Receivable Funding<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">By its very nature, this was <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/the-alternative-lending-industry-is-growing-due-to-a-vacuum-of-funding-sources\/\"><span style=\"font-weight: 400;\">risky lending<\/span><\/a><span style=\"font-weight: 400;\"> to businesses that could not obtain more traditional bank financing. \u00a0The investors were wooed by promises of high returns, but I am certain they did not really understand they were making unsecured loans to a company that placed the money into risky loans.<\/span><\/p>\n<p><span style=\"color: #00ccff;\"><strong>Small business loans Canada:\u00a0 The small investors<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">Bankruptcy documents indicate greater than 4,000 1st Global Capital accounts existed across the country at the date of bankruptcy. \u00a0Numerous are individual retirement accounts, each owed in between $621,000 and $922,000.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Court records indicate that 1st Global Capital stated that the cause of its bankruptcy was examinations by the <\/span><a href=\"https:\/\/www.sec.gov\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Securities and Exchange Commission<\/span><\/a><span style=\"font-weight: 400;\"> as well as the <\/span><a href=\"https:\/\/www.justice.gov\/usao-sdfl\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">U.S. attorney\u2019s office in southern Florida<\/span><\/a><span style=\"font-weight: 400;\"> over alleged securities violations.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">As a result, the inflow of money from investors stopped when 1st Global Capital could no longer offer its memorandums. The <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/consumer-proposal-or-bankruptcy\/\"><span style=\"font-weight: 400;\">bankruptcy files<\/span><\/a><span style=\"font-weight: 400;\"> show that as a result, the company dealt with an unexpected and intense liquidity situation. The regulatory agencies state that 1st Global Capital was selling securities and the company was subject to government registration with and oversight by government regulatory agencies.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The bankruptcy records do not indicate this but I am certain that eventually, the bankruptcy trustee will report that the investment scheme was a <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/ponzi-scheme-criminals\/\"><span style=\"font-weight: 400;\">Ponzi scheme<\/span><\/a><span style=\"font-weight: 400;\">. \u00a0If the inability to take in more loans caused the company\u2019s bankruptcy, it is obvious that they required fresh money in order to honour their existing liabilities. \u00a0New investors\u2019 money paying back older investors is a classic definition of a Ponzi scheme.<\/span><\/p>\n<p><span style=\"color: #00ccff;\"><strong>Small business loans Canada:\u00a0 Our very own Canadian case study<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">Not understanding what you are investing in is not a story unique to the United States. \u00a0Let me tell you about one of our case studies from last year called <\/span><a href=\"http:\/\/www.irasmithinc.com\/case_studies\/vci\/index.html\"><span style=\"font-weight: 400;\">Vaughan Crossings Inc<\/span><\/a><span style=\"font-weight: 400;\"> (\u201c<a href=\"http:\/\/www.canchina.ca\/wp-content\/uploads\/2016\/09\/Vaughan-Crossings-OctNOV.pdf\" target=\"_blank\" rel=\"noopener\">VCI<\/a>\u201d). \u00a0We were <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/330-university-avenue-2\/\"><span style=\"font-weight: 400;\">appointed by the Court<\/span><\/a><span style=\"font-weight: 400;\"> as Receiver of the assets, properties and undertaking of VCI. \u00a0The main asset of VCI was 5.5 acres of owned development land located at the northwest corner of Dufferin and Centre Streets in the City of Vaughan, ON. \u00a0In this <\/span><a href=\"https:\/\/en.wikipedia.org\/wiki\/Receivership\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">receivership,<\/span><\/a><span style=\"font-weight: 400;\"> our main role was to sell these lands. \u00a0You can find all the Court records and public information on our <\/span><a href=\"http:\/\/www.irasmithinc.com\/case_studies\/vci\/index.html\"><span style=\"font-weight: 400;\">webpage<\/span><\/a><span style=\"font-weight: 400;\"> that we set up for VCI, so I won\u2019t go through the history of the file in this <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\"><span style=\"font-weight: 400;\">Brandon\u2019s Blog<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The important point in this file is that the second mortgagee was a group of investors. These investors were found through the use of commissioned agents. These agents were mainly financial advisors and insurance agents.\u00a0 The agents made commissions to raise funds from their clients for investment in this project. \u00a0Just like in the 1st Global Capital case, the investors were mainly individuals, many of whom used funds in their <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/canadians-cashing-in-rrsps-before-retirement\/\"><span style=\"font-weight: 400;\">RRSPs<\/span><\/a><span style=\"font-weight: 400;\"> to make the loan.<\/span><\/p>\n<p><span style=\"color: #00ccff;\"><strong>Small business loans Canada:\u00a0 The dangers of not understanding risk<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">During the receivership, I had the chance to speak with many investors who called in wanting to know the status of their investments. \u00a0These unsophisticated people were wooed by the promise of high returns when the project was fully built out. Just like in the 1st Global Capital case, the mortgage syndicator had to cease raising funds as they were being investigated by the <\/span><a href=\"http:\/\/www.fsco.gov.on.ca\/en\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Financial Services Commission of Ontario<\/span><\/a><span style=\"font-weight: 400;\">. \u00a0Ultimately, the mortgage syndicator went into receivership also.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The money put in by this unsophisticated investor group was secured by way of a second mortgage. The developer ran out of cash to develop the property. The mortgage syndicator was shut down.\u00a0 The lands were not be developed. \u00a0The plan was that the mortgage syndicator was going to do another round of financing to provide construction financing, which would be in priority to the second mortgagee! The mortgage syndicator had the authority, acting as trustee of the second mortgage, to subordinate that mortgage to the construction financing. \u00a0However, that never happened.<\/span><\/p>\n<p><span style=\"color: #00ccff;\"><strong>Small business loans Canada:\u00a0 The receivership<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">Without construction financing, the development project could not continue; hence our appointment as Receiver. \u00a0There two mortgages against the property and numerous construction liens filed and perfected against the property. \u00a0We obtained our appraisals and ran a <\/span><a href=\"http:\/\/www.irasmithinc.com\/blog\/stalking-horse-credit-bid\/\"><span style=\"font-weight: 400;\">receivership sales process<\/span><\/a><span style=\"font-weight: 400;\">. \u00a0We sold the property for much more than its appraised value.\u00a0 The sales price repaid the construction liens and the first mortgage.\u00a0 However, there was very little available for the second mortgagee investors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The promise of a high-interest rate wooed these investors. They may not have been as focussed on the safety of their capital. \u00a0Unfortunately, these small investors did not understand the risks associated with this type of loan they were making. Shame on their financial advisors who sold them this investment, knowing it was not right for most of them. \u00a0The financial advisors were hungry for commissions, regardless of what harm may come to their clients.<\/span><\/p>\n<p><span style=\"color: #00ccff;\"><strong>Small business loans Canada:\u00a0 Is your business at risk?<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">If your small business is having financial problems, more small business loans alone is not the answer. \u00a0You must first look at all aspects of your business. First, you should look at the viability of your business. \u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Are there expenses that need cutting and activities that you must do that can generate more revenue? \u00a0\u00a0If so, perhaps we can restructure your business. You may not need a long-term small business loan.\u00a0 Perhaps a short-term loan to get over the immediate financial hurdle you are facing is enough.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you are looking for ways to restructure your corporate or personal debt call <\/span><a href=\"http:\/\/www.irasmithinc.com\/\"><span style=\"font-weight: 400;\">Ira Smith Trustee &amp; Receiver Inc<\/span><\/a><span style=\"font-weight: 400;\">. \u00a0We understand the stress and pain your financial problems are causing you. \u00a0We feel your pain and we can end it for you.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">Our strategy for every single business and person is to develop a result where Starting Over, Starting Now comes true, starting the minute you <\/span><a href=\"https:\/\/www.google.com\/maps\/dir\/?api=1&amp;origin=43.80831532297206,-79.54696685040093&amp;destination=ira%20smith%20trustee\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">walk through our door<\/span><\/a><span style=\"font-weight: 400;\">. You\u2019re just one call away from taking the necessary actions to get your debt settlement and back on the road to leading a healthy and stress-free life. \u00a0<\/span><a href=\"http:\/\/www.irasmithinc.com\/contact_us.html\"><span style=\"font-weight: 400;\">Contact<\/span><\/a><span style=\"font-weight: 400;\"> the <\/span><a href=\"http:\/\/www.irasmithinc.com\/contact_us.html\"><span style=\"font-weight: 400;\">Ira Smith Team<\/span><\/a><span style=\"font-weight: 400;\"> today.<a href=\"https:\/\/www.google.com\/maps\/dir\/?api=1&amp;origin=43.80831532297206,-79.54696685040093&amp;destination=ira%20smith%20trustee%20receiver\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-6730\" title=\"small business loans canada\" src=\"http:\/\/www.irasmithinc.com\/blog\/wp-content\/uploads\/2018\/09\/small-business-loans-canada.png\" alt=\"small business loans canada\" width=\"1280\" height=\"1073\" srcset=\"https:\/\/irasmithinc.com\/blog\/wp-content\/uploads\/2018\/09\/small-business-loans-canada.png 940w, https:\/\/irasmithinc.com\/blog\/wp-content\/uploads\/2018\/09\/small-business-loans-canada-300x251.png 300w, https:\/\/irasmithinc.com\/blog\/wp-content\/uploads\/2018\/09\/small-business-loans-canada-768x644.png 768w, https:\/\/irasmithinc.com\/blog\/wp-content\/uploads\/2018\/09\/small-business-loans-canada-1024x858.png 1024w, https:\/\/irasmithinc.com\/blog\/wp-content\/uploads\/2018\/09\/small-business-loans-canada-358x300.png 358w\" sizes=\"auto, (max-width: 1280px) 100vw, 1280px\" \/><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Small business loans Canada:\u00a0 Introduction Today I am going to be telling you a story about a US corporate bankruptcy, and then a case study of our own.\u00a0 The purpose is to illustrate how you need to understand all the risk factors as a private small investor in making small business loans Canada.\u00a0 Small business [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[2921,34,2002,2452,2929,2923,2934,2924,588,2926,2927,163,2932,474,2933,11,2920],"class_list":["post-6726","post","type-post","status-publish","format-standard","hentry","category-brandon-blog-post","tag-1st-global-capital","tag-bankruptcy-trustee","tag-buying-real-estate-from-a-receiver","tag-court-appointed-receiver","tag-financial-advisors","tag-financial-services-commission-of-ontario","tag-fsco","tag-insurance-agents","tag-ira-smith-trustee-receiver-inc","tag-loan-products","tag-mortgage-syndicator","tag-receiver","tag-risky-loan-products","tag-small-business-loans","tag-small-business-loans-canada","tag-trustee","tag-vaughan-crossings-inc"],"_links":{"self":[{"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/posts\/6726","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/comments?post=6726"}],"version-history":[{"count":5,"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/posts\/6726\/revisions"}],"predecessor-version":[{"id":6833,"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/posts\/6726\/revisions\/6833"}],"wp:attachment":[{"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/media?parent=6726"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/categories?post=6726"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/irasmithinc.com\/blog\/wp-json\/wp\/v2\/tags?post=6726"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}