Buy now, pay later company Affirm strikes $4 billion loan deal with private credit firm Sixth Street
Two trendy areas in finance — fintech and private credit — are coming together in a new multibillion-dollar joint venture.
Two trendy areas in finance — fintech and private credit — are coming together in a new multibillion-dollar joint venture.
Affirm Holdings is getting its largest-ever capital commitment with a new partnership from private credit firm Sixth Street, which is investing in $4 billion worth of loans over the course of three years.
Sixth Street is committing capital upfront for Affirm to underwrite short-term installment loans, between four- and six-month timeframes. Once paid back, the capital rolls back into the pot to make more loans, amounting to more than $20 billion that could be extended over the three years of the partnership. The deal encompasses a ramp, and the loan sale won’t start until 2025, according to a person familiar with the terms.
As private credit has exploded in recent years, alternative asset managers are increasingly looking at nonbank, fintech companies to invest capital. The fintech firms are opting for what they see as more-efficient sources of financing that can scale up or down based on the demand from their end users.
Unlike banks, which rely more on deposits to make loans, Affirm and many of its peers opt for a variety of funding models, including warehouse facilities, asset-backed securitizations and so-called forward flow agreements, such as the one it signed with Sixth Street. What this means is Sixth Street intends to purchase loans originated by Affirm for consumers as they buy items online through platforms ranging from Amazon to Apple. PayPal announced a similar deal this summer with KKR for loans originated in Europe.
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