Why the alt-lending space is increasingly part of prime

[00:00] There's not a very simple straightforward borrower type anymore. We're talking about great credit scores that are well into the 700s, low 800s, but we're talking about life happens. Brokers are small business owners. This affordability issue has now compounded for 5 years and the alternative space is going to be, I think, a huge eye-opener for a lot of the brokers.

[00:30] Fergal McAlinden: All right. So, next up we have Joe Cote, Chief Operating Officer at HipBilt Bank, whose booth we see just over here. Have you been having many productive conversations with brokers today?

[00:40] Joe Cote: Lots of discussions. I certainly think that there's been a lot of changes throughout the industry, specifically with HipBilt, which is very exciting. And having a lot of brokers come back and are interested to see, you know, tell me more. Tell me what you're doing. We're hearing a lot of exciting things that have been happening over the course of the last 6 to 12 months. Tell me what's happening over the course of the next 6 to 12 months and how can we partner together?

[01:00] Fergal McAlinden: For sure. And the event is happening at a really interesting time for the industry. I mean, not that we haven't had any non-eventful times over the past few years. It's just been one thing after the next. But 2026, how are you assessing the market this year? How's it been?

[01:13] Joe Cote: I think obviously the market has had a fairly large impact on a lot of brokers and a lot of lenders, the community at large. We are still very happy and fortunate with our position and our performance so far this year. We've got great partners. I think that value proposition that we have certainly been working on has been what, the proof in the pudding of being able to look to those partners. We've got a lot of partners that have come back. I think that they're very excited with the service, the products, and the relationships that we've built. And from an overall performance standpoint, we're going to finish the year actually fairly strong and we got some good growth prospects for 2027.

[01:45] Fergal McAlinden: I was interested to hear, Joe, from lenders about borrower types. We know that they've evolved a lot over the past few years. I'm wondering if there's a specific type of borrower that you feel best placed to cater to in the current market.

[01:57] Joe Cote: I think the short answer to that is there's not a very simple straightforward borrower type anymore. Well, I think one of the opportunities has certainly been around the evolution of the alt space and how it's very much part of the prime offering now. And it used to be around bruised credit, which is still very much the case and will always be part of the ideal client profile that the alt space was built off of.

[02:18] But now we look at the tightening credit box from a lot of the larger Schedule 1 banks. That business flow, as it's been tightening, has actually been coming into the alternative space. And that's not necessarily a bad thing. We're talking about great credit scores that are well into the 700s, low 800s. But we're talking about life happens. We're talking about divorces. We're talking about CRA. Multiple properties, business for self.

[02:43] It doesn't necessarily mean bruised credit anymore. It just means maybe not as simple from a credit profile standpoint. So, we are truly running the entire gamut of what I would say is the alternative space is now alt A through to what was bruised credit before. And I'd love to see the evolution of the space and the value that we're bringing back to the Canadian consumers.

[03:04] Fergal McAlinden: For sure. And I think that evolution, nobody's expecting that to slow anytime soon, especially with how the market is this year and some of the challenges being faced by buyers. When it comes to brokers, how have you been dealing with them this year? Are there any kind of approaches you've been keeping in mind with brokers?

[03:19] Joe Cote: Yeah, a big emphasis of our partnership model with brokers has been, how do we just focus on building our processes, our expectations, our interaction models completely around the broker community. And thinking about brokers as small business owners.

[03:34] I've been saying this a lot just recently on stage. I think the biggest thing was around brokers are small business owners. It is all about the experience. It's about the referral business. And if they land a great client experience based on the partnership that they have with the lender, that client's going to come back. They're going to refer more business.

[03:52] And that alternative space, again, especially in the small business community and or gig economy, we've got so many borrowers that are looking for solutions that they didn't even know existed before. So, we've basically repositioned, I would say, a lot of our processes and policies to be built around brokers and the client experience, keeping that really at heart.

[04:10] Fergal McAlinden: Great stuff. Looking ahead, 2027, hard as it is to believe, is just around the corner. Any trends that you're keeping an eye on or anything that you're expecting to be a big factor next year?

[04:20] Joe Cote: It's too fast. I miss summer already. I would say the trend, if anything, is probably going to be continuing. If you think about it, a couple of things. One has been the compounding effect of the interest rate environment, the tariffs, both in terms of just cost of goods as well as taxation on it, especially for small business owners.

[04:40] All those financing needs actually aren't going away. The financing needs are going to increase, especially if you think about this affordability issue has now compounded for 5 years. That's taxing a lot of Canadians, and that problem's not going to get any easier in the current environment.

[04:56] Not only what's happening with Canada and the US, but certainly I think in terms of the interest rate environment over the course of the next 12 months, there's not a single person that's expecting interest rates to stay flat. In that increasing environment, it's going to only compound the problem, and brokers are going to need to understand that business model.

[05:15] They're going to need to find ways to actually support their clients who are going to have needs, and knowing full well that the traditional means of prime sourcing is not necessarily going to be as viable as it used to be historically. And the alternative space is going to be, I think, a huge eye-opener for a lot of the brokers that are not currently accessing the alt space like they should be.

[05:27] Fergal McAlinden: For sure, and on that rate question, as you mentioned, I think we're all just strapped in waiting to see what happens on the bond market and on trade war and everything.

[05:34] Joe Cote: Yeah.

[05:34] Fergal McAlinden: Yeah, the only thing that's certain is that we have more uncertainty ahead, I think, is the way to put it. Maybe just one last word on the event, Joe. Have you met your target audience, and we'll be seeing you next year?

[05:43] Joe Cote: Absolutely. It's been wonderful, actually. Not only have I met, from an audience perspective, everybody in terms of our partners, as well as potential net new partners, both in terms of brokers, as well as a lot of other broker ancillary partners here.

[05:58] I think about the technology providers, I think about net new products that are coming on the market. I can point to a couple over there, which I just think are phenomenal in terms of the innovation that is showcased at the event, and I love being part of it, hearing the stories, how we can better service our clients.

[06:12] And looking at these partner solutions on how we can kind of improve the experience, I will definitely be back.

[06:15] Fergal McAlinden: Love to hear it. Okay, great stuff. Thank you for stopping by. Much appreciated. Then enjoy the rest of the event.

[06:19] Joe Cote: Thanks for having me.