A shared passion for property prompted Mitch Fraser and John Allen to create Tomorrow Finance – a website that offers prospective home-buyers and investors a new way of getting the ideal loan without paying brokerage fees or suffering through endless meetings with bank managers.
Their business plan is quite simple. Instead of charging brokerage fees, the entrepreneurs earn a one-off commission from banks. This means that they’re able to offer a lower rate of interest.
“The major difference between our site and traditional models is that we put customers in direct contact with senior bank managers when they have chosen the deal they want,” Fraser said.
Instead of scanning published information for the best deals, Tomorrow Finance pre-negotiates home loan rates for customers.
“Our focus is to create the easiest user experience possible when it comes to choosing a home loan,” Fraser said. “Rather than the customer fighting for the bank’s attention, we make them fight for yours.”
The approach seems to be working. The start-up has already directed $2.5 billion worth of home loan-related enquiries to banks and the co-founders estimate they will save customers an average of $30,171 over the life of their loan.
Not bad for a business that started as a hobby.
“We were both working in professional services. I was working at PWC and Mitch had his own web design agency called Drawstring,” John Allen told Dynamic Business.
“We were both extremely passionate about property and started running after-work events focusing on investment. We really just wanted to educate ourselves and like-minded investors about the post-GFC lending landscape.”
“And then one day, a banker from the National Australia Bank told us we could get a spotter’s fee for passing on leads to a bank.”
That proved to be their light bulb moment.
“We had built a community around a hobby, but quickly learned there was a way to build a business around it,” Allen added. “We realised we could bring the banks – and their best offers – direct to home-buyers.”
It wasn’t always easy. For starters, the co-founders initially had trouble getting all the banks on board.
“We had most of them on board but one major lender was still holding out,” Allen said.
“We were two young guys disrupting a fairly established and, to some extent, stagnant industry. We had to quickly develop trust. This meant engaging in nearly nine months of meetings with senior bank executives.”
However, it didn’t take long to get the lone non-believer on board after the pair showed how much business they were bringing to other lenders. A more difficult early hurdle was the fulfillment of leads they provided to lenders.
“Traditionally if you are a referrer, you pass the lead on to the lender and forget about it. We knew that wasn’t good enough and, as we got bigger, we ran into issues with lenders not living up to the same level of excellence and attention we’d provided our customers,” Fraser said.
But the ever-resourceful duo soon found a solution.
“We worked closely with senior bank representatives and set in place stringent systems and processes to ensure our leads were being handled in the right way. We even developed custom software for the banks to use in order to manage all the leads we were sending their way.”
Another major issue was cashflow. Fraser and Allen invested $70,000 of their own savings into the business and borrowed $50,000 from family and friends. After some early setbacks, they are now cash positive and have big plans for the business.
“We’re pretty focused on constantly improving the service and offering, so our energies are largely dedicated to the daily grind and continuing to innovate,” Allen said.
“Having said that – the personal finance space is ripe for disruption in many areas. We’ve been growing at 100% each year and we’re confident we can keep that up!”
It’s still a big commitment for the property-obsessed friends. “Every last penny you have is spent on the business, to the point where you begin compromising things in your life,” Allen said.
“When you’re a start-up, the risk is astronomical and it’s very stressful but when it starts to pay off, it’s very rewarding.”