With GreenSky credit company’s opening public offerings as early as later this week, all eyes are on the latest financial technology (fintech) company ready to break into the stock market. If the company succeeds with its estimated $700 million public offering, it will set itself up as the most valuable public online loan company in the United States, according to the Wall Street Journal.
A competitor of GreenSky credit loans, LendingClub, has a market value of just over $1 billion. If GreenSky public offering succeeds, its market value will sit somewhere closer to $4.2 billion. Other businesses could also profit from GreenSky’s credit business success. Specifically, other fintech startups that may be hesitant to go public due to experiences like that of LendingClub, which now has shares now down about 77%, according to the WSJ.
When the company goes public, stock shares will likely price between $21 ‐ $23 each and the company will sell between 34.1 and 39.1 million shares. When the shares hit the open market, it will be under the NASDAQ ticker symbol “GSKY.”
Why The Company Will Likely Succeed
GreenSky credit business is likely to succeed because it has made itself into a niche company. The fintech company caters mainly to home improvement companies and some elective cosmetic providers.
A recent report indicated that roughly 58 percent of all homeowners will pay for home improvements this year. Even better, the number of people planning to rely on a home improvement loan has jumped to almost 30 percent since 2017 and about 54 percent of those planning on making significant improvements will opt for a loan versus credit cards to pay for their projects.
GreenSky’ ability to provide quick credit approval creates a valuable pocket in that area of personal finance.
Pymnts.com reported that additional changes to consumer confidence in health insurance affordability and an increase in the percentage of patient responsibility makes it more likely that consumers could turn to loans for elective medical procedures. GreenSky credit loans already have a platform for cosmetic, dental, and vision procedures. Rising health costs could lead to further expansion into other areas, creating more potential avenues of revenue for the fintech company. While there’s nothing set in stone, the company could also venture into lending for auto repair, jewelry, and power sports, according to American Banker.
GreenSky is one of only seven Atlanta‐based startups that raised more than $100 million in funding. Its success has largely been quiet, but quick. In 2015 the fintech company facilitated over 289,000 loans. In 2017, that number ballooned to 488,000. As of the end of 2017, GreenSky credit business has partnerships with some 16,000 merchants and revenue of $263.9 million.
What Makes GreenSky credit Loans Different?
While GreenSky’s closest competitor, LendingClub, has reported losses for most of last 12 years, GreenSky credit loans have showed a net increase of 11 percent in 2017. GreenSky credit plans have significantly lower costs when it comes to gaining customers, averaging less than one percent of its revenue on marketing. In comparison, LendingClub spends nearly 40 percent of its income on sales and advertising.
One of the company’s largest expenses, at $127 million last year, is interest payments to lenders. GreenSky offers promotional credit loans, including interest‐free loans, and are responsible for paying some of that interest to the lenders.
GreenSky’s credit business also differs because much of its revenue comes from fees charged to companies in order to use its services. Because the fintech company does not directly lend money, it has fewer liabilities than competitors who provide direct lending services. GreenSky built a credit business around the companies rather than the consumer.
The Atlanta‐based financial services companyacts as a middleman between a customer and a service provider, most commonly providers of home renovations and elective medical procedures. The process involves a quicker approval process. Customers have their financing approved in a matter of seconds so that they can move forward immediately on their project.
The company can provide speedy loan approval by working only with clients who have higher FICO scores, usually in the mid‐700s or higher. The service benefits both the consumer, who saves time on the loan process, and the company, which doesn’t have to worry about a customer failing to qualify for financing to complete their project.
This strict approach to online lending made it possible for the company to secure financing from four major banks including Fifth Third Bancorp, SunTrust Banks, Regions Financial, and Synovus Financial. The four companies provide nearly 90 percent of all funding for GreenSky credit loans.
To date, GreenSky credit loans have helped push along more than $12 million, according to the company.