LONDON — British fintech firm Zilch said Wednesday it has raised $125 million in debt financing from German banking giant Deutsche Bank in a deal that will help the company triple sales over the next few years and move closer to an initial public offering.
The company, which offers shoppers the option to purchase items and repay debts in monthly interest-free installments, said the debt was structured as a securitization where multiple loans can be bundled together.
Zilch initially took out loans for its repayment plans and other loans from the private lending arm of Goldman Sachs. The company said the deal with Deutsche Bank came with more flexible terms and would allow it to take out a total of up to $315 in credit – including loans from various banks.
Philip Belamant, CEO and co-founder of Zilch, noted that the terms of the deal with Goldman Sachs were beneficial to the young, fast-growing startup — but ultimately too restrictive. Zilch’s capital needs accelerated as the business matured and required a credit arrangement that was more flexible, he said.
“For us, we think it’s a major milestone in the growth phase of the company, which means we’ve gone through the line that we are with Goldman, it’s been a great relationship and partnership,” Belamant told CNBC. “But now we’re going to step it up to securitization… so we. [can] keep scaling.”
An additional $190 million in credit will be available to Zilch as the company continues to grow. Belamant said the firm already plans to enter into agreements with other banks to raise debt in the coming months.
The move is a sign of how the buy-now, pay-later startups continue to double down on their products and loan growth even as larger financial and technology incumbents exit the once-bustling market.
This week, Apple announced that it will end its BNPL Pay Later program, which allows users to split purchases into four interest-free installments. Instead, it will integrate third-party services from firms like Affirm and Citi. Meanwhile, Goldman Sachs recently sold Greensky, the BNPL company it bought in 2021.
Belamant said that with the additional $125 million in capital, the firm’s path to an IPO is likely to accelerate, with Zilch currently looking to go public in the next 12 to 24 months.
The deal will help Zilch generate $3.75 billion in gross sales by 2026, Belamant said.
He explained that for every $1 in debt raised, Zilch can generate $30 in gross merchandise value (GMV) — the combined value of sales processed on its platform.
So with $125 million in capital, it will bring in $3.75 billion in gross sales. Once Zilch reaches its $315 million funding cap, it is expected to generate nearly $10 billion in GMV by 2026.
Zilch has already generated over £2.5 billion in GMV since its inception in 2018. The firm reported revenues of £30 million ($38 million) for the 12 months ending March 2023. Losses were £71.7 million, down slightly from 2022’s loss of £78.3 million.
Zilch has three key ways to make money. The first is through interchange fees, where the card networks charge the merchant from the bank account every time the consumer makes a payment. The second is commission fees, where merchants pay to appear on Zilch’s app.
Zilch also has an advertising sales network where it provides locations for retailers to promote their goods to consumers. The British firm claims to be able to achieve conversion rates of up to 55%, which is more than 10 times the search industry average.
Belamant cautioned that the firm is closely monitoring the uncertainty surrounding the upcoming UK election and market conditions more generally.
“It’s hard to say, of course, that we’re in this range just because of the market, [and] elections are underway [so] of course we’ll see what happens,” he said.