Everyone knows about the explosion in fintech credit providers over the last decade. However, in many people's minds, all areas of the industry are lumped together. Over the last few weeks AltFi has delved a little deeper into some more niche areas. Last month we spoke to Credible and LendKey about growth in the student (re)financing market and, in the previous week, AltFi spoke to some of the US' leading platforms about the nuances of the Real Estate market. In this article, AltFi spoke to Scott Harmon from Noesis, which provides financing options for energy efficient construction. This includes solar power, cooling systems and efficient lighting.
Harmon told AltFi that the use of financing options is muted in the energy efficient construction market. Typically, Mr Harmon said, credit providers like security for the loan – something to repossess in case the loan goes wrong. However, this isn’t possible in this market, as you can't repossess a heating control system. For this reason, although the construction market is worth $30 billion a year, the financing market accesses very little of this.
Noesis, however, is looking to change this. The company utilises its own proprietary underwriting scheme. The system is complex, according to Harmon, and provides a significant barrier to entry - many Noesis employees hold advanced degrees in thermodynamics and such like. Noesis' ability to tackle this hurdle has allowed them to partner with 200 energy efficient construction companies - including market leaders Honeywell. In fact, Mr Harmon claims, no other company offers a similar service. Through these partners, Noesis has a national coverage, with at least one partner in each state.
Noesis offers loans from $20,000 to $1 million – with the average loan at around $500,000. Mr Harmon says that Noesis can approve loans within 24 hours and can have money in the bank account within 5 days for smaller loans. Whilst loans greater than $500,000 can take weeks, one of the company's aims is to streamline this process. Mr Harmon claims that a typical APR is 8-15% - low, given that it's unsecured. Harmon puts this down to Noesis' accurate underwriting process. A typical IRR, according to Mr Harmon, is above 20%.
The real advantage of the business model is that, after construction is finished, the savings felt are immediate - freeing up cash for interest repayments. This means that if the valuation process is performed correctly, the customer can easily see whether the work is cost effective. To help facilitate this, Noesis offers an independent valuation service. Mr Harmon believes that one of the main barriers to customers undertaking energy saving construction is that they don't believe the cost benefits that their provider claims to offer. By providing an independent valuation - free of charge - Mr Harmon argues that Noesis can promote confidence and encourage expansion in the industry. Noesis provides this service for free – although its partners do pay an annual fee. Of course, if the customer does take project then Noesis can offer its financing options, if required.
Noesis represents another example of the wide reach that disruptive finance is having on the credit industry – driving down costs and increasing options for customers. We’ll keep a keen eye trained on the platform’s development. .