An interesting tidbit on Sezzle's interest expenses and...

An interesting tidbit on Sezzle's interest expenses and borrowings.

When compared to APT and ZIP, the interest rate Sezzle pays for its line of credit is basically shit.

SZL: 9.5% on 100M line of credit
APT: Weighted average rate of 2.2% for Aus borrowings and 3.2% for US borrowings
ZIP: Effective interest rate of 4.7%

And keep in mind Sezzle's line of credit is secured against its receivables just like the othes.

So what has management done? They have this 'Merchant Interest Program' where they effectively borrow from their merchants at LIBOR + 5% compounded daily.

At 30 June 20, the Merchant's payable was $39M (Dec 19: $13M) and they had drawn $37M from its line of credit. It will be interesting to see how much this grows by December as Sezzle only needs to have a minimum of $40M from the line of credit by then.

Obviously longer-term, it would be more sustainable to obtain institutional debt funding at a lower interest rate but as a merchant, having Sezzle defer payment to earn 3-5% interest above your bank account could be appealing for many.

Even if Sezzle does choose to cut back on this 'Merchant Interest Program' and not have it as a signifiant fundingsource in the future, it's good to see they're being resourceful and not paying 9.5% interest to fully fund their business.

I'm pretty sure ZIP and APT doesn't have a similar arrangement going on with their merchants but hard to say as the nature of their payables are broken down.