Affirm’s Industrial Bank Push: What It Means for Small Business Credit (and Beyond)

Last week, Affirm Holdings, Inc. submitted regulatory applications to establish a Nevada-chartered industrial loan company (ILC) marking a major shift in the company’s financing and product ambitions.

This move is part of a broader trend of fintech firms seeking charters that let them do more than point-of-sale lending, but Affirm’s play specifically could reshape how the company engages both consumers and businesses.

What Is an Industrial Loan Company (ILC)?

An industrial loan company (ILC) is a special kind of FDIC-insured bank that can be owned by non-financial companies and offers many banking services, including deposit accounts and consumer or commercial loans, under federal and state supervision.

Unlike traditional banks, ILCs don’t have to become holding companies subject to Federal Reserve oversight, which makes them an attractive charter route for fintechs wanting to expand beyond their existing product stacks without taking on the full regulatory burden of a traditional bank holding company.

Why Affirm Wants a Bank Charter — Beyond BNPL

Through its app and merchant integrations, Affirm today offers buy-now, pay-later (BNPL) plans and installment loans at checkout, plus products like the Affirm Card and savings features (held by partner banks).

But applications for Affirm Bank signal a desire to own the whole experience rather than rely on partner banks and third parties for deposit and lending infrastructure. Under a charter, Affirm could potentially:

1) Control the Full Capital Stack

Right now, Affirm partners with FDIC-insured banks to hold savings deposits and fund loans. A charter would let it source its own deposits, which are cheaper and more stable than wholesale funding, and that, in turn, could support broader lending programs.

2) Offer Deposit Products Directly

Affirm already provides savings accounts via partners, an FDIC-insured product, but with its own bank, it could potentially design tiered business savings, sweep accounts for merchants, and other yield-generating options tied directly to commercial cash flow.

3) Move Into Business Lending

This is the part your audience will care about: with a bank charter, Affirm could underwrite and originate commercial loans such as:

• Small business working capital loans

• Lines of credit for merchants and SMBs

• Term loans for equipment, expansion, or inventory

• Commercial credit cards and revolving credit products

• Deposits and payment accounts bundled with credit

These are the very products that fintech banks like PayPal Bank and others are eyeing as well, aiming to reduce dependence on external partners for merchant credit facilities while capturing more revenue and control over customer relationships.

How This Fits Into Affirm’s Bigger Picture

Affirm’s existing BNPL and installment products are consumer credit, and heavily anchored in digital commerce. But a bank charter expands the potential beyond short-term financing at checkout:

A bank can:

• Take customer deposits (a cheaper source of capital than partnerships)

• Build risk-rated lending portfolios based on cash flow data and purchase history

• Offer commercial banking services tailored to small business cash needs

Think of it like Affirm layering traditional banking infrastructure under its tech-first stack, so the company doesn’t just enable payments but actually finances operations, much like what Square (Block) and PayPal have been trying to build.

What This Could Look Like in Practice

Rather than a generic business loan product, Affirm could leverage its transaction and credit data at checkout to underwrite commercial customers faster and with deeper insight. For example:

• A merchant whose BNPL sales trend upward might automatically qualify for a working capital line or revenue based financing.

• A service business with predictable cash flow could receive term financing offers alongside Affirm payment options.

• Integrated insights could let Affirm launch revenue-based financing products that fluctuate with business performance, a natural progression from installment consumer credit to commercial credit.

This embedded approach, underwriting by digital behavior and cash flow signals rather than just credit scores, is where most fintech innovation in commercial lending is heading right now.

A Strategic Timing Advantage

Affirm’s charter bid comes in a period where regulators are both wary of but also open to fintech evolution. BNPL regulation remains patchy in the U.S., with different state laws and little federal oversight.

Owning a regulated bank, subject to FDIC and state supervision, could help Affirm navigate regulatory uncertainty and build durable lending businesses that stand up to scrutiny.

What It Doesn’t Mean (Yet)

It’s important to note: approval isn’t guaranteed. Industrial charters can take substantial time and require rigorous compliance structures. And even after approval, launching a full slate of small business products would require models, systems, and risk frameworks distinct from Affirm’s consumer offerings.

Final Lookahead: Affirm 2.0 — From Payments to Platform Banking

This isn’t just another fintech chasing a bank charter; it’s a strategic pivot toward platform banking, where deposit taking, underwriting, and lending sit under one roof and tie directly into merchant cash flow and consumer behavior.

If successful, Affirm Bank may end up being less like a traditional business lender and more like a data-driven commercial finance engine, one that bridges the world of embedded payments, digital credit, and small business lending in ways that today’s banks haven’t fully mastered yet.