Sixth Street Signs $4bn Forward Flow Commitment with Affirm

Sixth Street announced a new commitment of up to $4 billion to buy-now-pay-later (BNPL) platform Affirm through a forward flow arrangement—an agreement to purchase the loans before they have been originated.

Under the three-year agreement, Affirm will offload new loans to a dedicated Sixth Street vehicle, which the San Francisco-based fintech says will provide enough off-balance sheet funding capacity to generate more than $20 billion in originations.

Affirm, founded by PayPal co-founder Max Levchin, has grown its funding capacity by more than 50 percent over the past two years. Behind that growth is a financing operation that taps more than 130 different investors across channels, including warehouse facilities, securitizations, and forward flow deals.

Private capital and consumer BNPL might seem like an odd match, but it’s a surprisingly symbiotic relationship. For fintechs like Affirm, private credit deals let the company move loans off its books and free up capital, allowing fresh originations without inflating the balance sheet.

Forward flow agreements do have higher pricing than standard warehouse lending facilities, but the added capital efficiency more than makes up for it.

For private credit, it’s welcome exposure to a large and growing asset class with attractive risk-adjusted yields—particularly when taken in the context of an increasingly competitive traditional private credit market.

These types of nonbank-originated assets—not just limited to BNPL—have quickly become a key growth lever. The menu of options includes things like consumer installment loans, credit card receivables, and more esoteric specialty portfolios like solar panel financings. In all, nonbank offerings are an $800 billion chunk of the total $5 trillion private funding opportunity in consumer credit, according to research from S&P.

Recent activity includes BNPL competitor Klarna’s £30 billion deal to sell its UK loan portfolio to Elliott Investment Management, KKR’s exclusive deal with PayPal to buy up to $44 billion of its BNPL loans. Castlelake and Blue Owl have separately struck deals with personal loan platform Upstart, while Fortress signed its own loan-flow arrangement with SoFi.

The SMB market could be up next. Historically too small and risky to service for traditional lenders, Affirm sees it as the next leg of its expansion. The fintech has already launched a pilot program with Amazon Business and plans to continue rolling out new B2B financing options.