Klarna Transfers $26 Billion in Buy Now, Pay Later Loans Prior to Initial Public Offering
Klarna Moves Forward with IPO and Loan Sale for Financial Strength
Klarna, the popular buy now, pay later (BNPL) service, has announced plans to resume its initial public offering (IPO) in September 2025, aiming for a valuation between $13 billion and $14 billion and looking to raise about $1 billion by pricing shares between $34 and $36 [1][5]. The IPO was initially delayed due to economic uncertainties, but Klarna has now resumed its plans and filed an amended agreement with the SEC [2][3][5].
As part of its preparations for the IPO, Klarna is selling $26 billion in BNPL loan receivables to Nelnet, a U.S.-based financial services firm primarily focused on student loan servicing [2]. This transaction involves offloading newly originated, short-term, interest-free pay-in-four receivables over multiple years. The sale is intended to clean up Klarna’s balance sheet ahead of the IPO by converting outstanding loans into investable cash [2].
The impact on Klarna’s financial health is expected to be positive. By offloading these BNPL loans, Klarna reduces risk exposure and gains liquidity that will support future initiatives, including launching a Klarna-branded debit card and credit card later in 2025 [2]. This move also helps Klarna present a stronger and cleaner financial position to potential investors, improving confidence ahead of going public.
Recent financial results show Klarna’s BNPL delinquency rate dropped below 1% in Q2 2025, revenue grew 20% year-over-year to $823 million in that quarter, although net losses increased due to restructuring and stock-based payments; on an adjusted operating basis, Klarna showed a profit, indicating improved financial management as it approaches the IPO [4].
The benefits of offering BNPL significantly outweigh the costs for merchants, according to a study from the Journal of Financial Economics. BNPL increases sales by 20%, driven by low-creditworthiness customers [6]. However, Klarna has pushed back on the idea of reporting BNPL payment activity to credit bureaus.
Klarna's revenue model is based on merchant fees for transactions, as well as delinquency and late fees [3]. The company is expanding into traditional banking products and services like debit and credit cards to address the challenges with profitability [7]. Tough economic times disproportionately affect lower-income earners, who make up Klarna's primary user base [8]. An economic downturn could reduce consumer spending and negatively impact the financial health of Klarna's merchants.
Ongoing tariff wars may weigh on the long-term value of BNPL loans [9]. Danner, in a statement, mentioned that the challenges with profitability for large fintech firms like Klarna are not surprising, given the expansion into traditional banking products [10]. The primary benefit of BNPL loans, from the retailer's standpoint, is to increase sales rather than profit from lending activities [11].
In summary, Klarna's move to sell BNPL loans to Nelnet is a strategic step to strengthen its financial health and attractiveness to public market investors. The funds from the transaction will help support upcoming initiatives, including the launch of a Klarna-branded debit card and a credit card. Klarna's financial results show signs of improving operational profitability and lower delinquency rates, boding well for its IPO plans.
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