Share
7,705 Posts.
lightbulb Created with Sketch. 2797
clock Created with Sketch. 10/06/22
13:34
Share
Originally posted by StefanF:
↑
Affirm's longer dated debt causes a number of issues for them. First, it's higher valued debt and has a longer maturity which means any credit tightening will take a while to flow through their books. As a comparison, Afterpay's entire book turns over in a month so they can be extremely nimble. In addition, Afterpay's short debt duration means the book is extremely efficient in "self-cleaning" and removing bad customers, not really something that Affirm can do in a short time. twelve times a year. That's extremely good capital efficiency. In the most simplistic form this means they pay 6% and get 48% back (12 times 4% - simplified). If rates rise by 2% it means they pay 8% to get 48% back. This is different to an organisation where the book turns over, say twice a year.
Expand
For example, if Afterpay pays a 6% annual rate on their funding facility, that facilitates 4% ~margins twelve times a year.
(20min delay)