Fintech company GreenSky has quickly become one of the most successful in its industry. The company recently raised $50 million at a $3.6 billion dollar valuation, and it’s business model allows it to make money without taking on a lot of risk. It is also one that can be scaled in the future as the company moves from focusing on home renovations to other industries.
How GreenSky Works
The contractors that are affiliated with GreenSky are the ones that do most of the marketing to consumers. After a loan is made, the company gets 6 percent of the initial balance from the contractor, but the company is not the one that actually makes the loan. Instead, one of its partner lending institutions will provide the loan proceeds to the borrower. The lending partners then pay GreenSky 1 percent of the balance for the right to service that loan.
Who Does the Company Partner With?
For the most part, GreenSky makes loans to homeowners who want to get a new roof, replace their siding or make other general repairs or upgrades. However, the company plans on expanding its offerings to other professionals who want to offer financing to their customers. According to one of the company’s early investors, getting a contractor to use a relatively new financing product can be difficult. However, once the contractor is onboard, he or she usually won’t stop using it unless there is a compelling reason.
For the most part, borrowers have to have a reasonably high credit score and steady source of income to get approved for financing. Unlike other fintech companies, GreenSky doesn’t use social media data or other data to make a lending decision. This is because the loans have to be acceptable to the banks who are ultimately going to fund them.