GreenSky Credit has emerged as one of the most formidable startups that the fintech industry has seen over the last 20 years. Founded in 2006 by veteran entrepreneur David Zalik, the company has followed a radically unique strategy of creating value through making already existing processes frictionless and more widely available to consumers. As Carl Icahn once noted, the most money is often made doing the simplest things. While the technology that drives the GreenSky Credit platform is hardly simple, the business model is what Adam Smith or David Ricardo might have come up with if you told them how financial technology could be used. GreenSky Credit is an avowedly conservative and traditional means of creating big value for clients.
A deal where everyone walks away happy
The brilliance of Zalik’s vision for GreenSky Credit lies in a simple maxim: The best deals are the ones where everyone walks away a winner. Zalik first concentrated on home remodeling projects where the homeowners didn’t have the cash on hand to finish their projects. Cash shortfalls have always occurred in the home renovation business with surprising frequency for the same reason that commercial real estate developers often rely on sophisticated and multifarious financing structures. The simple fact is that construction is expensive. And when homeowners underestimated the cost of their projects, which they often did frequently and to a severe degree, the deals often fell through before the first nail was driven.
Zalik saw that as not only a huge loss for the contractors but also as a serious loss for the homeowners themselves. That’s because the majority of home renovation projects that are carried out in high-end homes add far more to the value of the property than the cost of the project itself. Zalik saw that these often-prime borrowers, who usually have FICO scores in the 800-plus range, could benefit enormously from an instant point-of-sale loan to complete their projects, a form of bridge financing for retail customers. At the same time, the contractors got jobs that never would have materialized. And the banks extending the loans get prime borrowers on their books, improving their financial position.