Sacramento-based financial technology firm Acorn Finance has raised $1 million in add-on seed stage funding to support its growth through the busy summer season.
The company’s technology connects homeowners with home equity loan offers from varying financial institutions to do home improvements, ranging from as small as replacing a stove to as large as building an accessory dwelling unit.
“We’ve been growing really well. We’ve been growing like crazy,” founder and CEO Giri Addanki told the Business Journal.
Acorn is the operating company of Headway Sales Inc., which does business as Acorn Finance. Earlier in June, the company raised $1 million in equity, according to documents filed with the Securities and Exchange Commission. That is in addition to $3 million in seed funding the company raised last year.
Acorn Finance, launched in 2018, has both a business-to-consumer business model and a business-to-business model where it works with contractors who do home improvement work, Addanki said.
The company works with 11 national lenders now, and it's developing partnerships with more. It is also getting licensed to operate in more states.
Acorn acts as a broker. In the business-to-consumer model, homeowners fill out a short form online or on a smartphone. Acorn then pulls credit reports and sends it electronically to lenders. They underwrite an offer in real time, and usually within a day, the homeowner gets a series of pre-qualified loan offers.
The company launched right into the pandemic, and that timing turned out to be good for the business, Addanki said.
“People were stuck at home, and they couldn’t go on vacation. A lot of people decided to do home improvements,” he said.
The company is based in Midtown Sacramento, but it has been working remotely through the pandemic. It has seven full-time employees, and it works with 18 others on a contract basis. Addanki declined to disclose Acorn Finance's revenue.
Since it works with a variety of lenders, it can offer loans as low as $500 and it can go up to $500,000. It doesn’t do the lending, rather its lending partners provide the loans. Acorn gets paid a fee from the lenders who make loans through the platform.
Most of the loans are for home improvement, but some borrowers use the home equity loan to consolidate debt or to pull out some equity, he said.
Acorn also works with Point Digital Finance Inc., a Palo Alto company that provides equity sharing loans. Under that model, Point doesn’t charge monthly payments for the loan. Rather, it takes an equity share in the home.
"Consumers really like the buy-now, pay-later model," Addanki said. That model works for people who may not have great credit, because Point is mostly interested in the appraised value of the home.
Acorn had planned to raise a second round of growth capital this spring, but that would have interfered with the peak home remodel season, which crests in July and August. Addanki didn’t want to get sidetracked during its busiest season, so Acorn took the add-on seed round money this month, and the company will pursue another round this fall or winter.
