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During Q2 Affirm funded about a third of its $4.7 billion buy-now-pay-later loan portfolio with cash from securitization deals. The company previously relied on warehouse funding from lenders, in which the company borrows against its consumer loan balances and direct loan sales to other companies. Securitization deals require less equity capital than warehouse financing.
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“Buy now, pay later” loans often appeal to customers who don’t qualify for credit cards or prefer fixed-payment plans. Consumers spent between $15 billion and $20 billion using such loans on e-commerce purchases in 2020, up from $6 billion to $9 billion in 2019, according to estimates from credit ratings firm DBRS Morningstar.
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