Launch HN: Kanda (YC W21) – Let tradespeople offer finance to their customers

[RobKanda]

Hey HN! We're Phil, Rich & Rob, the co-founders of Kanda (https://www.kanda.co.uk). We allow general contractors (electricians, builders, etc) to offer pay-monthly options to their clients. Contractors get paid in full like normal, and their clients pay us back over time.

Rich was an electrical contractor and after running his firm for 10 years he started to find it harder and harder to compete on price against bigger companies because they could offer pay-monthly options to their clients and he couldn't. When he started to look into it he realized how unrealistic it would be for a little guy like him to be able to offer a pay-monthly option anytime soon.

Why? Because lenders put arbitrary barriers to entry like needing to have a yearly revenue of a $1M, so local contractors like Rich get frozen out and bigger companies can dominate the market. Over 80% of construction businesses are local contractors and most of them face the same problem Rich did. So, together we set out to build a solution and we ended up with Kanda.

Kanda is an estimating tool that contractors can use to send clients estimates. When the client receives the estimate, we (Kanda), will offer the client the option to pay the contractor in full (like they normally would) or to pay them monthly.

If they choose to pay them monthly, then we pay the contractor in full once the client signs off the work and then the client pays us back over the term of the finance agreement, which could be from 10 months to 10 years. This not only helps the contractor to compete on price but it also makes it more affordable for the homeowner to have work done on their house. Win-win.

The way we see it, buy now, pay later is revolutionising e-commerce (for good or bad), and the only reason it isn't happening in offline services like construction is because it's hard to standardize the process of a contractor offering the finance. So, that's what our product aims to do. It aims to standardise how contractors send estimates and how they offer finance. Making it easy for them to do both. We’d love your ideas and feedback on what we are making.

[sterwill]

I haven't been in a position where I needed to finance work on my home, but I have wanted a safe and easy way to pay individual contractors. Some of them prefer cash or paper checks (and their tax liabilities are their business), but an electronic payment is better for me. I'd feel better if the payment platform offered me a bit of protection (arbitration? just a standard contract?) if there was a dispute over the quality of the work. I think there's definitely a space for a trade payments platform.

Best of luck with Kanda!

[RobKanda]

One of the products Kanda hopes to bring to market soon is a secure holding account to arbitrate payments. You could pay electronically upfront into the account, letting the tradesperson know you can pay for the work, and the money would be released upon completion and once you are happy with the quality of their work

[taxidump]

In the solar industry, lenders will cut off a contractor pretty quick if there are any issues. The amount of due diligence done by the lender is a pretty solid guarantee to the customer.

Our dealer fees are between 21-30% of the total loan, but the term is usually 20-25 years long.

[Super_Jambo]

If you get any kind of traction please start competing with Check-a-trade they're absolute hell for the consumer and I imagine not amazing for the contractors either.

You'd be in a pretty good position for this given the view you'll have of contractors number of disputes and similar.

Seems like an excellent idea to me, best of luck!

[RobKanda]

Thanks! It's certainly a consideration we've had, we have the full history of the tradesperson through our site, and would have the same for customers, so a tradesperson would know if a customer is trust worthy as well! Win win for both sides of the equation

[pdanny95]

lol checkatrade - read my mind

[say_it_as_it_is]

Have you found contractors willing to accept an estimate from a remote estimation tool without seeing the job in person? They're sore about visiting just to provide an estimate yet also wouldn't dare give one based on photos or video.

Another thing. Small business contractors have got to be the most dishonest people I've ever worked with. I've caught so many lies and frauds. Only reason I don't report them is because they'd kill me or destroy my property. I'm not going to entrust them with any personal information that they could use to overcharge me, charge me for other jobs, or associate me with any other scam jobs they're running.

Be strong! You're going to be dealing with characters..

[RobKanda]

One of the features we recently launched and have a good user base using is an estimator widget we host, specific to the contractor, that allows for estimation fo boiler installations. We're also working on an electrical installation one at the moment. These allow the homeowner to get a quick estimate without bothering the contractor, then select an option if they decide that's what they want, at which point the contractor is sent an email to arrange with the customer. We work with the contractors on these to ensure they're as accurate as possible, and priced as the contractor wants.

In terms of the dishonesty, we believe that's a completely untrue and unfounded accusation. We have a very trust worthy base of users, who whenever an issue has been raised have been the first to jump at rectifying the situation. In our contractors eyes, customers can be the untrustworthy ones, not paying on completion, saying things aren't up to code when they are, accusing the contractor of property damage they didn't cause. We try not to discriminate.

[sammyd56]

A stark reminder to end users of any service that if you are not paying, you are the product. There is good reason that the sale of financial services through intermediaries is a highly regulated area: it takes a firm counter-force to stop businesses from exploiting customers when all the incentives are there, and there are enough links in the chain for plausible deniability.

[boulos]

Nice idea! It's kinda like Greensill et al. for smaller businesses. I'm a little confused about your economics though.

Your pricing [1] is simple, but I'm a bit surprised that there isn't something that scales with volume. For example, I know banks and retailers commonly offer 0% interest over 10 months for direct customers, but that's with the hope of additional related business. Are you that "more business"? (it seems like maybe? Since some jobs are not interest free and the basic plan is also with interest).

Alternatively, what does "9% subsidy instead of 11% on successful finance applications" means? (I was put off by the intercom chat widget wanting me to provide an email to watch your demo video. Sorry. I'm also not a potential customer). Is that where the risk premium gets included?

I also get to repeat the patio11 meme: charge more. For 45 pounds a month at the top end, you've probably returned a small fortune to the business owner. Even just handling the quoting and receipt of payment part is a big deal! (Here in San Francisco, it can be hard to get an invoice from a contractor and even send them payment; we've had to follow up for months!). Tossing in Financing and support for cards (and do you mean "debit" or also "credit" cards; I know you're UK based, so the defaults are probably obvious to your audience, but I figured I'd ask).

Either way, sounds like a big win for small shops!

P.S. There's also a "Downlaod" typo in the first pricing column.

[1] https://www.kanda.co.uk/pricing

[PragmaticPulp]

> I also get to repeat the patio11 meme: charge more.

I'd suggest the opposite: Drop monthly fees to $0 and leave it to the per-transaction fee (what they call a "subsidy", confusingly).

Charging customers a monthly payment only to follow up with a steep 9-11% transaction fee when they actually use the service is not a recipe for happy customers. You also risk churning contractors off the platform if nobody takes their financing option for a month or two. You're going to get people trying to cancel and then re-subscribe as soon as they find a customer who might want financing, only to cancel again.

IMO, ditch the monthly fee so you don't give people a reason to cancel.

Also, drop the lowest priced plan. It doesn't make sense to have a £25 plan right next to a £30 plan. If someone is buying the service, making them jump through the mental hoops to calculate if £5/month is worth it for them is friction you don't need. Simplify to 2 plans, or even 1 plan.

If you can reduce the mental load of signing up from "Which of these 3 plans, if any, is right for me?" to "Should I sign up yes or no?" it's a win.

[RobKanda]

Hi, thanks for taking the time to look over the site and thanks for the feedback! Our base price for our subscription might seem cheap, but for tradespeople, whose margins might already be tight, its seen as a fair price for the quoting and invoicing features. The 9% or 11% subsidy we charge is on the quote total when the tradesperson offers 0% finance - if a customer took out a 0% loan for £1000, we would charge the tradesperson a £90 (or £110) subsidy for the finance package. If you’d like to see the demo video, here’s the link:

https://www.youtube.com/watch?v=pVHBFHTNS90&ab_channel=Kanda

For card processing, we actually support both debit and credit cards, though typically we process debit cards and have a subsidy charge for credit card processing, due to higher processing fees from the banks.

We do think Kanda is a big win for the small guy - we put the power in their hands to compete with the big companies in the sector, offering finance products they couldn’t otherwise offer and winning more work for it

[boulos]

Ahh, that makes sense!

I’m not used to the term “subsidy” used in this manner (is this a common British English usage for “fee”? In the video you use the term “fee”), but if you’re basically charging ~10% of the invoice then that’s a very different story.

In that universe, the monthly charge is basically your hurdle for support. Free / cheaper would give you more volume, but you probably don’t currently want folks who aren’t willing to pay even a few pounds a month for support. I’d still say there isn’t enough spread between those plans though.

Like the downstream comment, I feel like I’d want the fees more clearly spelled out on the pricing page. “Offer installment plans to your customers (11% fee)” or something. It would make it more clear that “oh, I’ll be using that, I should take the other plan for the 2% drop; even 1000 pounds of work a month pays for itself”.

The video makes it clear that in your UI the fees are more clear (though I might add a paragraph break when describing that the financing option is “cost to you: 11%” and the personal loan “cost to you: 0%” but then say “customers prefer the 0% interest, even with higher quotes” or something). So I think to improve your customer acquisition, you just need a bit more clarity in the pricing panel text.

P.S. thanks for the video! I think you had an editing problem though. The “let’s see the customer view” happens both at the start and again after we see the vendor-side view. (Unless that’s intentional)

[londons_explore]

The word "subsidy" is unclear to me... I'd understand it far better if you just said "We charge you an 11% fee for all finance arranged through us".

Kinda odd to have fees that big though... I thought the norm in the industry is to pay money the other direction, with the understanding that a good portion of customers will fall behind on finance payments and then have to pay sky high fees and interest rates for decades to come...

[RobKanda]

These fees are actually representative of the fees charged to retailers to offer 0% financing options. We don't hide these fees from the tradespeople, so they can decide to up their price to include that fee if they wish, or can choose to swallow the cost to win more work. We put the power in their hand to decide how they want to handle each situation as they see fit

[londons_explore]

Why do retailers push financing options so hard if they only get 9% less money?

Lots of stores (here in the UK at least) will, after you've decided to buy a product try to persuade you to use their financing. Sales reps usually get bonus only for customers who use financing. I always assumed companies earned more if you used financing.

[PragmaticPulp]

> Why do retailers push financing options so hard if they only get 9% less money?

Typical financing options like Affirm only charge 2-3% to the retailer.

The 0% financing is a bit misleading as they're just collecting their profit up front as a separate fee (the 9-11%) instead of collecting it as interest over the course of the payback period.

Expecting contractors to take a 9-11% cut out of their profits is not likely, at least in my area. Realistically I'd expect contractors to raise their quotes by the amount of the financing fee so they come out at the same final payment amount.

[RobKanda]

We're a UK founded and based company, so we see this all the time as well. The finance option makes it a lot easier to sell to a customer - if you're told you can pay £700 for a TV today, or take it away and pay £30 a month for 2 years, most people would rather take the finance. I don't know why the sales reps would only get commission for finance sales, but the stores would rather take a small loss and make a sale than lose a customer to a high price.

For our tradespeople, most of their customers know they can get finance from companies like British Gas. Even though our tradespeople would be cheaper outright, BG can offer 0% and so the customer doesn't have to pay it outright. We've had people tell us they signed up to use us for this very reason, with someone even saying BG were £1000 more expensive, but the customer went with them as they could pay monthly!

[thaumasiotes]

> When he started to look into it he realized how unrealistic it would be for a little guy like him to be able to offer a pay-monthly option anytime soon.

> Why? Because lenders put arbitrary barriers to entry like needing to have a yearly revenue of a $1M

This seems incomplete. Why is it unrealistic to offer the option directly? As a small business, maybe you can't get a bank to lend your customers money so they can pay you the full amount up front. But you can lend your customers "money" so they can pay you monthly; this doesn't even involve a money transfer.

[RobKanda]

Whilst you could maybe set up a monthly payment plan for your customers, that leaves you very exposed to them not paying. Assume you have three or four customers on a payment plan, and they decide not to pay, you could be out of money for the month, not be able to complete other jobs, etc. Also, there are legal obligations and restrictions in place for these types of agreements as well. With us, the tradesperson has no risk of non-payment. They are paid the full amount on completion.

[edoceo]

So, how do you deal with the risk of non-payment?

[RobKanda]

The bank we offer the finance through run full credit checks and assess the risk. Non-payment is only tied to our lending bank, the tradesperson isn't at risk. If the customer is a risk of non-payment, the bank will elect not to lend to them. For the tradesperson, we'll let them know if the customer has been rejected for finance, and they can choose to proceed with the work and hope the customer can pay them if they choose, or decide the customer isn't worth the risk

[thaumasiotes]

> If the customer is a risk of non-payment, the bank will elect not to lend to them.

This seems a little glib. Everyone is a risk of non-payment. I have total confidence that over ten years of operation, there will be at least one occurrence of non-payment.

If you're actually providing 0% financing -- you pay the tradesperson $X up front and collect $X over the next 24 months -- that would mean you start out being able to employ zero people, and even the most infinitesimal risk of non-payment immediately puts you in the red.

[thaumasiotes]

Presumably by charging more money overall.

[smashah]

There are other companies that you can sell invoices to to get cash instantly that will recoup the money from the client or sell the debt on to someone else (e.g marketfinance.com).

Pipe is doing a similar thing but their threshold is $100kARR

[admax88q]

Economies of scale?

[ryanSrich]

Interesting idea. I don’t know if this would apply to US (most home projects for fixing issues are relatively affordable), but I could see it working for maybe roofing (often very expensive).

[boulos]

Actually, AFAICT, Home Depot has a large business doing financing for precisely this reason. Most Americans can’t afford a $2000-5000 small remodel, but they are willing to pay $200/month on a “no interest for two years” credit card to Home Depot.

[RobKanda]

Whilst most home projects may be affordable, the average American has less than $1000 in their savings. A single project could leave their bank account wiped for months

[anonuser123456]

If you are a homeowner, you can tap a home equity line of credit for maintenance projects. Homeowners that can't get a HELOC because of credit issues are going to be a credit risk for the contractor.

[RobKanda]

Whilst you could take out a HELOC to complete a home maintenance project, the minimum you can often take out is $5000. If your project was only $1000, you may end up paying more in interest for the HELOC rather than a personal loan for the amount you want to borrow with Kanda. Not only that, but our tradespeople can offer 0% finance to their customers, reducing the repayments even more. Sure, if they were unlikely to get an HELOC they are unlikely to get approved with us, but then the tradesperson knows the customer is unlikely to be able to pay for work completed and is protected

[monkeybutton]

Everyone I know that has done major renovations has taken this approach for financing. What would be the advantage of going with Kanda rather than their own bank?

[pdanny95]

We offer 0% financing, way more attractive than raising debt against your home

[the_optimist]

This seems directly disingenuous -- the up front fee is going to have to come out of the price, and is way, way more expensive than secured financing.

[pdanny95]

The customer literally pays no fees. The tradesperson takes the hit and puts it down as a marketing fee.

So, it's not more expensive.

[ryanSrich]

Seems like that kind of person wouldn’t qualify for financing anyway then? Isn’t it safe to assume a homeowner with less than $1,000 in savings would also have a very difficult time paying back a $5,000 (or more) loan?

[RobKanda]

Well if they wouldn't qualify for financing, then the contractor is informed the customer is unlikely to pay for work, so they know not to work for them. Similarly, if they are approved, the contractor knows they will get paid, as the money is held by Kanda upon the customer agreeing to the loan. It becomes a win-win situation for the contractor. Finally, they are completely de-risked - if there is a non-payment, it'll be the bank who has to follow up on the non-payment and recoup any costs. All this does is empower tradespeople to ensure they're paid fairly for their work

[ryanSrich]

Yeah that makes sense. Do you know how contractors in the US offer financing now? When I had my furnace and AC unit replaced I was offered financing options. I didn’t dig too deep as I didn’t need it, but it seems like there are options for certain sized projects. How are you more friendly to the contractor in situations where they already provided financing?

[RobKanda]

We've seen it here in the UK as well, with the larger firms being able to offer finance, either by lending their own money or agreeing with a bank and having spent the time and money to ensure they're fully compliant. This compliance includes how they can advertise, how they can talk to customers about finance, how they can handle their invoices and payment plans, etc. For the UK, they need to stay compliant with the FCA. With Kanda, we ourselves are the ones offering the finance. All of our systems, advertising (including the bespoke social media advertising we give to our contractors) and such are compliant, so the tradesperson knows they can use us and not need to worry. We're putting finance in the hands of the every day contractor, something previously only available to the larger firms who have outlaid costs

[mrDmrTmrJ]

Really cool idea! I'm curious to hear how you're offering financing. If you're able to speak about this part of your business - are you using Stripe or another charter bank?

[RobKanda]

We offer financing to the customers in two ways. Firstly, we offer a 0% finance package that allows the customer to split the cost over 10 months, bests suited to smaller jobs. For this, we're partnered with a bank. Secondly, for slightly larger jobs, we offer unsecured and secured personal loan finance

[donnythecroc]

This is great and I would expect most of the cost of the financing to be passed onto the customer. How did you give debt funders the reassurance to back your business as a startup?

[Irongirl1]

May I ask a question? Re: "the secure holding account?" Does the UK have escrow as we do in the US? See Escrow.com for an example. Here, if we are ordering something from ebay as an example and it is expensive, then we can use sites like escrow.com to act as the secured party. Their site lists both an API and a Partners section. Perhaps you can offer that service sooner than you thought....

[pdanny95]

we are building it ourselves because the fees are outrageous on escrow.com

[barryhand]

Where is the proof/data for "Win 30% more jobs by offering monthly payments"?

[0xferruccio]

How are you able to provide financing? Do you have some sort of agreement with banks?

[RobKanda]

We are partnered with a bank who have provided us a debt line to offer 0% finance to customers of our tradespeople

[adav]

What’s in it for the bank?

By the way, there’s a misspelling “Downlaod” on your pricing page.

[RobKanda]

The bank makes commission on the 0% finance - we charge the tradesperson a 9% subsidy for any 0% finance agreement taken out, which includes the bank's fees. If the customer takes personal loan finance, then the bank charges them an APR instead.

Thanks for the heads up on the spelling mistake! Slipped through review somehow!

[anonuser123456]

Are you holding the risk of non-payment or does the contractor still own that risk?

[RobKanda]

The risk of non-payment falls onto the bank we are partnered with. The finance agreement is between us (and the bank) and the customer, so the tradesperson is completely de-risked

[anonuser123456]

I could see contractors loving your service on that front. How do you plan to handle contract disputes? Mandatory arbitration?

[RobKanda]

We currently require our contractors to be associated with a regulatory body, who can inspect their work if a dispute arises. In the UK, this is mandatory anyway. The customer also signs a satisfactory notice on completion, and we encourage them to ensure they are happy with the work before signing the note

[endisneigh]

This is an interesting idea.

Personally the issue hasn’t been financing because you can get outside financing to fund any renovations already.

What I want is an intermediary that takes the money and acts as an escrow and only gives the contractor payment once observable metrics have been completed, e.g. bathroom was completed with permits pulled and inspection done by the city; 4/4 recessed lights installed per agreement, etc.

In my experience the biggest issue for contractors and homeowners is one party not living up to their end of the agreement.

In other words I want to be able to write a contract like code and want guarantees about what I’m paying for. If and when unexpected things happen they should’ve already been explicitly discussed in the contract.

[RobKanda]

Whilst some outside financing is available, for the general contractor the ability to offer 0% finance just isn't there. Kanda provides these contractors the ability to offer this and compete with larger companies. Rather nicely, the agreements that both parties sign on our finance products actually achieve what you’re asking for: the customer signs a satisfactory note on completion of the work (assuming they’re happy) which allows the release of funds.

For customers, however, we do know that an issue can be that work isn't completed to the standard you expect. One of the products Kanda hopes to bring to market soon is a secure holding account to arbitrate payments, allowing upfront payment with tranches released on milestones being completed, pretty much exactly as you've explained above, to hold both parties to agreements.

[hayksaakian]

any plans for a US release?

[pdanny95]

yes - within next 18 months

[stormqloud]

This is highly country and legal environment dependant. Very difficult to scale.

Often a tradesperson can secure a lien on a property as part of their permit for that job.

If the tradesperson gets paid,then the security on the debt/loan is gone.

In my own case of endless home renovation, a bigger issue is you have to front the workman etc the $$$ to buy the supplies/lumber/etc.

[RobKanda]

Whilst the main concept itself is subject to local legal variations, the idea of contractors being able to make their jobs more accessible and more affordable to the average homeowner resonates around the world. What Kanda aims to do is to take this legal restriction minefield away from the contractors, so they can continue to do what they do best, whilst offering their customers an affordable payment plan. Securing a lien when doing smaller work, such as fitting a boiler or rewiring a house, is not ideal when you want to get paid as soon as the job is done. If the customer instead arranges finance with us, the payment can be immediately paid out and the contractor can continue on with their business without worrying if they will get reimbursed. Finally, the concept of fronting the money for the materials arises from the fear of the contractor not getting paid at all; if the job isn't paid for, at least the contractor won't be out of pocket. With us, the money is secured before the job starts. They don't need to worry about being out of pocket from a customer refusing to pay or being unable to pay.

[stormqloud]

Fronting the money for the supplies usually comes from the fact the tradesperson went on a bender after you paid him last time!

Also in the area where I live, most home trade jobs are done with as much cash as possible to avoid taxes.

The pay cash tax savings is greater then any bank financing.

When you pay 50% income taxes you can see that the incentive to work cash is much much greater then formal financing.

If a car repair was going to cost $1000, the tradesperson keeps $500 after tax. He's better off to offer you $750 cash. Take $500 now (he's paid up).

Then if he still collects the $250 cash that's pure bonus.

I didn't even factor in the 20% sales taxes on the work the buyer would have to pay.

All I can say is don't try to expand to a newly third world country like Canada. I just can't see it working here.

[RobKanda]

Most tradespeople are professionals, running professional businesses. Whilst your tradesperson might have gone on a bender with the cash last time, that wouldn’t be possible with Kanda. The money doesn’t get to the tradesperson until they’ve completed the job and the customer signs off on it. Then they can go on all the benders they want, they’ve done the work and it’s now their money. Whilst many jobs are still done in cash, the average person doesn’t have sufficient cash in their account to pay for larger outlays, such as a boiler, but could afford it on a monthly payments. What happens in that case? They just don’t get a new boiler, despite needing one? No, they look for an alternative payment option. Kanda offers the tradespeople that option, to offer monthly payment options to their customers, with zero risk to their own business. Finally, in terms of taxes, surely the income tax only applies on profit, with material costs subtracted. But regardless of that, paying tax on a job and getting income, versus not getting the job and not getting any income is surely better. $500 after tax is better than $0 because the customer can’t use you. And when your competitor is offering monthly plans, all of your customers will go to them to get their work done instead

[stormqloud]

You are talking about union construction workers here. They are only used on commercial jobs mostly.due to the price. All the good trade people work commercial and get paid well. Residential is left with people that can't get the good union jobs mostly.

[sterwill]

I understand the desire to avoid paying tax by taking cash, but is it common that a tradesperson is paying 50% income tax? I only have a US resident's perspective, but that rate seems very high.

[stormqloud]

In Canada the top rate of 50 percent hits anyone making over $60k Usd for comparison.

Most trades in Canada are max tax rate, because the max tax rate kicks in at extremely low levels compared to USA.

[sterwill]

Interesting, that's a pretty low threshold for such a high rate.

[bombcar]

If you count the 15% self employment tax (social security) it can easily reach 50% after state and federal.

[sweeneyrod]

In which country?

[arcturus17]

> Very difficult to scale.

Are you an expert in international legal environments for contractors, or are you just assuming that because it's difficult in your jurisdiction (also, tbh, your arguments in that sense are not that persuasive either), it's difficult all over the world?

[anonu]

You only need to be successful in one big county to get scale you need to survive. So you can focus in the early days and scale as you get traction