Zilch Secures $125 Million in Deutsche Bank Deal

British fintech firm Zilch has raised $125 million in debt financing from Deutsche Bank, positioning the company to significantly expand its operations and advance towards an initial public offering (IPO) within the next two years.

Zilch, known for its buy now, pay later (BNPL) service allowing shoppers to pay for purchases in monthly, interest-free instalments, structured the new financing as a securitisation deal. This arrangement enables Zilch to package multiple loans together, enhancing its borrowing flexibility and capacity.

The fintech initially obtained credit from Goldman Sachs’s private credit division, but CEO and co-founder Philip Belamant stated that the terms became too restrictive as Zilch matured. The new agreement with Deutsche Bank allows for more flexible credit terms and access to up to $315 million from various financial institutions.

“For us, it’s a major milestone in the company’s growth. Our partnership with Goldman Sachs was beneficial, but we needed a more adaptable arrangement to support our accelerating capital needs,” Belamant told CNBC.

This financing boost is expected to triple Zilch’s sales over the next couple of years. The company anticipates generating $3.75 billion in gross sales by 2026, leveraging the new capital to drive growth. Belamant detailed that for every dollar of debt raised, Zilch can produce $30 in gross merchandise value (GMV).

Zilch, founded in 2018, has already processed over £2.5 billion in GMV and reported revenues of £30 million for the fiscal year ending March 2023, with losses slightly decreasing to £71.7 million from £78.3 million the previous year.

The BNPL sector has seen significant changes recently, with major players like Apple discontinuing their BNPL offerings and Goldman Sachs selling off its BNPL firm, Greensky. Despite these shifts, Zilch remains committed to expanding its product and loan portfolio.

Zilch’s revenue model includes interchange fees from card network transactions, commission fees from merchants for app placement, and an advertising network that boasts high conversion rates.

Belamant remains cautious about potential market uncertainties, particularly regarding the upcoming U.K. election, but is optimistic about Zilch’s growth trajectory and its path towards an IPO.