Procore: A Software Company Integrating Financial Products
It's a win-win for the company and its customers.
Here is a great example of how a leading vertical software company is expanding its growth runway by offering financial products to its customers.
Procore (PCOR), a provider of cloud-based software for the construction industry, is now offering material financing to subcontractors.
Here’s what that means.
When they’re working on a construction project, subcontractors have to purchase materials with their own money. Suppliers typically give them a 30-day window to pay for the materials, but the subcontractors don’t get paid by the general contractors of a project for 120 days on average.
As a result, subcontractors have to keep a bunch of money tied up while they wait to get paid. That’s obviously a big headache and it limits how many projects they can work on.
To help solve this issue, Procore is now offering financing to subcontractors, many of which already use the company’s software. The company will purchase materials directly from suppliers and then the subcontractors can pay Procore back over a length of time that better matches their own cash flows.
In return, Procore gets an origination fee and weekly interest payments.
Procore already has a huge customer base of subcontractors and tons of data on not only the subcontractors, but the general contractors and project owners that they work with. That gives the company valuable data to safely underwrite these loans.
I expect Procore will add more and more financial products to its industry-leading software over time. I’m bullish on Procore for this and many other reasons.