[HN Gopher] Launch HN: Kanda (YC W21) - Let tradespeople offer f...
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Launch HN: Kanda (YC W21) - Let tradespeople offer finance to their
customers
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.
Author : RobKanda
Score : 60 points
Date : 2021-03-20 15:00 UTC (8 hours ago)
| stormqloud wrote:
| 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.
| arcturus17 wrote:
| > 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?
| RobKanda wrote:
| 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 wrote:
| 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.
| sterwill wrote:
| 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 wrote:
| 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 wrote:
| Interesting, that's a pretty low threshold for such a
| high rate.
| bombcar wrote:
| If you count the 15% self employment tax (social
| security) it can easily reach 50% after state and
| federal.
| sweeneyrod wrote:
| In which country?
| hervature wrote:
| The USA, the second highest bracket for federal (greater
| than $160,000) is 32%, then you have the 15.3% self-
| employment tax (social security + medicare), that alone
| is 47.3%. The minimum state income tax in most states
| will push you over 50%, but at $160,000 in California,
| that would be an additional 9.3%, so 56.3% total. Of
| course, we're ignoring credits but I assume $160,000 for
| a contractor in SF is pretty regular.
| boulos wrote:
| Fwiw, those are _marginal_ rates and you deduct the
| "employer half" of self-employment taxes.
|
| So a (filing single) contractor making 160,000 in
| California would pay more like $60k in total taxes (which
| is still 37.5% effective).
|
| But given the number of UK folks for this topic, the
| "Social Security" and FICA amount (~15%, so nearly half
| of "tax") is effectively similar to National Insurance.
| hervature wrote:
| Sorry, I thought I put marginal in there (that's why I
| mentioned brackets). There was lots of stuff I omitted
| like the SALT deduction. But I lumped all that stuff into
| "credits". For those reading, if you are paying 50% in
| tax in the US, you're probably doing something wrong even
| if all the marginal rates add up to that.
| RobKanda wrote:
| 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 wrote:
| 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.
| anonu wrote:
| 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
| [deleted]
| thaumasiotes wrote:
| > 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 wrote:
| 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 wrote:
| So, how do you deal with the risk of non-payment?
| admax88q wrote:
| Economies of scale?
| RobKanda wrote:
| 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
| smashah wrote:
| 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
| thaumasiotes wrote:
| Presumably by charging more money overall.
| anonuser123456 wrote:
| Are you holding the risk of non-payment or does the contractor
| still own that risk?
| RobKanda wrote:
| 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 wrote:
| I could see contractors loving your service on that front.
| How do you plan to handle contract disputes? Mandatory
| arbitration?
| RobKanda wrote:
| 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
| Super_Jambo wrote:
| 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!
| pdanny95 wrote:
| lol checkatrade - read my mind
| RobKanda wrote:
| 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
| endisneigh wrote:
| 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 wrote:
| 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.
| say_it_as_it_is wrote:
| 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 wrote:
| 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.
| sterwill wrote:
| 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 wrote:
| 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
| mrDmrTmrJ wrote:
| 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 wrote:
| 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
| boulos wrote:
| 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
| RobKanda wrote:
| 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 PS1000, we would charge the
| tradesperson a PS90 (or PS110) 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 wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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.
| RobKanda wrote:
| 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
| PS700 for a TV today, or take it away and pay PS30 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
| PS1000 more expensive, but the customer went with them as
| they could pay monthly!
| ryanSrich wrote:
| 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).
| RobKanda wrote:
| 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 wrote:
| 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.
| pdanny95 wrote:
| We offer 0% financing, way more attractive than raising
| debt against your home
| monkeybutton wrote:
| 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?
| RobKanda wrote:
| 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
| ryanSrich wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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
| boulos wrote:
| 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.
| hayksaakian wrote:
| any plans for a US release?
| pdanny95 wrote:
| yes - within next 18 months
| 0xferruccio wrote:
| How are you able to provide financing? Do you have some sort of
| agreement with banks?
| RobKanda wrote:
| We are partnered with a bank who have provided us a debt line
| to offer 0% finance to customers of our tradespeople
| adav wrote:
| What's in it for the bank?
|
| By the way, there's a misspelling "Downlaod" on your pricing
| page.
| RobKanda wrote:
| 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!
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(page generated 2021-03-20 23:00 UTC)