Anytime I hear about getting “something for nothing” I pause and immediately question the premise of the offer. So when I was first introduced to Ziero Financial I was more than a bit intrigued. Ziero’s business model is to offer free credit to borrows. Does it sound too good to be true? Perhaps. But Ziero’s service is not free, it is just interest-free to the individuals borrowing the money.
Think about it. Approximately 6 out of 10 Americans are ill-prepared for any sort of financial challenges. Many Americans have less than $1000 to their name. This means millions of people live paycheck to paycheck – just barely getting by. When they get in a bind they go straight to friends and family for a loan or handout. If they do not have a support group the next option is a visit to the local payday lender, pawnshop or loanshark. If getting a few dollars in your pocket now is the difference between getting to your job or not. You do it. You have little choice.
On the other side of the equation is the employer. Think construction companies, restaurants or cyclical businesses. For the owner / operator if an employee does not show up it can mean a work slow down or a mini-crisis. It is these very same owners that have been providing IOUs to their employees for probably hundreds of years (or longer). Frequently these business owner have known their valued employees for many years. They know they are good for a short term loan. Yet it still means a cash outlay and a bit of risk.
Enter Ziero Finance.
While there are several companies that are providing payroll credit, Ziero is different as they are underwriting the loans for a structured fee. The cost is born by the employer. The borrower gets the money they need to fix their car and the risk is shifted over to Ziero Finance.
Recently I spoke with Benny Yiu, CEO and co-founder of Ziero. He shared how his parents ran a small family business and, when it was necessary, they would provide interest-free cash advances to their loyal employees. Yiu has set out to provide a service that replaces SME IOU’s. Having just luanched earlier this year, Yiu has already received some decent traction in the San Francisco metro area. Yiu shared his insight into the future of Ziero Finance below.
Crowdfund Insider: Can you please share the genesis of Ziero Financial
Benny Yiu: As entrepreneurs in the FinTech lending space, we were aware of brilliant entrepreneurs who were constantly working on disrupting the predatory payday lending industry. However when we learned that as households with income between $50-100k had difficulty coming up with $1,000 to cover unexpected expenses and no one had figured a way to provide interest free loans in the larger loan size range ($1,000 to $5,000), we instantly knew that there was a way for us to provide this financial safety net.
Crowdfund Insider: You recently did an Angel/Seed round. Who invested?
Benny Yiu: Ziero’s investors from the angel round include Ferst Capital Partners, a Fintech focused Micro VC and Mitch Salis, the former CFO of Thinking Capital.
Crowdfund Insider: You have a unique business model for providing credit. While there are other point of payroll credit providers – your loans are “free” to the borrower. Please explain. What is the value proposition for customers?
Benny Yiu: After speaking to many business owners and HR managers, we learned very early on that many got involved and provided financial assistance to their employees because there were no solution in the market that provided interest free loans. When their employees are in trouble, they do not want to be liable into getting them into additional high interest-carrying debt, where workplace loan (payroll credit) providers will charge anywhere from 6% to 50%+ APR for a loan to the employees in need.
Understanding that the employer’s concern is much less about cost but rather to help out their employees, we turned around and prioritized on making it interest free to the employee. In addition, our value proposition to businesses already making loans to their employees (SMB owners), is that by paying a small fee, we help their business free up both time and working capital, while they have full control in helping out their staffs in need.
Crowdfund Insider: What type of companies do you foresee utilizing your service? How big is this market?
Benny Yiu: Our clients are mainly small businesses owners. Typically they are less than 100 employees, and they often have a close relationship with their employees There are approx 2 million SMBs with 2-99 employees. They don’t have budgets for lavish benefits, but here is a very affordable benefit that’s tailor-made for any employee.
Crowdfund Insider: You have already signed up several companies. Can you share why they decided to use your service?
Benny Yiu: Many companies we are signing up were already making loans to employees. They mainly use our service for two reasons: time and money. These are the main concerns for any business owner. One problem we often see an SMB owner facing is that working capital is tied up in employee loans, when it could instead be deployed back into the business. In addition, managing a loan program requires a lot of time spent on administrative paperwork, bookkeeping, loan repayment tracking, accounting, etc. With Ziero, they can provide their people no-interest loans, which not only helps with employee retention, attraction and productivity, but also eliminates the huge time burden they otherwise would take on.
Crowdfund Insider: You lend based off of certain metrics – so not every employee will qualify for a loan, but you can provide 100% coverage – correct?
Benny Yiu: We try our best to provide our interest free loans to all employees, but there are scenarios where employees do not meet our minimum credit criteria. In those cases where an employer wants to make this available to all employees, we help craft a customized program that enables the business to provide a guarantee of repayment in the event an employee defaults.
Crowdfund Insider: Do you have any direct competitors?
Benny Yiu: There are many lenders that use employers as a channel to sell loans to their employees at rates from 6% and up (way up), but Ziero is the only provider of truly interest-free loans to employees in need of funds for any kind of unforeseen expense.
Crowdfund Insider: Have you considered parenting (partnering) with a Zenefits? Or another large HR SaaS provider?
Benny Yiu: Yes, some HR benefit brokers have reached out to us, whom we plan to work with down the road.
Crowdfund Insider: How are you going to market your service?
Benny Yiu: We are developing partnerships and building a team to bring Ziero to a wide range of SMBs. We are positioning the Ziero loan as a new type of HR benefit that works as a great perk, on its own, or as part of a broader employee financial wellness program that includes guidance and advice on personal budgeting, savings, debt reduction, retirement planning and more.
Crowdfund Insider: Do you see an opportunity to provide additional services beyond SMB IOUs down the road?
Benny Yiu: We don’t really see this as an SMB IOU, but rather an employee perk that gives workers access to 0% small dollar loans, when they are in a pinch. We plan to provide a range of other financial products that will include financial planning, credit card debt consolidation, financial wellness programs and more.