In 2005, David Zalik was working as a consultant to some of the biggest home improvement companies in America. The entrepreneur had already found success running, first, his own computer company and then going into real estate and founding an e-consultancy called OutWeb. This firm allowed Zalik an up-close view of the way some of the largest home improvement companies made their money. He quickly noticed a serious leak in their business model, one that was costing them billions of dollars per year in the aggregate.
Bridge loans for consumers
What Zalik saw was that there were a large number of high-end homeowners who were seeking to do home improvement projects. Some of this business was coming directly into the home improvement stores when the homeowners were trying to act as their own general contractors. But most of this business was essentially hidden; it was secondary business that was happening when home improvement contractors would come into the construction supply stores to buy all the things they needed to complete their projects. This is one reason that Zalik was one of the first people to catch this huge problem.
Zalik saw that these homeowners, who rarely had anything resembling real contracting experience, would constantly and reliably underestimate the true cost of their projects by thousand or tens of thousands of dollars. When they got the real estimate from a professional contractor, the sticker shock combined with the simple lack of readily available liquid funds meant that many of these projects fell through the cracks. Zalik saw a way to save most or all of those deals.
He founded GreenSky as a way to instantly provide point-of-sale loans to high-end homeowners, who almost invariably fall into the prime-borrower category. GreenSky , then, effectively provides bridge financing for retail customers. The brilliance of the GreenSky model lies in the fact that literally everyone participating in these deals walks away a big winner.
When GreenSky issues a point of sale loan, the contractors get to complete five- and six-figure projects that they would have otherwise lost. The homeowners get to add tremendous value to their homes and the banks get high-quality loans on their books.