How embedded lending can transform renewables

In our latest episode of the Embedded Finance Review podcast, we sit down with Peder Broms, the co-founder and CEO of Cloover. Cloover is revolutionizing the renewable energy sector by offering software and consumer financing products for hardware installations like photovoltaic systems. This episode dives into the innovative solutions Cloover provides, the challenges of the renewable energy market, and Peder's vision for the future.

You can find the episode on Spotify, Apple Podcasts and other podcasting platforms.

Key Takeaways

  • Innovative Financing Solutions: Learn how Cloover’s plug-and-play solution helps home improvement companies offer financing options, making renewable energy installations more accessible to homeowners.
  • Customer Journey: Understand the seamless customer journey from initial contact with installers to financing approval and installation.
  • Partnerships and Vetting Process: Discover the stringent requirements and robust vetting process Cloover uses to ensure high-quality partnerships with installation companies.
  • Market Insights: Gain insights into the renewable energy market dynamics, especially in the DACH region, and how Cloover is positioning itself for growth.
  • Future Vision: Peder shares his vision of Cloover’s long-term goals, including expanding across Europe and supporting the entire ecosystem of renewable energy with innovative solutions.
  • Challenges and Opportunities: Hear about the challenges in customer adoption, the importance of quality installations, and the unique underwriting process Cloover employs to mitigate risks.
  • Funding and Growth: Get an inside look at Cloover’s recent funding round and their strategic approach to financing and partnerships with banks and institutional investors.

Written summary

In case you prefer to read, you can find an edited and shortened version below:

Lars Markull: Welcome to the Embedded Finance Review podcast. I'm your host, Lars Markull. This is our second episode, and this time, we have switched gears. In the first episode, I spoke with Metro, a German food wholesaler offering financial services. Today, I'm speaking with Peder Broms, the co-founder and CEO of Cloover. Cloover is an infrastructure provider that offers software and consumer financing products for renewable energy hardware. For example, if you want to install a photovoltaic system on your roof, you can finance the hardware and installation through a local installation company partnered with Cloover. We'll discuss why Peder started Cloover, the types of financing products they offer, and how he sees the competitive landscape developing. Let's dive in.

Lars Markull: Hi, Peder. Welcome to the podcast. How are you doing today?

Peder Broms: Hi Lars. All good. Thanks for having me.

Lars: Great to have you on the show. On Cloover's website, it says you're providing home improvement companies with a plug-and-play solution to offer financing options to their customers. Can you walk us through a typical customer journey and explain how they can apply for financing and what products they can use it for?

Peder: Sure. The journey starts before the customer is even aware of us. We only work through installation companies and vendors, so we have a robust vetting process to get them onto our platform. From the customer's perspective, the installer or vendor partner creates an offer through our platform or integrates it into their ERP or CRM system. This sends an offer to the customer with an option to pay with Cloover, including various payment plans and add-on services like maintenance packages.

Lars: So, if I want to do some home improvement, like installing a photovoltaic system, I contact my local installer. They then tell me I can get a loan from their partner, Cloover, and I can obtain funding through that?

Peder: Exactly. It's a physical journey for the customer, usually preceded by visits from the installation company. Our processes are hosted online, either on our platform or embedded into the installer’s workflow. Once the customer passes through the initial steps, we manage data collection, underwriting, signing, and identification, and then give the go-ahead for the installer to proceed.

Lars: I assume partnerships with installer companies are crucial for you. Can you tell us more about the requirements for these partnerships?

Peder: We have robust onboarding requirements. Since we engage with customers for up to 20 years, we depend on the quality of the installer’s work. We prefer companies with a few years of experience, a certain size of operations, and a vetting system for their subcontractors. The renewable energy industry is young, with many subcontractors, so ensuring quality is essential.

Lars: What's more challenging: convincing installers to offer your service initially or ensuring they consistently offer it to customers?

Peder: Initially, in 2022, the market was different. Energy prices were high due to the Russian invasion of Ukraine, and installers didn’t prioritize customer financing. However, in 2023, with increased competition and pressure on margins, our financing solutions became more appealing. We help installers sell more and close deals faster. We have a large pipeline of installation companies, especially in the DACH region, and we're focused on quality partnerships.

Lars: You mentioned that customers can receive financing decisions quickly. Can you elaborate on the user journey?

Peder: It's similar to e-commerce platforms like Klarna. The customer journey has physical and digital parts. After the initial physical visit from the installer, the customer receives an email from Cloover to provide more information. We manage data collection and underwriting, using both traditional credit metrics and energy savings metrics. Once approved, the customer signs up for an installment purchase, and the installer proceeds with the installation.

Lars: Why did you choose the installment purchase model instead of a traditional loan?

Peder: The installment model offers more flexibility in terms of repayment plans and additional protections like warranties and maintenance. In the US, the market has transitioned from operating leases to loans, but in Europe, the installment purchase model is a halfway point that could evolve into a loan model if the market demands.

Lars: So, customers pay monthly installments for the products installed on their property?

Peder: Yes, exactly. It’s not a loan; it’s an installment purchase, offering more benefits than just a variable interest rate.

Lars: Does targeting homeowners with better credit ratings make your underwriting easier?

Peder: Absolutely. Homeowners generally have better credit ratings, which supports our underwriting. Our goal is to help the mass market transition to renewables. We underwrite transactions that generate savings for customers, ensuring a better credit profile.

Lars: How do you handle cases where customers move houses or can no longer make payments?

Peder: Moving houses is expected, and customers can either refinance at the point of sale or transfer the contract to the new homeowner. For delinquent payers, we underwrite transactions to be cash flow positive, and we have collateral protection through the assets installed.

Lars: What are your target markets in Europe, and why?

Peder: We started in Sweden, expanded to the Netherlands, and now focus on the DACH region, particularly Germany, due to its large and stable renewable market. Our goal is to grow our partnerships in these regions and expand to other European markets in the future.

Lars: If installers from other countries want to partner with Cloover, is that possible?

Peder: We're focused on the DACH market for now, but we're open to conversations with installers from other countries. Localization is essential, but our platform is designed to scale across markets.

Lars: Can you tell us about the founding story of Cloover and the backgrounds of the co-founders?

Peder: I started Cloover in Sweden in 2022. I have a background in credit and energy financing. I joined forces with my Swiss co-founders, who have experience in SaaS businesses. Together, we aimed to address the adoption challenges in the renewable energy sector. We combined our expertise in finance and technology to create Cloover.

Lars: How do you position Cloover against competitors like Enpal and Zolar?

Peder: Unlike companies like Enpal, we don't engage in digital customer acquisition or hardware installations. We focus on enabling SME installers with efficient operations and financing solutions. The European market is large, and we target the 85% of installations done by SME installers.

Lars: You recently announced a funding round. How do you see your financing strategy developing?

Peder: We are working with banks and exploring various financing models. We don't intend to carry a bloated balance sheet. Our long-term goal is to find suitable partners, whether through banks or institutional investors, to support our growth.

Lars: If your journey with Cloover ends, do you see yourself returning to finance or staying in the renewable sector?

Peder: I've grown accustomed to the tech space and my passion for renewable energy. I hope to stay in this industry, contributing to sustainability and innovation.

Lars: Thank you for the insights, Peder. For those interested in partnering with Cloover or learning more, how can they reach you?

Peder: We're active on LinkedIn, so that's a great place to start. You can also visit our website for more information.

Lars: Perfect. Thank you, Peder, and until next time.

Peder: Thanks, Lars. Have a good one. Bye.

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