Klarna has established its first forward flow and warehouse financing agreement in Germany, a EUR 900 million facility supporting its consumer financing products.
According to the official press release, the EUR 900 million facility is designed to support the growth of the company's consumer financing products in the market, following demand for its Fair Financing offering.
The agreement responds to demand for Klarna's Fair Financing products, which the company has described as one of Europe's largest consumer markets. Klarna's Chief Financial Officer said Fair Financing has seen continued momentum among German consumers, adding that the facility represents a step towards greater capital efficiency as the company scales the product further. The official also noted that new partners had joined the structure, citing the credit quality of the underlying products as a factor.
Structure of the two-year agreement
Under the terms of the two-year agreement, Klarna has sold a portfolio of its German Fair Financing term loans and will sell newly originated German Financing receivables on a rolling basis. The structure is intended to provide scalable, off-balance-sheet funding for the company, while Klarna continues to retain all consumer-facing activities relating to the products, including underwriting and servicing.
As underlying assets amortise over the two-year term, new loans will continuously enter the facility. Klarna expects the agreement to facilitate the origination of up to EUR 5 billion worth of German Fair Financing term loans over the remaining life of the programme.
Wider context
Forward flow and warehouse financing arrangements allow consumer lenders to fund loan origination without holding the full value of those loans on their own balance sheet, as portfolios are sold on to external financing partners on an ongoing basis. Such structures are used across the buy now, pay later and consumer credit sector to support origination volumes while managing capital requirements.
The German facility extends Klarna's use of this funding model into a new market, following the company's broader expansion of its Fair Financing products. In addition, the arrangement adds a further funding channel in Germany, alongside Klarna's existing consumer-facing lending operations there, as the company continues to scale its financing business across Europe.
