GreenSky Credit has emerged as one of the most successful fintech companies of the last decade. The company was founded in 2006 by serial entrepreneur David Zalik with the intention of providing customers across the country the quick means to access large loans to complete their home renovation projects. But in contrast with other fintech companies, like OnDeck and Lending Club, GreenSky Credit decided early on that it would only go after the most prime borrowers, typically, people who had FICO scores in the 760-plus range.
Bridge financing for retail customers
Zalik first had the idea for the creation of GreenSky when he was working as a consultant to some of the biggest names in the home improvement space. He quickly noticed that there was a major flaw in the business model of many of the top home improvement retailers and the contractors who were doing the remodeling projects.
Zalik saw that a large number of customers, most of whom had no experience whatsoever in estimating the costs of construction projects, were underestimating the true costs of their home remodeling projects by such large amounts that when they got the final estimate, they simply didn’t have the liquid funds to go through with the project.
Zalik, who had long been a commercial real estate investor, knew that running short of cash on hand was an extremely common and mostly easily solved problem within the commercial real estate development business. But commercial real estate developers usually have access to sophisticated credit instruments that allow them frictionless access to bridge financing. Without the ability to borrow short-term funds on large development projects, the commercial real estate industry in the United States would grind to a halt.
Zalik’s insight was that if this sort of bridge financing could be developed for retail applications, then it could potentially generate billions of dollars in extra business each year for contractors and home improvement retailers. This was the concept that Zalik would eventually build into GreenSky Credit.
Today, GreenSky concentrates on prime borrowers in order to provide them with instant point-of-sale bridge loans. The company does more than $5 billion each year in retail loans.