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).
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.
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
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.
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
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?
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?
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
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?
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