Most tech start-ups tend to stay private, at least until they get their footing, but David Zalik has decided to take his company public much earlier. That company, GreenSky Credit, has already filed a confidential application requesting an initial public offering (IPO). The move already has analysts guessing that Zalik’s company will raise as much as $1 billion through the offering, bringing the estimated value of the company as high as $5 billion.
Although other successful startups, like Uber, Stripe, and Credit Karma, are still privately owned, David Zalik sees the benefits in offering up shares to investors. Even though the application has already been submitted to the Securities & Exchange Commission, Zalik still has the option of keeping his company private. He has yet to share his plans, but, if he does intend to go public, the confidential filing gives him the time to prepare for the debut of GreenSky Credit in the market.
GreenSky Credit is based on a lucrative premise. It offers quick loans to homeowners interested in making home improvements, but the actual holders of the loans are commercial banks. This means that Zalik’s company earns a profit, while letting banks like SunTrust, Regions, and Fifth Third take the risks. While GreenSky Credit doesn’t hold the loans or lose out on defaulted loans, the pay they receive from each bank is based on loan performance. In addition to those payments, Zalik arranged his company in a way that requires each bank to pay about 1% to GreenSky each year as payment for facilitating the loans.
The situation benefits homeowners as well. They use their mobile devices to apply for loans of up to $65,000 on the GreenSky Credit app. Applicants receive a decision in just a few seconds, making this one of the fastest and most hassle-free ways to obtain a loan currently available. While other lenders have gone public and failed miserably on the market, David Zalik’s approach may be more attractive to investors. The business model developed by Mr. Zalik creates a generous profit margin, while facilitating loan applications in much quicker way. These benefits may pave the way for a new kind of lending, while helping Zalik present a very promising IPO.