Small Business Spotlight #4 Don’t worry pet owners, Scratch Pay is still here through the pandemic to provide financial help with your veterinary bills.

When the pandemic first started the big financial institutions got nervous just like everyone else. But what about the small lenders? Neil Stanga is the director of sales and marketing at Scratch financial incorporated, or Scratch Pay.  He was the first employee the company hired in early 2016 and now they have grown to about 150 employees.  Scratch Pay offers payment plans and loans to pet owners who are in need of financial assistance with their veterinary bills. The company started with the two co-founders, John Keatley, Caleb Morse, and an idea.  “It’s been a wild ride says Stanga, I was in UCLA grad school when I started, and I then dropped out.” “I felt like I was learning more working on Scratch Pay than in business school, it was definitely the right decision.”

Scratch Pay started with the John, Caleb, and Neil “cold calling” local Southern California Veterinary Hospitals and selling them the idea behind their financial product.  Since no one had heard of them, it was difficult.  But they knew that they had a great product and they would be able to help a lot of pet owners if they could just get their financing into veterinary hospitals.  The veterinary hospital I used to work for AVSG after hours, was one of the early adopters of Scratch Pay and we were able to help many pet owners with their emergency veterinary bills by offering them a financial alternative.  “Scratchpay’s mission is to help more pets get access to the care they need to live happy lives

When I asked him about his previous experience, he said that he worked in commercial real estate for a little while, and then he worked on Wall Street at JP Morgan for about five years. “I just had general business experience and some sales experience, a lot of sales experience.” “I think that is what I initially brought to the table.” “But working at a startup was a totally new experience for me, there’s really no qualifications or anything, just an endless amount of work,” laughs Stanga.  

Why did he pick Scratch Pay over his graduate education?  “My whole first year of business school, I was really interested alternative lending.” “Going beyond just a FICO score or credit score to assess credit risk, and ability to repay, using a new area of financial technology.” He met with John and Caleb the co-founders, where they laid out the basic idea of what they were doing, being less restrictive in terms of lending to people.  “I think probably what sold me the most from that interview was the two of them.” “They’re just very, very smart, very accomplished.” “And I just had a lot of faith in both of them, as well as the idea” says Stanga.

How is Scratch Pay/ different from other financial lenders? “Other companies are more selective, we approve more people,” says Stanga.  “And our products are totally different, we don’t offer any deferred interest products, which is a big difference.” Even though they don’t have the same deferred payment options, Scratch Pay offers lower interest rates than their competitors.  Instead of having one high interest rate for every customer, they base the interest rate on the customer’s individual credit, so people with better credit can benefit with a lower interest rate.  They are also typically cheaper for the veterinary hospital as well, which encourages more hospitals to offer their financing. It is also very easy to apply, clients can do it from their smart phones and approval takes just minutes. The approval information is also emailed to the veterinary hospital so they know that the client has been approved. The pet owner can then decide if they want to pay with Scratch Pay or not.

When I asked if they had any big challenges in the beginning, he said that they had pretty consistent growth.  “When I hear about other startups and people’s experiences there, we’ve had a fairly straightforward path.” “Personally, I’ve been challenged to learn a tremendous amount and take on a lot of responsibility, but in terms of the business, it’s been relatively smooth sailing.” The biggest challenge for us so far, has been the Coronavirus

What has been their biggest impact with coronavirus? Growth and the loss of veterinary tradeshows and conferences. “Our biggest challenge is just maintaining our continued growth, because we don’t want it to slow down.”  Also, a lot of their marketing efforts were focused on veterinary conferences, and their interactions with the veterinarians and the managers.  “We have had a lot of success at industry trade shows and those are shut down now indefinitely,” says Stanga, “so that has been a challenge.” Surprisingly, they have not seen as many defaults as they initially expected, “I think it has something to do with people not going out and saving money as well.” “Or maybe the stimulus checks had some impact on that.” 

Stanga said they had some lofty goals for 2020, “we had goals of how many practices we were going to sign up this year.” Over the past 4 years they have helped over 70,000 pets receive veterinary care and have partnered with over 5000 veterinary hospitals in all 50 states, and they wanted to help more. They had a really good start at the beginning of the year, and then they “hit a wall.” They also just doubled their space at their headquarters in Pasadena, CA relatively recently and with the original shelter in place restrictions, it is sitting empty right now. “That’s just another thing with the coronavirus, we invested in office space and then now we can’t use it.” Thankfully, their whole company has transitioned relatively well to working from home. “We have a lot of people overseas, either in our technology department or customer service, and so we’re a fairly remote workforce already” “We’re not planning on going back to the office anytime soon,” says Stanga. 

We talked about the loss of the trade shows.  “At the beginning of the year, we were just pouring resources into the trade shows and really tripling down on that channel, and so we’re just redistributing across different channels at this point.” “Instead of focusing just on that one channel, we’re moving to direct mail and trade journal advertisements and things like that,” Stanga stated.  They are figuring out different ways to get the word out to veterinary hospitals and their clients.

What are his biggest concerns?  “I think generally my concerns are, can we keep growing, number one, number two, are people going to pay us back?” Being a financial lender, the state of the global economy is a big concern to them.   Not only do they have to worry about people defaulting on their loans, they also are also concerned with how they are able to raise the capital needed to provide money for future loans. “I feel pretty confident with our CEO’s ability to raise money, and so the biggest concern is the growth and just finding ways to grow as quickly as possible, because you can always grow faster, it’s a lot of pressure,” says Stanga.  “That’s what I think about all the time, is how we’re going to sign up more practices and how we’re going to do it more quickly.” Signing up more hospitals with their financing helps more pet owners, and ultimately helps more pets. 

I asked him if he would do it over again, would he give up grad school and join a startup company with no guarantee of success? “Yeah, 100%, definitely,” he replied.  “There’s this quote by the cyclist, Greg LeMond, he’s a famous US cyclist, and I think a reporter was asking him about training, does it get easier? Does the training get easier? Does do competitions get easier, and his response was, “It never gets easier. You just go faster.” “And I really feel like that sums up my experience at Scratchpay and probably any startup.” “I’m just amazed at how much I’ve learned in the past four years and it’s been draining and definitely, well, I guess would I go to another startup as a first employee or try to start a company?” “I don’t know, I’m not sure to be honest, because it is a lot, but I never want to go back to a really big company,” says Stanga. 

I asked him what advice he would give to someone who is thinking about starting a business. “I think in general I’d say working at a startup or starting a company is not historically a good way to get rich, because the majority of them fail.” “Like 95% of businesses or startups fail.” “So that is what I would keep in mind, that failure is a possibility, even Scratch Pay could still fold and I’d have no idea how I would feel at that point.” “But if you’re comfortable with just learning a lot and ultimately having the business fail, then yeah, definitely, startups are great,” he says with a smile. “I would change nothing about this experience.” “I feel like I really lucked out to find Scratch when I did, and I feel very lucky.”

I asked him if that 95% was a legit statistic? “Made that up off the top of my head” he says laughing. 

August 28, 2020, Melissa Tompkins, BS, CVPM, PHRca, CCFP

About the author,

Melissa is a small business owner in Southern California, owning South Coast Veterinary Management Solutions.  She works as a veterinary management consultant focusing on helping veterinary hospitals, practice owners, and their team members be successful with their business.

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