Sunbit founded back in 2016, is a fast-growing tech startup that provides instant loans for essential purchases such as dental appointments and auto repair bills. The startup believes that there are plenty of companies out there that offer loans for luxuries, but not for basic needs.
However, how does Sunbit earn its revenue? Sunbit earns its revenues from two sources: (i) selling loans at a discount rate to merchants; and (ii) charging borrowers high-interest rates for their loans.
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Business Model of Sunbit
I’m sure you’ve heard a ton about “Buy now, Pay Later.” It’s the hot new thing in financial technology (fintech). But if you’re like most people, you’re wondering what it means. What is it? What does it do? Why does it matter?”
We’ll now look at Sunbit’s business strategy to see why we think it works so well.
Service
Many startups began when their founders were faced with an inconvenient situation. Sunbit is yet another such example.
Tal Riesenfield, the founder and an American immigrant, founded Sunbit because he was denied a bank loan due to his lack of a track record. He believed that there were others like him who needed financial assistance and wanted to provide them with access to loans.
Sunbit allows its customers to instantly fund their accounts using credit cards, debit cards, cash deposits, bank transfers, etc. Sunbit charges interest rates ranging from 0% – 35.99%, depending on the type of loan and the length of the term.
It also has an app that enables consumers to pay using their smartphones, tablets, and scanners, and provides stores with mobile devices and training for staff members on its use.
With the help of the tablet provided by Sunbit, the retailer can easily complete the entire sales transaction without any hassle. Furthermore, the associates trained by the company can convince the customer to buy from them.
When the customer makes the payment, the system scans the ID of the customer using the tablet and then checks whether he/she has enough available funds. If so, the system allows the transaction to proceed. Otherwise, it displays an error message.
The credit check happens in just 30 seconds. Because of its powerful AI platform, Sunbit is able to get through 90% of customer applications within 30 seconds.
After entering the purchase price, the buyer selects an installment plan for making payments.
Sunbit charges merchants for each transaction they process and then collects payment from their customers at a later date.
The loan is made by the Transportation Alliance bank, which decides whether or not the borrower qualifies for the loan and sets the terms of repayment.
If merchants want to accept payments through Sunbit, they must partner with the company. Its primary partners include automotive repair shops, dental clinics, and eyeglass stores.
One of the benefits of using Sunbit is its no-fee policy for delayed payments.
Marketing & Target Customers
Sunbit intends to promote its brand by placing standees and posters in retail stores. As people enter these stores, Sunbit wants them to see that there is another way to pay for things besides cash or credit cards. Even if someone doesn’t intend to buy anything, seeing this option might change their mind.
They’re targeting both people with good and bad scores.
Moreover, the business is developing a dealer directory. Suppose you’re a client and you’ve bought your vehicle repaired and paid via Sunbit. Some months later if you need an eye specialist you’ll be able to view various ophthalmologists in your region. Essentially, they are creating a referral program that will benefit both Sunbitten and the associated dealers.
On the merchant’s end, they’re trying to target large retail stores that have been ignored by the “pay now” boom. Most companies are courting big-name stores as a means to scale quickly and diversify their relationships. This leaves an enormous untapped market of non-discretionary and smaller businesses which Sunbit is aiming for.
Initially, they worked with local business owners but they now also have relationships with national-level retailers like Honda Motor, KIA Motors, Cycle Gear, and Eyemart Express.
Sunbit currently operates in 45 U.S. states and carries out approximately 400,000 eCommerce transactions per month.
Expenses
As a company, we need to consider our expenses. Here, we’ll take a closer look at some of them.
- Marketing: It’s difficult to get new merchants onboarded without incurring significant costs.
- Technology costs: Because they have an app through which customers can check their payments, the company has to pay for the cost of developing that app.
- If you borrow from a bank, then you may incur interest costs. Also, if you default on your loan, you could lose some or all of your money.
- Management Costs: These would include administrative costs (such as payroll), salary, rent, utility bills, etc.
Plan for Profit
By bringing more online retailers on board, Sunbit hopes to increase its revenues. A greater number of retailers would mean more customers who would buy from them, leading to more sales.
Furthermore, working with national-level merchants could increase your customer base significantly because of their high footfall.
How Does Sunbit Make Money?
Sunbit works with both merchants and customers. Merchant refers to the company selling products online, and Customer refers to the person buying from them.
The business has multiple sources of income, including those from both its own clients and third parties. It generates revenue through its own online store, as well as through partnerships with other companies. In addition, it benefits from the services provided by Sunbit. On the flip side, it also receives money from its clientele through its own website.
Sunbit Inc. is a financial services provider that offers loans to businesses. Its fees vary based on the type of business and the creditworthiness of the borrower. It also collects a monthly service fee from borrowers.
By using this method, Sunbit makes its own profits by selling services for merchants who want to use its payment processing system, while letting buyers make payments they otherwise couldn’t afford.
We’ll now take a closer look at each of its major revenue streams.
Transaction Fees
A merchant typically charges between $2 and $8 for every credit card transaction. The rate depends on where the store is located and whether there’s any risk involved. Some merchants also add a flat rate of 30¢ per transaction.
Technology Subscription Fees
Sunbit also has a monthly membership fee from its merchants for using their services.
They provide tablets, scanners, and training to associates; assign an associate success management team member to each merchant, and visit them in person to teach and certify their staff to use Sunbit technology.
They also provide digital media services to small business owners. They provide all the creative assets necessary for their client’s campaigns.
Sunbit provides merchants with detailed insights into their store’s sales and customer behavior through its partner portal. Merchants can view their sales by location, and they can also get granular details about their stores.
Interest Fees
Sunbit charges an annual percentage rate (APR) ranging from 0%-35.9% from its borrowers depending on their loan term. Borrowers must pay a minimal down payment when they take out a loan. The rest of the balance can be repaid over a number of months, which may vary between one month and five years.
There are two options for the customers.
- A 3-month, 0% APR plan is available to all eligible customers at participating merchants. An average customer could save up to $1,000 by using this offer. However, actual savings may be less depending on factors including the customer’s credit history, current debt levels, and the type of account they open.
- It’s best to start saving for retirement early. If you’re planning to retire at age 65, you’d need to save $1,000 per year starting when you’re 25 years old.
APRs may differ depending on creditworthiness, state residency, and merchant locations.
Sunbit Funding, Valuation, and Revenue
Since its inception in 2016, Sunbit grew to over 200 people and has raised $210 million (making it a unicorn worth $1.1 billion).
Here we go! Let’s take an overview of Sunbit’s crowdfunding campaign.
Sunbit’S estimated annual revenue is $2.09 million. It is growing its revenue by 200% annually.
We’re focused on the automotive industry. One in four U.S. car mechanics accepts our payments.
With its mission of targeting the non-discretionary spenders, Sunbit makes it easy for customers to pay for car repair over several monthly installments.
Sunbit also enjoys high levels of customer satisfaction. According to company officials, 30 percent of its customers are likely to continue using Sunbit for at least one year.
Despite COVID, the business continued to perform well and even saw some of its best months ever in terms of revenue.
Conclusion: How Does Sunbit Make Money
At this stage, we’re going to finish off our discussion of Sunbit’s business model.
We hope you liked our analysis of Sunbit’S business model and that we gave you insight into how these types of businesses operate. We also hope that we were able to help you gain knowledge about how “buying now, paying later” type businesses function in general. These can be a good option if you cannot afford to fully cover items when you make them purchases. Make sure to research your payment methods thoroughly before signing up.
Thank you for taking time out of your day to read our blog posts. If you liked them, feel free to tell your friends about them. And don’t forget to let us know if there’s anything else you’d like to learn about Sunbit or any other company we’ve covered. We’re always happy to help!
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