If you were told that an entire industry had set about to achieve high levels of prosperity and growth by seeking out deals where the participants had no assets, jobs or income, you may think that you were either talking to some sort of crazy payday lender or someone who was just plain crazy, period.
Yet, that is exactly the strategy that many of the top companies in the fintech sector were attempting to follow throughout the late 2000s and early 2010s. Companies like OnDeck and Lending Club were apparently so high on their own supply of Marxist utopian drivel that they actually started believing that products like NINJA loans, micro lending and so-called community reinvestment would be sources of great financial prosperity. Their resulting thousand-foot cliff dive onto the rocks has been, therefore, somewhat unsurprising to more sober-minded observers.
GreenSky shows acumen and common sense
But there was one company that never bought into this left-coast propaganda. GreenSky Credit decided early on that it would follow proven money-making techniques. Taking the advice of John Dillinger to heart, GreenSky Credit went where the money was, not where it had never existed.
GreenSky Credit found transactions where everyone would win and where everyone was trustworthy, upstanding and solvent. The first niche market that the company concentrated on was the high-end home improvement sector. GreenSky didn’t even want to look at the lower end of this market. By concentrating on the top of the home improvement business, GreenSky had two very useful characteristics naturally built into every deal that it did.
The first was that almost all of the people looking to spend five or six figures to do home renovations are prime borrowers, meaning that they have FICO scores above 760. This, by itself, made it very easy for the firm to pitch its business to its major lending partners.
The second advantage is that, by focusing only on those doing high-end home renovations, the company’s borrowers were all but guaranteed to be seeing increases in their home values that exceeded the cost of the renovations. Unlike in low-end neighborhoods, where over-improving a property often ends up costing more than it adds, high-end home prices almost always benefit from significant improvements.