Neo Financial has a new source of money for its credit cards. The Calgary company secured a $185-million syndicated warehouse facility led by ATB Financial, the Alberta Crown corporation. Credit unions Vancity, Beem, Alterna Savings and Innovation Federal joined.
A warehouse facility is a credit line backed by the loans themselves, here Neo’s credit card balances. It lets Neo lend more without raising equity. Co-founder Jeff Adamson told BetaKit the terms allow it to grow to $250 million. “Building a more competitive banking system in Canada is a team sport,” he said.
It’s been a rough year for Neo. It lost two flagship loyalty partners, Tim Hortons and The Hudson’s Bay Company, and laid off about 10% of staff in September. In June it launched four new cards, including ones with Mastercard and United Airlines.
Why it matters: Debt from Crown and co-operative lenders, rather than a U.S. venture round, is a vote of confidence in Neo’s loan book from Canadian institutions. It’s also a sign that credit unions see fintechs as partners rather than rivals as they try to compete with the Big Six banks.
