Demystifying a BNPL startup

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Today’s guest is someone who was new the US but had a great job and was making good money. So imagine how surprised and embarrassed he was when he was turned down for a Costco credit card when shopping with his family.

That experience led him to look deeper into the market and see that there was a big opportunity to make credit more available for non-discretionary purchases.

Arad Levertov is the founder of Sunbit, a buy now, pay-over-time solution. I invited him here to find out how he did it.

Arad Levertov

Arad Levertov


Arad Levertov is the founder of Sunbit, a buy now, pay-over-time solution.


Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interviewed entrepreneurs, but where I still do interview entrepreneurs about how they built their business. Um, a few years ago I offered a course for, we decided to go all out and we offered it for over a couple of thousand dollars and it was selling well.

And then someone on our team said, Andrew, you should offer a payment plan. And I said, Hm, I’m not so sure then someone. In the audience said you should offer a payment plan. I thought payment paying planets $2,000. Plus people have their credit cards. What do they need me to give them a payment plan for.

But it was pushed so much that I finally decided to give it a shot and sure enough, the payment plan was such a powerful option that I almost could have gotten rid of the pay once because so many people are taking it. And that’s when I realized that there’s an opportunity to break up expenses and that maybe I’m a little out of touch when it comes to how people pay.

I just assumed if someone wants payment plan, they have a credit card. They’re good to go. Anyway, today’s guests kind of noticed something similar and then he took it to the next level. Uh, rod Laverton, Ledbetter. I keep saying Leverton Levertov what does Levertov mean? Lever? Tub. Oh yeah. Tub. Good. All right.

Let the good lever that actually works well for your business. Uh, rod is the founder of sun bit. What they do is they help make these necessary purchases more. It’s not affordable. What’s the phrase that you use to describe.

Arad: I think it is a, by the way, I think that at the end of the day, we allow people to get the service they need or buy what they need right now and pay over time. And we focus on, necessary purchases. When you need to fix the car, you need to go to the doctor, which you need to do it to get back to your life.

You want to get done with it, but it’s a lot of time it’s unexpected and you don’t have these $2,000. You don’t have this $1,000. You don’t have the phone with dollar, like a 40% of American do not a $400, um, to, to, with it. Not necessarily expect expensive and we allow them to get what they need and get back to the life.

Andrew: All right. I’m going to find out how you figured out this. This was a model, how you actually. Well to get, basically you’re giving them a short-term loan for people who don’t have credit cards in often. And like you said, they don’t even have $400 at times. How are you able to do that? How are you able to put this whole model together?

And we can do it thanks to HostGator. If you’re out there and you need to start a new business while you’re probably going to want a website and HostGator’s a great hosting option, right? No, I use it, but I’ll tell you about those later first. Alright, give me a sense of how much revenue you guys are doing.

Where are you guys at some bit?

Arad: So we are running, we build them on the, we started in 2016, um, officially, um, and then we are. Right now in about 7,500, a location and growing in hundreds of hundreds per month, as I mentioned, focusing unnecessary business non-discretionary we call it like a necessary business, like fixing a car, going to the doctor.

And we are having, uh, Tens of thousand customers every month using our service. And we are in a 10th of the million dollar in revenue. And, um,

Andrew: Tens of millions of dollars in transactions going through your service or that’s how much your, your share of it is.

Arad: the transaction is actually, uh, tens of millions per, uh, per month and growing in a 25 to 30% quilt off the quarter over the last seven quarters.

Andrew: How many people don’t have credit cards. I felt like the credit card companies were giving them to everyone.

Arad: it’s a great question. And, uh, we’ll probably, uh, correct you a little bit that. Many people that have credit card, which is around call it 60% of the people in the U S um, 40% do not have credit card, or they have a credit card, which is super limited. Doesn’t really fill all the needs. Um, as I mentioned to kind of, uh, before, before we didn’t talk I’m, as you can hear, I’m an immigrant.

I came to the us, I wasn’t born here. I didn’t have credit. I actually went to. Buy groceries to my kids and then decided to apply for a credit card. And actually after 10 minutes, I go decline, which is humiliating. And I

Andrew: where this is a Costco,

Arad: this is what these happened in college.

Andrew: you had a job at the time.

Arad: I had a job. Um, I had a job. I was a strategy and operation manager in a, in a company in lending company.

Andrew: in the lending company?

Arad: Yeah.

I was making good money. And then, um, I said, okay, it’s time for me to get a credit card. Right. Cause I deserve a credit card. Why not? So after, um, Coming to the cashier. And I know if you’ve been to Costco, but it’s always called like three, $400 when you go there. Um, with three of my kids around me, um, asking me, starting personal a question, how much do I make?

Where do I live?

Andrew: We don’t ask it. Don’t they just give you a form. You fill it out.

Arad: No, the cashier in this case, the cashier actually filled it out for the, for me. So I was talking to him and do you need me? I need

Andrew: that’s so awkward for them to ask you how much you make with other people listening.

Arad: is awkward. And also where do I live and do I ran to their own? And if I have a mortgage, would I pay? And then after about 10 minutes of discussion, the guys tells me, I’m sorry, I cannot help you right now, but you will get a letter in the mail that says, okay, so what they do right now with what they need to buy. You have to find another way to buy with this. And I’m on the Tappan and apparently 50%, which will one out of two people that actually apply for credit card store is getting declined. And, and then, then getting declined. And by the way, the people who do get good credit cards, they pay high fees, they pay over interest.

They pay like a lot of, a lot of payments that are not transparent. So that’s when I realized that. And as I mentioned, I was working in the lending company and. And eventually people take loans to buy stuff, right? I mean, that’s something they don’t take long to put in savings. Right. It doesn’t make sense.

So they bet they take loan to buy either to pay for, for necessarily purchases of all the stuff. And they realize why can’t we just cut all this middleman and give the people the ability to buy now pay later in the store and do it for everybody in the low rate interest and fulfillment. It took about to think about it, to really investigate the market. Really, again, coming from the EU from outside of the us. Um, I, I couldn’t believe 50% of the people get declined and the people will get approved, actually not necessarily get the great rate. So I went to investigate, I went to furniture store.

I say, it’s actually happening in the store. I went to talk to, um, to mechanics to say it doesn’t work. There is issue in mechanical.

Andrew: just went into a mechanic and you said, Hey, are people getting turned down for credit? No, what’s the question you asked.

Arad: know. So I, uh, first of all, I go to, I go to, I applied for credit in a, in a furniture store and ask how many people get approved, how many people get declined? Um, my, I set up a time with my partner, um, and said, okay, let’s go meet in another furniture store and see what is the process? I went to McCann.

I started asking questions. What is the process? And I actually saw. Paper based application, literally paper. And we are talking about five years ago and still happening, like a paper. When you have to fill out, like you mentioned, you, you fill out perform, Um,

it takes 10 minutes and then you need to give it to the cashier or to the doctor or the mechanic.

And they need to put it in the computer, which is another, uh, another, um, 10 minutes. And then 50% of the people get declined. The Lucas statistics, I saw it. And then I read it. It doesn’t make sense. It’s wanting to get declined in front of your banker or you or Tom alone. We’re doing a line which is not fast.

It’s not fun at all. But when you do it in front of your doctor, who knows the, if you were a kid in front of your mechanic, it’s humiliating. Not only to you, but also to the

Andrew: Was there a thing where doctors were, were filling out forms for people like that credit applications

Arad: it’s still

Andrew: existed before

Arad: It is existing right now. It

Andrew: I had no idea that this, that

Arad: when you go, when you’ve gone to the dentist, right, you’re going to the dentist, maybe now many times it is a pay performance. Some things I call it, they put the form in the computer. The process is the

Andrew: Yeah. Yeah.

Arad: So you sit with their, you do dentists and maybe some of the dentist maybe is the payment coordinator, which is the receptionist.

And then the tailor. Andrew, do you make whatever, all these questions, because you need to have the root canal, which costs $1,500. And then. Five out of 10 will get declined sometimes, actually six out of seven with a decline, um, after 10 minutes. And what would the customer does? The customer will just walk away.

Andrew: I had no idea this was going on. Did you know this was going on because of your previous experience at what’s the company and Nova.

Arad: So I knew this was going on Because I was one of these, right. I actually got

Andrew: you got only because you got declined at

Arad: And, and then I realized that my previous company, that’s what they do. They give loans for people don’t get credit cards, but, but for me as an immigrant, thank you. Come. I was 30 when I came to the us and I didn’t have credit.

So it took me a while To build the credit

Andrew: To build credit history.

Arad: I actually were, I will, the Supreme court, then there was a newborn customer numb and now I’m, I’m, I’m a good payer. So I’m a prime customer.

Andrew: but you’re saying, because the work that you did at your previous company, this was, you were the COO chief operating officer at Inova, which gave loans to people. Is that how you understood that there are people who can qualify for loans who can pay off those loans, who are still not getting it? Is that like, how did you know that this was an opportunity worth pursuing?

Arad: That’s great. So sorry I saw the problem. I thought a problem. Cause the cause I got declined and then I realized that, um, that company that give loans to these guys, but that, but also the credit card companies. I mean, I really, I started getting a lot of mail from critical companies and I’m sure everybody gets it? all you got pre-approved for, for, Uh, for credit card.

Right? You get it in the mail every day. What you do is. Nine 19 and 900 out of 999 out of 1000 people actually go and throw it to the garbage. Right. But the credit card companies, I mean, there is a reason they, they do it because both Inova, which gave logs for people that are not qualified for credit cards and credit.

Yeah. The company pay a lot of money to acquire customers. They pay sometimes $500 just to get the customer in. And what does it mean? That means that. Their lifetime value of the customer will be more than $500, right. They need to make more money on this, but this $500 is the waste. It doesn’t go to the value to the customer.

It doesn’t go to the, to the company. It goes to the advertise

Andrew: so here’s what, here’s what I’m understanding. Yes. This experience to great origin story, go to Costco and realize that you can’t get credit, but you also had all the background before that where you realize there are people who can qualify for credit, giving out credit to those people who are, uh, Who aren’t necessarily credit worthy in other people’s eyes is valuable.

There is money to be had here. You understood how the infrastructure of getting the money to them made sense. And you said, I think I see a way to cut out marketing expenses. We don’t have to send out all the mail that is wasted. If we can catch them at the store with a product that’s better than credit card and give them a higher, a yes.

Rate than credit cards. I, yeah. Okay. Yeah. I’m definitely being very anal. I see how all this come glides

Arad: Yeah. It all came together. It all came together and I would just, I would just push one more thing on Monday thing that we have customer that are not only those that don’t qualify to cost critical. We have many customers that actually the, um, the majority of the, of the customer to do with critical, they have credit cards, but they pay so much money for the credit card and they rather manage it.

Ben says, and be more transparent with us. Cause we, as you mentioned, we saved this marketing money. We help the merchants to walk with us. We give them value. We allow them to sell more and we get the customers. So it’s a, win-win win for the merchant and we for the customer, because we, we give value for the merchant by allowing them to sell more.

And then we don’t have the marketing costs so we can give lower cost for them or for the company.

Andrew: All right. This makes a ton of sense when you talked to me like that. All right. Who’s the co-founder.

Arad: So we are focal founders. Um, I I’m the founder. We have, um, doll, which is a childhood friend. He is the head of sales. Um, we are here in, uh, in Los Angeles. We had, uh, two additional founders, which I knew for many years. One is on each she’s, uh, she’s the CTO. She was, uh, walked with me almost 20 years ago at, uh, at Intel electronic as a, as a, as a developer.

And then, um, Uh, professor Tamir, which is the, uh, is the head of data science and machine learning in the, which is the equivalent to a MIT in Israel. He is in charge of the data science and artificial intelligence and machine learning that allows us to make this decision for these customers.

Andrew: All right. You get the team together. And I think it was just you and tall. Your co-founder first. Am I right? Who decided you were going to walk store to store? No, it was all four of

Arad: yeah, no, no. Two of us went to

Andrew: Yeah. So you go.

Arad: to build data, to build the build

Andrew: Okay. So it was still the four of you in the beginning, but you decided we’re going to go store to door, talk to different merchants, see if you could put it in.

And from what I understand at first, you thought it was going to be the local retailer. And in fact, you walked into this one boutique with your wife in this case and your, how many kids you have, dude.

Arad: Now I for motive, I think he did say a little bit for focus.

Andrew: All right, impressive. So you go in there with your wife and four kids. And what do you say to this boutique owner?

Arad: No. So this would equal nine inch. It’s funny. I went to see, and we didn’t have the product. We just said like sketch of the product. Um, Tyler and I went first and then I wanted to target places where I, when I walk in, I may see the decision-maker. Right, because you don’t want to big giant that’s so it’s cool.

But I don’t know. I’ll go talk to corporate, right? And this lady is color, all that. And mobile takeaway started here in Culver city. She loved them to say payment land is good. She said our customers actually use layaway. Do you know what  mean?

Andrew: I can’t believe that people still use it. My dad did. The stores in the hood or sell to them. It was because someone couldn’t afford to pay $10 for a sweatshirt. They would then put $2 down and keep paying their money until they hit the $10. And then they

Arad: And then they get the threats.

Andrew: right.

Arad: So that it’s true. Like people still use it and don’t say, why do you do it? Let’s get the sun beat, get the threshold now in the old case and pay overtime. So she loved it. She gave us the opportunity. We started walking with her. She was our first merchants. Then we collect the different merchants.

We try to understand which vertical it will work best.

Andrew: But before we go to the verticals at that point, she is selling something. She needs the money in her account right away. Was it you taking your own money out of your bank account and sending it to her, wiring it to her? Or is it an IOU or what, how do you work that out?

Arad: We we invest in, You know, as co-founders we, we invest some money in the, in

Andrew: into your store later this week, we’ll give you the cash.

Arad: yeah, no, we, we, we, we give the money to magically from bank to bank account. This is what we did, right. Uh, we gave the money the next, the next, the next day she got the money in the

Andrew: you weren’t working with a lender yourself. This was you personally taking on the risk of the people who came

Arad: We, yeah, we take the risk from our own money. We didn’t have any, we didn’t have any investment data, which was our money. No, we did. Of course we, when the festival Did we get, we check the customer, we look at the customer. We, we, we gave, we got that, that we start building the model. Um, but we didn’t have data.

So we, we made some guests based on my. I know some history and some knowledge, but we made some guests, but then we said, let’s do it. You know, it’s the, it’s the first customer. You need to get the data to start working on your own.

Andrew: Right. One of the things that I love about your website is as soon as I get to it, I see an iPad, not a piece of fricking paper. You’re right. How many times do you get an application for credit on a piece of paper? It’s it’s such a ridiculous thing to do because I’m not used to typing on paper. I make mistakes.

You see, I even say typing on paper will make mistakes. So you created the app on an iPad, David to her. She puts it in front of people. They get a credit check. You automatically say yes here, we’ll give you the money and get, let them buy the, the product. That’s how it worked. Even

Arad: do it. A soft credit check. We actually. Yeah, first and one.

we get the data and then we, of course we used a lot of data to make the decision not based on the credit check, but we, we don’t, the customer doesn’t even need to fill an up in application. We just scan the back of the driver’s license.

And if you look at your driver’s license, you will see that on the front, you have your name, your address, your date of birth. So basically we use these to fill automatically filled application for yourself,

Andrew: you could do that. And, and you check to make sure this works in every state. How did you make sure.

Arad: I eat some grapes. So when we’re thinking about the idea, I started calling my friends from different states. Show me your driver’s license. See if it’s walking. So I actually scanned by the way, but, but it, it doesn’t work in every state. Uh, we checked it. There is a code. If you look at your driver’s license, there is.

Andrew: What, what can I, what can somebody get from that? My first name, last name. Did he get the credit card? I mean, did he get my, uh, my date of birth from it,

Arad: Everything you have on the front. Um, everything you have in the front, which is the data growth and the, and the, and the

Andrew: anyone who wants to get my contact information instead of putting a form in front of me, I could just, they could just scan that car.

Arad: Correct. You can see there is a, there is a tick barcode in your, uh, on the backend of your, off your rivals on this. This has the information that you have on the front,

Andrew: Oh, that’d be so good. I wish more people knew that.

Arad: of the state. There is some say the some less information, but in general, that’s what you have. Yes.

Andrew: Okay. W w that’s phenomenal. I don’t know why bothers me so much when I have to fill out my name and date of birth and all that. All right. That makes a ton of sense. I’m with you now, you then go in, it starts to work and still today, you’re not selling to boutiques. Mainly you were starting to tell me how you figured out who the, this would work with, who Sunbelt would work with.

How’d you figure that out.

Arad: So, so we try to see which verticals the right verticals and try to just really walk in in Los Angeles, like walking and driving, getting into places. Cause you want to be in a place That from one hand, A little bit, it’s a few hundred of dollars, right? Because you, you, it makes sense to split it over payment plan from the other end.

It’s not like a huge purchase that you spend, like 10,000, $20,000 that you have the time to see it and to negotiate with the seller. So you want in yours because our process is so fast and within 30 seconds we approved nine out of 10 people. We want the funding to revival, and then we got, um, my partner thought he went to, uh, um, to rehearsal period in Toyota.

To Toyota and actually you bought a car and then, um, um, the offering financing, but then it’s okay. What’s going on? What about if I need to fix my car? What do we have? And we don’t have anything. We don’t have anything if you fix the car. So actually to call diaper then shortly to them and the guy told him I wanted to now leave it with me.

So then we realized there is something over there, right? There is something in the car repair. Um, and then. Literally today, we are in a one out of four dealerships in the U S there are 17,000 dealerships, which authorized dealership on the repair side. We are in more than 4,500, uh, growing in 150, 200 a month for the last, uh, year and a half.

And, um, we are the main player there. We help them. We have them to help people fix the car. Pretty simple.

Andrew: That makes a ton of sense. I can understand that I’m standing there. They tell me that I need to fix the car. It’s going to cost a thousand dollars there. I may not have enough money, my credit card. I see. Maybe I don’t even have a credit card. I get it.

Arad: Even if you have a credit card, then maybe you don’t want to put it on a credit card. Right. And then, um,

Andrew: you’re right. I, you know, I don’t, I don’t pay attention to it because I pay off my credit card every month that automatically gets paid off.

Arad: You do, but many of you, as I said, many of the people that do have credit card, I’m not talking about the woman. They carry balance. That’s how the credit card companies make money.

Andrew: right. I am blind to it because I don’t personally experience it and it’s staring me right in the face and it makes a ton of sense. So I’m not coming at you and saying, this makes no sense because of me, I’m going, how did I not realize that? That I am dealing with credit in a different way than most people.

Of course it makes sense.

Arad: And then one more thing I will say about vertical. So then we started with the pan and then we thought, Okay.

where is the not places when people get the surprise? Right. Okay.

Fun, biggest surprise. And they need to do so then we went to healthcare and in healthcare, the same idea you go to the doctor, you think you have a feeling.

It depends. It happens to me, a root canal. You go to cleaning, it happens to be a feeling and you need to get it done because it terrorists. The doctor wants to sell it. Same idea, huge market. These are, I call it the non-sexy vertical, but they’re vertical. Everybody is everybody that drive a car, go to the doctor.

And you also were pretty strong in Iowa in repair. You know, I glove you go, you leave the nightclub. Um, over there it’s interesting is cause usually I guess cost maybe 300, $400. So it’s not that expensive, but many times people want to buy the second pair. And over there, the retailers are we working with the retailer to offer for every customer, no interest loan for three months.

So knowing to throw for three months, and it works for the customer, it’s a win for the customer and a win for the merchandise.

Andrew: Okay. And the way that you discovered this was because you, your partner goes into the Toyota repair, realizes this, a thing that they want. And then you say, what is it that makes them so hungry for this and makes it so effective? It’s that people have a big expense that they have to have. Where else can we have that?

That’s the ABC to get to where you are today. All right. Hi, I’m curious about the mechanics of this. Like where does the money in your industry come from when you’re, you’re basically borrowing money? Is it, is it turned into, um, into debt instruments somehow? Is there a company that stands behind you and makes these loans based on your credit assessments?

Where does this money come from?

Arad: So we have different, um, sources of capital and we have, we have hedge funds that give us the money and then the. Uh, once the loan is done and again, the loan is done by a bank festival. So the loan is we are not done. The right to do is a bank that we basically, uh, the loan is signing, use leverage in our technology, but after the bank is a, um, so the bank is a, is lending.

So we. We can purchase the loan from them and use, use, use a different source of capital sources of capital to leverage it. Um, and basically the merchant itself gets the money right away. So there’s a most important thing. The merchant itself will get the money right away. They pass merchant fee, but, but they will get it like the next day and they don’t have to worry about it.

So we have to deal with all the infrastructure with the regular regularly regulations, with dealing with the customer. We did deal with dealing with the lenders.

Andrew: You’re in California, same state as I am right now, because you started out in California because.

Arad: That’s a great question, because if I was living in Chicago, my partner was living in New York and California had the best regulation to start with while we started the it called state that regulation. And we started with the regulation that had the ability to call retail installment act, which was good in California.

That’s why we moved into California with the families, by the way. They can address, uh, um, say, okay, let’s do it. Uh, don’t take money, put money and see if it works. And then once we proved in California, we actually, two years later, two years later partnered with the bank and then the bank is actually the lender across the 50 states.

Andrew: Right. Our producer, the, one of the reasons why you’re from Israel, one of the reasons why there are so many Israeli entrepreneurs who do well is because of the army. I want to come back and ask you about the, what otherwise would be considered chutzpah that you learned from the army as a good management, uh, infrastructure.

But first, let me talk about my first sponsor. It’s HostGator or out. I’m going to ask you this. I like to bring my guests in on a sponsor ad. If you were let’s. You’re a super smart guy. Let’s go back to let’s say when you’re 12, before you had all this going for you. If I were to say rod happy, oh, 13 happy bar mitzvah, instead of giving you money here, instead of giving you something else, I’m giving you a website that I will personally host for the next five years, build a company.

What would the 13 year old rod build on the site? What’s a good idea that you could build that doesn’t require regulations and everything else. Let’s come up with a quick one.

Arad: I have kids that play games all the time. So I have kids that are 14. And so that’s what they do. So probably play games and we’ll gain the big Buddha stuff.

Andrew: You’d create games for kids on your site.

Arad: no, I would, uh, I would do a social, I have no clue.

Andrew: All right. I think I have an idea around that. The thing that you might experience as a dad, which is one, one of the things that I experienced is what kids are good and what games are bad. How do I make this useful? And how do I make it so that it’s like, or how do I, how do I make sure that I’m picking stuff that’s fun and useful for them and what are the tools for it?

And so imagine if somebody puts together a site. Of games and like guidance for dads, let’s say focus specifically on dads in the beginning. Right. And so maybe you’re a dad and you forgot that chess was fun when you were six years old because in the world today, you think it’s. But they recommend it and they say don’t use, use chess, kids, buy

And here’s what you should be doing there so that your kid can have fun. Boom. Then what do you do is Minecraft useful or not put that on there? What else is out there and what? Right. And then through all of this, as you’re starting to give feedback to dads, maybe you also start to come up with your own game and old game that people don’t pay enough attention to that you believe should be modernized.

I’ll give you an example of it. Um, What is it go fish. I’ve noticed you people used to play goad, go fish with just a standard deck of cards. Maybe realized someone realized go fish should be played with its own deck of cards. So they invented a goldfish car, right? You come up with your own and now you’ve got to pull up people.

Who’ve given you feedback over the years who you’ve gotten trust from and you sell to them. That is an interesting idea. What do you think rod?

Arad: That’s good. I think it can increase the bonding between the 13 years old kid and the dev, which is super important.

Andrew: Right. Oh, and imagine this, they check off a box of what your kids’ ages are. So if you have a five-year-old and a ten-year-old and a 15 year old, and the dad what’s one game that they could all play in common. And maybe how do you twist some of those games so that they could all play in calm, maybe it’s monopoly, but you have to have these.

All right. This is one crazy idea. We throw these out in every one of my interviews. But chances are good that whoever’s listening to me has a great idea of their own and they need a website for it. So where do you go to get a website? You go to all these different companies that have now sprouted up. A lot of them are fantastic, but here’s the problem.

Number one, they’re more expensive. Number two, they aren’t portable. So when you’re ready to move on, you’re stuck with them. HostGator will let you host with all these open source platforms, make it easy to get started, make it inexpensive they’ll scale with you. And if you hate their guts, You take your sight and you walk away or maybe you’re like me, you love them.

And you love that. They have the lowest price possible. When you use this URL. It’s to get that URL, All right, let’s talk about the Israeli army. What was that like?

Arad: It’s a great experience. It’s everybody does it. It’s a mandatory when you are a team and, um, and you really learn that you can do everything. You do, stuff that you didn’t think you would do. Um, I spent five years in the Israeli Navy. And, um, when you were 20 finished almost 1 24, you are a different man.

Um, I think, I think he taught me that everything. Yeah. Possible. You have to stay humble and confident that you can do You just need to achieve it.

Andrew: You also told our producer, and this is something that we learned in, um, in management class at college, they said that anyone can challenge the leader and they talked about how that is the way the thing is. What did that mean? So you’ve, what is it called? The person who was on it was the head. Is it a commander?

Whoever’s in charge?

Arad: Yeah. You know, in many times it’s a good point. Many times people say army it’s like, you need to have rules and discipline, which is super important. But what is unique about the, by the Israeli army? The idea is that you teach the, the, the, the regular soldier to be commanders in the, in the two to switch positions.

People ask, Okay.

why do we go from here? Why they go through them? Not all the time where, you know, when you fight, you’re fighting, but, but doing the training and the challenge, everybody to do more. And when you look at the company right now, for some bit, there is only one goal is to make the customer happy and to make customer SunButter better.

Right. Which is the making the customer happy. If the customer happy, the merchant is happy. It’s good. And it doesn’t matter if I say, or personal, just out of the company site and never the better. Say, say it out loud, like something about the authorities, about the value of the customer. So so that’s what you learn in Israel.


Andrew: what’s an example of somebody who spoke up to you and said, Hey boss, you’re wrong.

Arad: Oh all the time to do it. I mean, it’s like, yeah. I mean, I mean, it’s, it’s you hide it. Look, we, we started as I am, as I said, we started like four people when I’m going to myself and, and calling that a people and now. You have more people. Now we have training. We are heading more many stores all the time and they told me, no, we need to do the training this way or that way we need to go and visit the store or we need to actually, you cannot train them online.

You cannot train them mechanical line. You have to go there and to be with them and to Really.

shoulder to shoulder to do it. So let’s be. Um, a strategy around it. I didn’t think about it when I started it. Cause you remember, my background is from credit and I got declined. I didn’t think about walking hand to hand with the retailers, but we built it.

And now one of the things that we are doing when I’m, so, I’m so proud of is the fact that we have great support for our merchants and retailers that work with them end to end to help the customer. So this is something that came from one of the employees.

Andrew: What’s an average interest rate.

Arad: So many of the customers actually get zero interest, literally zero, like, because, because the merchant actually take the, Um,

um, take the risk, right? So, so, so instead of paying a hundred dollars to the merchant, we’ll pay 95 or 93%, but the customer will get it to zero. And when they look at their verge interstate, you need to differentiate between the, um, are the prime customer, those who actually get credit cards.

So for those. We basically cut at least by, you know, 40, 50% of the, of the cost. So if the, if your credit card, if you look and you pay everything a fond, but if you look at your statement, you will see that your interest rate will be probably 20, 25%. For us, you will get, you may get along like 10 to 15%.

For those who do not have credit card will get declined for credit card. They go to something called payday loan. I don’t know if you heard about this term, but this goes to 400, 500 and a thousand percent. Annual interest rate and what we will charge them, maybe, you know, high twenties. Um, but it’s like 10 times cheaper than what, than what the, there would be at a firm otherwise.

So we, we, we thrive to say that each customer will get a better offer from sandwich compared to compared to what they have in the wall.

Andrew: All right. I understand that in the beginning that money was coming out of your pocket, right. You then get to Arizona after California. Now you’re expanding. And at that point you went to look for a bank partner, roughly how much, how much business were you doing month to month before you went to get a bank part?

Arad: So relatively, not a lot. I mean, we did, we did like running, we had probably three, 300 to 500 stores. I mean, at the time that we talked to bank

Andrew: does that mean a half, a million dollars in sales that your

Arad: Maybe one, maybe one, one an off he’s he’s he’s

Andrew: and you guys had between the four of you? One and a half million to shell out every month?

Arad: we don’t. We did to make some money, You know, we did raise

Andrew: raise money. How much? So before you got a banking partner, you raised money.

Arad: Yeah. Yeah. We raised money. when we run in California, we raised money to raise money from ’em. So we raised the, um, I think $30 million between the seed and the round day, uh, which, which is a relatively, uh, big amount, because you need to build the infrastructure, right?

You need to build the, um, one, you need the sales people to you need, you need the, all the regulation and then the, the legal end to make sure it’s all a hundred percent cautious because they want to be clean. So, so we raised this money.

and then. I think somewhere around 2018, we raised another $10 million and that’s where we exactly negotiated with the bank.

And then we got the bank, um, sometimes after the.

Andrew: Okay. How hard was it to get a banking partner?

Arad: So we, we knew this is something that it has to be right from the beginning. We build it. Right. It just takes time. Um, not everybody walks fast, like your startup, it makes sense. Right. So you just took time. But, um, what we did, right? We had a, we had a great partners. We have a great bank that works with us and, uh, we like it.

Andrew: Lending clubs situation impacted you. What happened with lending club? And then what impact did it have on you?

Arad: you?

know, many of the, um, Invest or sometimes the follow the herd, right? The follow the industry and what happened in LendingClub in 2016, they had some internal issues with actually dropped their, the devaluation from, I think, whatever seven, $8 billion to the time. It was maybe some, $1 billion operation and, um, And it puts the entire lending, um, industry that, that used to get a lot of money from venture capitals, um, at risk.

So many, many VCs didn’t want to invest in lending and we needed money from VC. So we had to find people, um, and we’d like it to find people Who are super happy with an investor that actually. I think, yes, I know lending is not great right now, but here that building a different model, remember the story about the marketing, what they’re building is something that will add value and will not cost a lot of money eventually.

Yes. We need to believe that they will go to the stores and they will be able to get along, but we believe in the team and that’s why we found out great investor that are still there, you know, since 20 16, 20 17.

Andrew: Who was the investment? Who’s the investor.

Arad: So we have, we have, uh, three main investors that are leading the round. One of them is Chicago ventures that came from Chicago.

Uh, um, the other one is group 11, which is a local group here in, in Los Angeles, which is focused on FinTech, which both of them been with us since in 2016 and 2017. And then we have their ventures, which is based on sort of the Silicon valley we joined in 2018, um, um, is a great investment. They’re still with us living the dream.

Andrew: And you recently raised $130 million. It’s just like weeks ago, I think, right? No. Uh,

Arad: ago, two months ago.

Andrew: may I think is when I saw the announcement hundred and $30 million and now you’re officially worth more than a billion dollars. A unicorn. Unreal. Why are you not, you’re not even smiling as I say that. It’s not, no,

Arad: No, because.

I’m focused on the, on the value that we need to do. You know, it’s just a, it’s great. It’s a great sentiment from the, from the investors. We’ve got it from internal investor, we’ve got external investor, like insurance companies that came to, to join and led this round. Um, which is a great, I mean, we’re super excited about it.

This is a great, uh, a recognition of what we did. But there’s so much more, we can do so much thing. We can do that. So many customers in the U S and in the, in the entire road that needs our service. And, um, it just puts more pressure on me and, and the team, which is great.

Andrew: What’s your process for getting, um, forgetting new merchants.

Arad: So we have, we have, uh, um, multiple, uh, strategies, right? We have it all starts with boots on ground. Like it’s, it’s.

Andrew: people going in

Arad: actually, people going in showing the iPad and, you know, we call it the magic trick. Um, give it like 30 seconds show that you can scan everybody and approve nine out of 10. So that’s what we do.

So we have people right now, as we’re speaking, we have people running in the entire country that actually selling. We also have people that training the people after it. So this has started with this, but then when you’re growing. We also have partnerships. We have partnerships with the big OEM, like with Honda, with Kia, with Nissan, we have partnership and they endorse us into their dealership and the same with other verticals.

So we start with boots on the ground. Then we go to the guys, um, and we work with their mental and.

Andrew: And what happened to COVID when a lot of these locations were shut down and they were definitely not eager for someone to just walk in.

Arad: That’s a great question. So, so, you know, March, we realized that the COVID is much have in 2020 realized COVID is real. It’s not like something like a flu that nobody knows. And then, um, what would you you do, right? I mean, what, what would they do? And then, and then we realized that, um, wander the few concerns.

One, you are. There is people will not use the service too. You’re afraid that the people who use the service will not pay you back, right? Because you don’t know what will happen to the road, to the loan. Right.

And you want to be in between. You still want to approve nine out of 10 people because we have commitments for your merchants, but you want to be more careful.

So, so we adjust the model to be able to be more careful while still maintaining this 90% approval. Again, remember all the credit cards and other companies not to put more than 50% and we approved nine out of 10 and then. We, we realized that since we work with necessarily businesses, all the dealerships were still open and why they didn’t, they didn’t have any, a lot of cars coming to them.

They realize that this is opportunity to get a service that when they, when the customer come back, they will lead it. And we were a little bit lucky cause they, the manager had more time to answer our calls and to see our faces and they sign the sign. They found the, um, uh, the Americans actually Q2 of 2020.

Was a record quarter fast in the dealership because many of them signed, um, and enter the service and the new that when they start customer coming back in may and June, they will need it. And actually, so we completed a really nice Vishay between, um, February to June. And since then we keep going.

Andrew: And then what about the other businesses like dentists? I think we’re seeing

Arad: this, then this, and then I we’re re we’re basically down for like two quarters and stuff picking up in late Q3 and Q4, but we took the time we walked with them, whatever they need. And then, um, and then we were there with them.

Andrew: What are you doing online? I was surprised that you were online. I, I was thinking of the sunbed as the offline.

Arad: So we mostly offline.

that’s the focus, but we do offer, we have a full solution, a line like the other buy-now paleo to solutions and we offer it mostly for merchants that actually want to get the full omni-channel. So we have a chain of hundred 50 store location that actually fells apparel for motorcycles.

And we’ve been with them for like in 2017. And they actually wanted to add us into their, um, e-commerce site. So the customer, if they go to shop online, they can buy it. And when they go to the store, so we have a solution which is great online. Uh, we also have a solution when you fix the car, sometimes you leave your car in the morning, you go to your work and then you get a text message.

Oh, it’s not only the bags, it’s also the tires, but you want to get pre-qualified so you can do it online. And then you come complete the purchase in the, in the south. So we have the full. Um, uh, scale of solution for me, the only in the store start online, finish in store or fully online.

Andrew: And I told you before we got started, this is simply, it seems similar to affirm. And the distinction you told me to pay attention to was that affirm is for regular purchases. It could even be for the really nice jacket that you wanted, but Sunbelt is for the thing you have to have, like fixing the brakes on your car, right?

Arad: I think that, um, yeah, film and the other companies are doing great job in bringing, bring them the buy. Now pay later to the e-commerce to what, to what we say. Nice to have things. When you buy a jacket, when you buy a, you know, Um, bicycles, like the cool things like this, and most of it happened in the, in the, um, e-commerce when you do it online, what we did, we build it the same idea.

We build the same technology, which higher approval rate, um, and the, and, um, in different level into the real-life, which mostly happened in the.

Andrew: All right, let’s close it out with this white. Why Sunbelt? How’d you come up with that name?

Arad: That’s a great, that’s a great question. So we were looking to find funding the trines with credit and debit because we knew we wanted to develop a new payment method, which is kind of hybrid between debit to credit. Right. You give credit, but you collect it automatically. You don’t give you collect automatically.

The debit card. And, um, and then we came up, actually, my, my, my, my co-founder’s wife came up with the idea why not submit because it’s one, it rhymes with credit and debit to fan is positive. The sun rise to everybody. So you, we approve nine out of 10 people. So he tries to everybody and there is a bit which is needs technology.

Now we said you can pay bit by bit with some bit, we are super happy about the name, um, the luggage receipt. Um,

kind of pieces, which reminds of 12 payments. And um, now we just need to get it out there.

Andrew: And you take it out of people’s bank account directly.

Arad: So when the, when they complete the, uh, the trundle transaction, they also scan the debit card. Um, and then they basically pay down payment.

They allow us to authorize the debit so they don’t have to worry about it. Don’t have to, to think about.

Andrew: All right. Simplicity. I just fricking love that you could scan a driver’s license and automatically pick up all the data you need. All right.

Arad: It’s also, the idea is to be super simple for the customer and super sophisticated in the backend with each customer, with the best offer that they can.

Andrew: All right. Great freaking idea. Um, hang on with me after it’s done. I want to ask you about, uh, uh, someone in my audience and what they’re working on. That’s that’s kinda similar. I’d love your feedback on it, but for now, I’ll say thank you. The website is sun and I want to thank HostGator. If you need a website, hosted, go to

Bye everyone.

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