Among the tech companies that have fared the worst are those that have attempted to shoehorn starry-eyed utopian principles into otherwise viable business models. Many times, the socialist tendencies of these startups’ founders are hard to ignore. Some particularly egregious examples of this can be seen in the fintech sector, where companies like Lending Club and OnDeck thought that they could teach the banking sector, which has a 500-year-old business model, a thing or two about solid lending practices. They were wrong.
The problem with the lending business is that there is little margin for error. Even one bad loan can wipe out an entire year’s worth of profits for smaller lenders. That’s why the credit-scoring system came about in the first place. It is absolutely imperative for those issuing unsecured loans to take account of the risk level of the borrowers. Any banker who makes a practice of lending to bums will soon find himself at the soup kitchen.
GreenSky Credit is one of the few fintech startups mature enough to recognize this timeless reality. Rather than originating NINJA loans for street people and drug addicts, GreenSky Credit prudently focused in on the crème of the prime borrowing market: homeowners.
GreenSky Credit connects homeowners who are looking to renovate their properties with lenders who are eager to find high-credit-score borrowers to pad their books. GreenSky Credit has helped homeowners, banks and general contractors make tens of billions of dollars in deals over the last 15 years that simply wouldn’t have otherwise taken place.
David Zalik, the CEO of GreenSky Credit, says that he was then able to expand his company’s operations to the realm of other big-ticket items. Today, GreenSky has more than 17,000 merchants across many different industries who can be paired up with 14 of the country’s largest lenders. These include Region’s Bank, Fifth Third Bancorp and Sun Trust.
Because the average GreenSky customer has a FICO score of 760, the terms for these loans are often highly favorable to the customers. Typical loans require no interest payment for the first year and no payment. Almost all customers pay off the balance before higher rates kick in.