Upstart Holdings (UPST) saw its stock decline on Wednesday after the AI-driven lending platform revealed a forward-flow agreement with affiliates of Fortress Investment Group to purchase up to $1.25 billion in consumer loans over the next 15 months. The shares recently traded at $30.77, down $2.09 from the prior close.
The deal marks another step in Upstart's efforts to secure committed capital for its growing loan origination volume. Sanjay Datta, president of capital and enterprise at Upstart, described the agreement as providing a “resilient and stable foundation” for the company's funding needs. Fortress Managing Director Matt Biczak highlighted the platform's “efficient access to scaled origination” as a key attraction for the investment firm.
Market reaction, however, underscores ongoing investor skepticism about Upstart's business model, which relies heavily on external funding partners rather than deposit-based lending. In 2025, institutional investors purchased 64% of the principal for loans originated through Upstart's marketplace, while lending partners retained or bought 26%, and Upstart held 10% on its own books, according to a regulatory filing.
The Fortress commitment comes as Upstart works to demonstrate that it can support its rapid loan growth with reliable capital sources. The company reported that March loan originations reached $1.263 billion, a 60% increase compared to the same month last year, based on unaudited preliminary figures released monthly.
This agreement follows a similar forward-flow deal announced last week, under which funds managed by Centerbridge Partners will purchase up to $1.2 billion in consumer loans over a 24-month period. That arrangement builds on an initial transaction between Upstart and Centerbridge in 2024.
Upstart's platform processes over 90% of loans through fully automated systems, using artificial intelligence to make credit decisions and, in theory, to price risk more accurately. The company's annual report for 2025 provided a clearer growth narrative than in prior years: revenue jumped 64% to $1.0 billion, total originations surged 86% to approximately $11.0 billion, and net income swung to $53.6 million from a loss of $129 million in 2024.
Despite these positive metrics, the broader consumer finance sector faces headwinds. SoFi Technologies (SOFI) also saw its shares decline on Wednesday after maintaining its 2026 revenue outlook, even while reporting record first-quarter loan originations. William Blair analyst Andrew Jeffrey noted that the absence of a guidance increase disappointed investors, though he flagged that downside risk appears minimal.
Upstart is also pursuing a strategic shift in its funding model. In March, the company announced plans to seek approval from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to establish Upstart Bank, N.A., and to become a bank holding company under the Federal Reserve. If approved, this move could enable deposit-based funding and simplify regulatory and operational complexities.
However, committed capital agreements do not fully insulate Upstart from credit cycle risks. In its annual report, the company warned that investor capital is sensitive to economic fluctuations, interest rate changes, market liquidity conditions, and regulatory shifts. Upstart also noted that it could be required to compensate investors if loan performance or committed loan-sale volumes fall short under certain agreements.
Investors will get the next official update on May 5, when Upstart releases its first-quarter 2026 results after the market close, followed by a conference call at 4:30 p.m. ET.
