When GreenSky Credit was founded in 2006, it’s founder, David Zalik, couldn’t even convince a bank to loan him the money that he needed to get his enterprise off the ground. For that reason, Zalik was forced to reverse mortgage his entire $12 million commercial real estate empire, representing virtually his entire net worth.
Now, 13 years later, that bet has paid off beyond Zalik’s wildest imagination. GreenSky has become one of the most successful companies in the fintech sector. The company is estimated by some analysts to be worth as much as $10 billion, a figure that reflects the company’s rumored upcoming IPO. And the GreenSky business model has been roundly proven, allowing the company to continue to grow year after year even as its closest fintech competitors are clinging to life by the barest of threads.
Instant loans for the well-heeled
The key insight that Zalik had in the creation of GreenSky was the fact that instant loans existed for the low-end retail market as well as for the largest commercial applications. But they didn’t exist for ordinary Americans who wanted to make middle of the road purchases, especially in areas where those purchases were likely to directly lead to value creation.
One particular area that Zalik decided to focus on was the home remodeling business. He saw that there were billions of dollars each year being lost in sales for home improvement companies and contractors when homeowners who had no idea how much a given job really cost would vastly underestimate the true final tally. This would inevitably cause the projects to stall due to the simple fact that the homeowners didn’t have the necessary cash on hand to complete the deals.
Zalik saw that most of these homeowners were prime borrowers, with FICO scores in the 760 range and higher. He knew that it would be an easy sell to partner with lenders. After all, most lenders would trip over each other trying to get more prime borrowers on their books. At the same time, the deals were highly value creating for the homeowners as the net value increase to their homes often far exceeded the amount of the final cost.