This story is part of GlobalCapital's SF Vegas special report on the outlook for US securitization in 2026. It is available exclusively to subscribers until the conference takes place in February.
The popularity of asset based finance (ABF) is opening up forward flow arrangements (FFAs) to more types of lender. Under the deals, lenders agree to sell certain assets to a buyer, normally a fund or bank, on a continuous basis for a pre-agreed price.
Sources expect more FFA transactions in 2026, after some significant deals in 2025. Motorcycle manufacturer Harley-Davidson has agreed to sell two-thirds of future retail originations to KKR and Pimco, while Klarna struck deals with Nelnet and Elliot to fund a portion of its buy now, pay later business.
FFAs give lenders certainty of funding and diversification beyond warehousing and syndicated securitization bonds. In addition, the deals are whole loan sales so none of the seller’s capital is tied up financing junior tranches, as they would be in a securitization.
The deals are also attractive to the buy-side. “From an investor’s perspective, [FFAs] create a way to access well-underwritten product directly, without the requirement to own an origination platform,” says Aaron Ong, head of asset-based private credit at TPG.
TPG closed three deals in January alone totalling $4.4bn, with auto lender OneMain Financial, equipment financing firm Elevex Capital, and home improvement lender Thrive Financial.
“There is a pricing benefit [to working directly with an originator] and it allows us to get closer to the asset,” says Adam Rizkalla, managing director at asset manager Canyon Partners.
His firm pledged $250m last year to support originations by Florida headquartered lender A&D Mortgage.
“Originators also want to work with funds like Canyon that are committed to a sector and provide long-term, consistent capital,” Rizkalla adds. “We are buying loans with enough flexibility to allow [different forms of refinancing and exits], working with issuers who have strong track records with billions of dollars in originations across multiple cycles.”
Sizing up
The attraction to the market on both sides is reflected in the deal flow. “A few years ago, before this market grew significantly, I can’t recall working on a forward flow in which it was [the seller’s] first capital markets transaction,” says Phil Sarid, partner at law firm Morgan Lewis. “Traditionally, there’d first be some kind of bank financing, and the forward flow would come later, if at all. Today, I think forward flow facilities are an option for just about any lender.”
That demand to do deals is compounded by the proliferation of non-bank lending replacing retreating banks. Advisory firm Five Sigma Finance’s Joshua Meier says there has been an “emergence of tech-driven originators and their new tech-enabled loan products”.
“These loan products are not yet tried and tested with little track record and therefore can’t access public securitization markets,” Meier says. “These originators have a real need for alternative private funding sources and forward flows provide more certainty of future funding and diversity across funding options.”
Yet, despite the large number of opportunities, investors stress the importance of choosing their counterparties carefully.
"Although there are many originators eager to pursue forward flow relationships, success depends on selecting the right operator within each asset class,” says Ong. “We draw on our experience and analytical capabilities to identify partners that align closely with our view of the world.”
As well as credit risk, FFA buyers need the seller to originate enough loans to justify the cost of the work involved in setting up the agreement. Meier estimates that at least “$100m of origination [is needed] over the first 12-18 months for the economics to work”.
An eye on the exit
Demand for deals deepens further if buyers can recycle capital. Depending on their cost of funds, it can be important to asset managers’ returns to get senior funding. To accomplish that, they face similar options to the asset originator - warehousing, a public securitization, or a whole loan trade.
“We’re not seeing many forward flow purchasers going out and doing a 144A broadly marketed term securitization with their assets,” says Morgan Lewis’ Sarid.
Warehousing is common, but a public deal is more costly and requires cooperation from the originator. Many investors seem to view the public markets opportunistically taking opportunities as they arise.
“While public, lower cost financing options may be available over time, we do not rely on them to justify an investment,” says TPG’s Ong.
Selected US forward flow deals 2025
Originator | Buyer | Assets | Lending volume |
Affirm | Liberty Mutual | Buy now, pay later | $5bn |
Pagaya | Blue Owl | Consumer loans | $2.4bn |
Upstart | Fortress | Consumer loans | $1.2bn |
Harley Davidson | KKR and Pimco | Retail vehicle loans | >$5bn |
Klarna | Elliot | Buy now, pay later | $6.5bn |
Octane | Moore Specialty Credit | Powersports loans | $300m |
Klarna | Nelnet | Buy now, pay later | $26bn |
Point Digital | MidOcean Partners | Home equity investments | $600m |
Parafin | Cross River Bank PFG | SME financings | $360m |
GlobalCapital data gathered from publicly available sources. Lending volume is as disclosed by deal participants. Facility sizes will be significantly smaller for short tenor assets.
Source: GlobalCapital
