Acting as a third party, PaySAFE aims to provide financial protection for both consumers and contractors.
Matt Medlock remembers the project that made him recognize the inefficiency of how contract work is financed. “It was for a basement. At the end of the project, I got no bill for 60 days,” he said. “I’m a formally trained finance guy. I don’t know you, but I know you need this money. What is this guy doing for cash flow?” It can be tough for small-business owners to find time to work their craft and follow-up with an invoice and collect. And what about before the project is even started? There are usually no credit checks on anyone, not the contractor to see if he’ll complete the project, not the homeowner to see if she actually has the money.
“Thanksgiving 2010 was my aha moment,” said Medlock (left), former vice president at First National Bank, now CEO of PaySAFE. “It was the middle of the night. I woke up and thought, why hasn’t anyone come up with an escrow answer for contract work? Why is there still this teeter totter of trust between consumer and contractor?”
More than a year later, PaySAFE – SAFE is an acronym for secured audited funding and escrow – offers consumers and contractors a transparent, secure way to hold funds in escrow until a project is finished (graphic below). After a contract is agreed upon between, say, a homeowner and a landscaper, the homeowner places the landscaper’s total fee in an escrow fund managed by PaySAFE. After PaySAFE determines that the money is good, the company takes two percent of the total, starting at $35. The contractor can work with peace of mind that the homeowner can afford to pay, and the homeowner avoids the worry of a fly-by-night contractor leaving with a deposit. PaySAFE releases the funds at the end of the project, eliminating any waiting period caused by slow invoicing and collection.
PaySAFE provides a project management dashboard that gives both the consumer and contractor involved a snapshot of the project’s life cycle (above).
“Nothing’s more personal than money,” said Medlock, 37. “We’re just bringing transparency to a previously stressful part of business.”
But if you’ve eliminated a deposit going straight into the contractor’s hands, aren’t you taking away capital necessary for him to begin work? “PaySAFE has a draw feature,” Medlock said, “for materials invoices. It’s like a line of credit, but through us with the consumer’s own money, not through a bank.”
Medlock still talks like the fourth-generation banker he is, even though he left First National last summer. The new venture of his own company has occasionally been a stretch. “Banking is a very structured environment,” he said. “But when you’re building your own business, you have to be flexible and learn from your clients.”
He’s honed one area of PaySAFE in particular by trial and error: its user-friendly website. “It’s deceptive how complex simplicity is,” Medlock said. “You have to identify six points you’re trying to get across before you realize that two is enough for your client.”
As PaySAFE evolves, Medlock has plans for the site to grow with it and still maintain its simplicity. While PaySAFE focuses on service-oriented contracts, a second website is in the works for people who want to sell goods instead. “Soon the trade and contract sites will both be integrated under one landing page,” Medlock said. “You’ll just click on a button saying what you want to do, and you’ll go to trade.trustpaysafe.com instead of construction.trustpaysafe.com.”
Evidence that PaySAFE is growing includes a new office in Dundee above the Kohll’s building and a new employee. Dave Riedl, previously with Infogroup, is now lead software developer at PaySAFE and the first full-time employee after Medlock.
Though Medlock has bootstrapped PaySAFE up to this point, he realizes that to get to a national level it’s necessary to bring in outside funding. “But I’m not looking for money so much as I’m looking for a partner,” he added. “That’s the next big thing when we start looking in the summer.”
Nationwide is definitely where Medlock is looking and particularly at Escrow.com. “They’re the gorilla in the market, the preferred escrow company of eBay. We want to get there.” Medlock added that Escrow.com shies away from performance-based contracts because they’re sticky. “Those contracts are more objective. Did you finish the project? Both yes and no at the same time is too common an answer.” For those contracts where the consumer and the contractor simply can’t agree, PaySAFE has a detailed dispute process in place.
But he’s willing to give that growth time. “One thing I’ve learned over this year is patience,” Medlock said. “Patience in realistic, attainable goals. Patience to let them develop. Don’t rush to production. Do it correctly and with the right people.”
Here’s a PaySAFE promotional video providing an overview of its product.