Zilch CEO Phil Bellamant.
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LONDON — British fintech company Zilch said Wednesday it has raised $125 million in debt financing from the German banking giant Deutsche Bank In a deal that would help the company double its sales in the next two years and move closer to an initial public offering.
The company, which offers shoppers the ability to purchase items and pay off their debt in interest-free monthly installments, said the debt was structured as a securitization, where multiple loans can be bundled together.
Zilch initially obtained credit for installment plans and other loans from Goldman SachsPrivate credit arm. The company said the deal with Deutsche Bank came with more flexible terms and would enable it to withdraw up to $315 in credit in total – including from different banks.
Philippe Bellament, CEO and co-founder of Zilch, noted that the terms of its arrangement with Goldman Sachs were beneficial for a young, fast-growing startup — but ultimately too restrictive. Zilch's capital needs accelerated as the business matured, requiring more flexible credit arrangements, he said.
“For us, we think this is a major milestone in the growth phase of the company, that we've crossed the line that we have with Goldman, and it's been a great relationship and partnership,” Bellamant told CNBC. “But now we are intensifying our efforts towards securitization… so that we can continue to expand.”
An additional $190 million in credit will become available to Zilch as the company continues to grow. Bellamant said the company is already planning agreements with other banks to raise more debt in the coming months.
The move is a sign of how to buy now, pay later, as startups continue to double down on their products and grow loans, even as larger existing players in finance and technology exit the once-crowded market.
this week, apple It announced it would shut down its BNPL programme, Pay Later, which allows users to split purchases into four interest-free instalments. It will integrate third-party services from companies like Affirm and Citi, instead. Meanwhile, Goldman Sachs recently sold Greensky, a BNPL company it bought in 2021.
IPO within two years?
With an additional $125 million in capital, the company's path toward an IPO will likely accelerate, with Zilch currently aiming to go public in the next 12 to 24 months, Bellamant said.
The deal will help Zilch achieve total sales of $3.75 billion by 2026, Bellamant said.
He explained that for every $1 of debt raised, Zilch can generate $30 in gross merchandise value (GMV) — the combined value of sales processed on its platform.
So, with a capital of $125 million, this would generate total sales of $3.75 billion. Once Zilch reaches its $315 million funding cap, it expects to generate approximately $10 billion in GMV by 2026.
Zilch has already generated more than £2.5 billion in GMV since its founding in 2018. The company reported revenues of £30 million ($38 million) in the 12 months ending March 2023. Losses totaled £71.7 million, down Slightly on 2022 loss of £71.7m, £78.3m.
Zilch has three main ways to make money. The first is through interchange fees, where card networks charge merchants' bank accounts each time a consumer makes a payment. The second is a commission fee, which merchants pay to appear on the Zilch app.
Zilch also has an advertising sales network where it provides placements for retailers to promote their goods to consumers. The British company claims to be able to achieve conversion rates of up to 55%, more than 10 times higher than the search industry average.
Bellamant warned that the company is closely monitoring the uncertainty around the upcoming UK elections and overall market conditions.
“It's hard to say clearly that we're in this range just because of the market, (and) there's an election happening, (so) obviously we'll see what happens,” he said.
