When David Zalik was running his own e-consultancy firm, OutWeb, he started to notice a pattern with some of his home-improvement industry clients. Many of the nation’s largest home-improvement companies, like Lowe’s, Benjamin Moore and Home Depot, were losing large amounts of business at the point of sale. Zalik dug in a little further and discovered that even more business was being lost through contractors that usually buy supplies from these outlets. He started to zero in on the cause.
Bridge financing for retail customers
What Zalik found was that there were a large number of high-end home remodeling projects that were falling through due to the fact that the people trying to complete them had severely underestimated the true final cost of the projects. Over a period of months, Zalik started looking into this issue, doing in-depth research. What he found left him stunned. Zalik estimated that there were billions of dollars in home renovation projects being lost each year due to the customers simply running out of cash to complete their projects or not having enough to begin with. He saw a golden opportunity.
This was the original insight that led to the creation of GreenSky Credit. GreenSky Credit was founded as a way to help homeowners who were looking to complete costly and cash-intensive home renovation projects but who didn’t have the cash on hand to do so. One of the most brilliant aspects of the GreenSky Credit business model is that it only focuses on prime borrowers, most of whom are doing projects that will very clearly lead to added value on their homes. Although the loans themselves are mostly unsecured, Zalik realized that homeowners who have high FICO scores to begin with and who are seeing immediate boosts to their home values of more than the cost of the projects are extremely unlikely to go into default.
The lenders that GreenSky Credit partners with to extend these instant point-of-sale loans, therefore, are more than happy to offer some of the best loan terms in the business, including no payments or interest for the first year. Almost all GreenSky customers end up paying off their loans with no penalties.