BNPL Giant Affirm Secures Massive $4 Billion War Chest in Blockbuster Deal--But There's a Catch...

Fintech and private credit are like peanut butter and jelly—two trendy favorites that somehow work even better together. Case in point:  Affirm Holdings just secured a $4 billion capital commitment from private credit heavyweight Sixth Street. As you can imagine, all the BNPL (Buy Now, Pay Later) peeps are losing their collective minds.

(Source: Giphy) 

In short, here’s how this girthy $4 billion partnership works: Sixth Street is dishing out the dough for Affirm to underwrite a buffet of short-term installment loans (we’re talking four to six months).  Once borrowers cough up the cash, the money flows back into the pot to fund even more loans. It’s basically the financial equivalent of a slow-cooker—set it, forget it, and let the money simmer. The problem though? Don’t expect to smell what Affirm is cooking until late 2025, because that’s when this whole operation ramps up. Patience is a virtue, friends.

On the other hand of this massive move, Private Credit is having itself a big moment, with  firms like Sixth Street are basically the prom kings. With alternative asset managers drowning in cash and hunting for juicier yields than what your grandma’s savings account offers, fintech is their new playground. Deals like this one—called forward-flow agreements—let private credit firms buy loans before they’re even a glimmer in Affirm’s eye. 

(Source: MSN) 

In addition, when it comes to Affirms position, this isn’t just about fat stacks of cash. It’s about staying nimble. Unlike banks that rely on deposits to fund loans, fintech players like Affirm have a buffet of funding options—warehouse facilities, asset-backed securitizations, and now, private credit. With Sixth Street in the mix, Affirm gets a shiny new off-balance sheet channel to keep scaling its buy-now-pay-later (BNPL) empire on platforms like Amazon and Apple.

What’s more, is that while the BNPL industry has seen some bumps in the road, Affirm has been maneuvering like a pro. As of September 30, its funding capacity was $16.8 billion—a 130% jump over three years. Gross merchandise volume? Up 34% in the first nine months of the year. Sure, it’s not the 2022 peak, but hey, who among us is performing at our pandemic best, amirite?

(Source: Affirm) 

But, but, but… with that said, Affirm isn’t the only BNPL darling cozying up to private credit. Earlier this year, PayPal inked a similar deal with KKR for its European loans, and Klarna’s been selling off loans to hedge funds like my broke cousin pawning his old Pokémon cards for rent money. The $5.2 trillion asset-based finance market (think auto loans, mortgages, and more) is a treasure chest for nonbank lenders—and private credit is diving in headfirst.

For this reason, Wall Street is foaming at the mouth. Affirm shares have surged 51% this year, and if BofA analysts are to be believed (for once), Affirm is out-hustling competitors like Klarna and Afterpay on key metrics like GMV growth, credit performance, and profitability trajectory. Basically, Affirm is that overachieving sibling who makes Christmas dinner awkward for all the family losers everyone else.

(Source: Giphy) 

So, given all of this, is this the future of fintech and private credit? If Affirm and Sixth Street have anything to say about it, the answer is a resounding “hell yes.” This deal doesn’t just pad Affirm’s wallet—it cements its place as a standout in a crowded BNPL field. Meanwhile, Sixth Street gets to ride the fintech wave without lifting a weight. 

In fact, as Sixth Street’s Michael Dryden put it, “We look forward to being a key funding partner for Affirm and continuing to build on this relationship to support the company’s growth in the years to come.” Translation: “We see dollar signs, and we’re not letting go.”

(Source: Giphy) 

In the meantime, it’s clear that the BNPL party isn’t over yet. And with that, it may be time to circle back on these kinds of stocks that have been overlooked for some time. Obviously, do what you will with this information but please, place your bets accordingly friends. As always, stay safe and stay frosty! Until next time…

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Stocks.News holds positions in Apple and Amazon as mentioned in the article.