Klarna’s $26 Billion BNPL Loan Deal to Fund U.S. Expansion

Klarna has taken a significant step to fuel its expansion in the U.S. In mid-2025, the Swedish buy-now-pay-later (BNPL) pioneer announced the landmark Klarna-Nelnet Partnership, with the leading U.S. loan servicer.

Under the multi-year agreement, Nelnet will purchase up to $26 billion of Klarna’s “Pay-in-4” receivables, giving Klarna predictable capital to scale its business, strengthen its balance sheet, and accelerate its path to profitability.

Key Takeaways

• Klarna has struck a multi-year deal with Nelnet to sell up to $26 billion of its U.S. “Pay-in-4” buy-now-pay-later (BNPL) loans.
• Under this agreement, Nelnet will continuously purchase newly issued short-term installment loans from Klarna, providing Klarna with cash upfront in exchange for future consumer payments.
• The transaction frees up Klarna’s capital, bolstering its balance sheet and liquidity. The funds are earmarked to fuel Klarna’s aggressive expansion in the U.S. market.
• By offloading these loans, Klarna reduces its exposure to credit risk. Nelnet – a student loan servicer – gains a new asset class by investing in what it sees as “cash-flowing assets” of consumer installment loans.
• This deal is one of the most extensive BNPL funding programs to date, underscoring how mainstream BNPL has become and highlighting a broader trend of fintechs partnering with traditional lenders for stable funding.

Klarna-Nelnet Partnership: Secures $26 Billion U.S. BNPL Funding

Klarna – the Swedish fintech and buy-now-pay-later innovator – announced in mid-2025 that it had partnered with Nelnet, a U.S. student loan servicer, to finance its U.S. BNPL business. Nelnet will purchase up to $26 billion worth of Klarna’s U.S. “Pay-in-4” loan receivables over the life of a multi-year agreement. This is a forward-flow financing arrangement: each week or month, as Klarna originates new short-term installment loans for consumers, Nelnet buys those loans, providing Klarna with immediate cash.

Because Pay-in-4 loans are typically paid back over 6 to 8 weeks (four bi-weekly payments), the portfolio turns over relatively quickly – but over time, Nelnet’s purchases can sum to $26 billion in payment volume. The structure is off-balance-sheet for Klarna, meaning the loans are effectively removed from Klarna’s books, freeing up capital and improving its financial flexibility.

Klarna’s own statements make it clear that the influx of funding will support its growth in the United States. By monetizing its receivables in this way, Klarna obtains cash to reinvest in marketing, partnerships, product development, and lending capacity without issuing new equity or debt. Niclas Neglén, Klarna’s CFO, described the agreement as a “landmark transaction” for the company in the U.S., one that allows it to “scale a core product responsibly” while continuing to provide consumers with smooth, interest-free payment options. In short, the deal supplies Klarna with predictable capital at scale – money it can use to expand its Pay-in-4 program and related services in the American market.

For Klarna, this is fundamentally a financing strategy. Rather than funding $26 billion worth of consumer loans from its own balance sheet, Klarna sells the loans as they are made. It likely receives slightly less than the full face value of the loans (as Nelnet will pay a discounted price or collect the payments directly), but it gains liquidity immediately. This arrangement reduces Klarna’s credit risk: any borrower who defaults or misses payments on those loans now poses risk to Nelnet, not Klarna.

Klarna trades the uncertain future cash flows of consumer credit for cash today. The company’s announcement emphasizes that this “enhances balance-sheet flexibility” and fits into its long-term capital strategy. By clearing roughly $26 billion of loan receivables from its books (spread over several years), Klarna can operate with a lighter balance sheet and preserve capital for future growth.

Nelnet, for its part, is adding a new line of business. Traditionally known as one of the largest servicers of U.S. student loans, Nelnet has been moving into other loan markets. In unveiling the deal, Nelnet’s Chief Investment Officer, Judd Deppisch, stated that the company is utilizing its financial strength to “invest in attractive cash-flowing assets” by acquiring Klarna’s installment loans. In practical terms, Nelnet will pay Klarna for the loans and then collect the payments from consumers (who face no interest on each Pay-in-4 plan).

Because Klarna’s BNPL loans are short-term and have historically seen relatively low default rates, Nelnet views them as a safe, steady-yield asset. Essentially, Nelnet is acquiring an extensive portfolio of consumer installment loans, with the expectation that most customers will repay on schedule, and earning revenue from the spread between what it paid for the loans and the payments it receives. This is a logical diversification for Nelnet: instead of lending only to students, it now gains exposure to younger consumers buying retail goods and services through Klarna’s platform.

The Buy Now, Pay Later industry is inherently capital-intensive. BNPL companies must pay merchants upfront for purchases made on behalf of consumers, and then collect payments over a period of weeks or months. As these companies proliferate, they require vast pools of capital to fund the receivables (outstanding loans). In many cases, BNPL fintechs have partnered with banks, Wall Street investors, or created securitizations to access funding. Klarna’s $26 billion Nelnet deal is among the most extensive financing programs in the BNPL sector to date.

It demonstrates the business’s significant growth: BNPL firms are processing hundreds of millions of dollars’ worth of transactions through their platforms every week, and they require stable funding channels to match that volume. The deal also reflects broader economic pressures – with higher interest rates and tighter credit markets, fintech lenders have to be creative. By pre-arranging a multi-year flow of funding, Klarna locks in capacity even if market conditions change. It’s a hedge against uncertainty: rather than scrambling for loans each quarter, Klarna knows it has a committed buyer of its BNPL receivables.

For Klarna’s U.S. strategy, the timing is significant. The company has been aggressively expanding in America, where it competes with homegrown BNPL players like Affirm and Afterpay (owned by Block). In recent years, Klarna has signed up millions of U.S. shoppers and partnered with major retailers (from online stores like Amazon and Shopify merchants to point-of-sale options in physical stores).

It has also launched new services, such as a Klarna-branded debit card and credit card (through partnerships with other financial firms), to broaden its product suite. The Nelnet funding deal gives Klarna confidence that it can keep extending Pay-in-4 offers without hitting a capital crunch.

For example, Klarna might use some of the cash to offer more promotional deals or cover the initial payments of more customers. It could also allow Klarna to keep merchant fees competitive; with ample funding, Klarna might accept lower fees from retailers to win business and market share. In short, having a steady $26 billion channel means Klarna can grow its U.S. loan book more confidently. Company executives have noted that this deal is a “critical pillar” in its narrative for going public. (Klarna has been planning a U.S. IPO, delayed by market conditions, and improved funding can help show investors the company is on firmer financial footing.)

Financially, the deal will alter Klarna’s financial accounts. Instead of reporting tens of billions in BNPL loans as assets (with associated credit provisions), Klarna will gradually remove those as they are sold to Nelnet. This reduces Klarna’s capital requirements and loan-loss provisions, since Nelnet now assumes the borrower credit risk. Of course, Klarna effectively pays for this benefit: it likely sells the receivables at a discount. It will service the loans on Nelnet’s behalf (collecting payments and handling customer service) for a fee. But analysts view this as a good trade-off. In the short term, Klarna converts loans into cash, which can be used more efficiently.

Over the longer term, Klarna can focus on earning revenue from merchant fees and fintech products, rather than holding large consumer credit balances. Importantly, BNPL loans have been a drag on Klarna’s profitability: in 2024 and early 2025, Klarna reported continued losses driven by credit losses on loans and high operating costs. By offloading a portion of its lending book, Klarna may narrow those losses. The sale is seen as part of Klarna’s effort to sharpen its path to profitability by reducing risk on its balance sheet and emphasizing fee income from retailers and fintech services.

This move also illustrates a broader partnership between fintech and traditional finance. When a venture-backed startup or fintech like Klarna needs funding at scale, it often turns to institutional investors or banks. Here, a Silicon Valley-style payments company has allied with a century-old loan servicer. It’s a mutual benefit; Klarna receives reliable capital, and Nelnet gains access to a modern consumer finance market.

Deals like this signal that BNPL has matured into mainstream finance – not just a niche tech lending solution. In the BNPL sector, we’ve seen other examples (for instance, PayPal once sold a portfolio of BNPL loans to an asset manager, and Affirm regularly issues securitizations). The Klarna-Nelnet deal is among the largest, underscoring that installment credit is a significant business. It may set a template: future BNPL lenders may routinely form long-term loan-sale agreements with banks or funds to manage growth.

Conclusion

Klarna’s $26 billion loan sale to Nelnet is a landmark financing move. It demonstrates how Klarna is leveraging its innovative payment model in conjunction with traditional capital sources to drive expansion. The deal reduces Klarna’s balance-sheet load and opens up funds to invest in its U.S. business, while providing Nelnet with a steady return from consumer installment loans.

As the BNPL market continues to grow, such partnerships are likely to become more common – bridging the gap between fintech agility and the deep pockets of established financial institutions.

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