Affirm Plunges 44% YTD, Fintech Stocks Drop

President Trump recently announced a new 10% tariff on goods imported from all countries, which has caused a big reaction in financial markets. This change in US trade policy has especially affected the fintech sector, leading to a drop in the stock prices of these companies.

• Affirm: Down 44% year-to-date, with a 21% plunge since April 2
• SoFi: Fallen nearly 20% since the tariff announcement
• Upstart: Dropped 12% following the announcement
• Robinhood: Decreased by more than 17%
• PayPal: Experienced a 3.5% drop on April 4 alone, adding to an 11% two-day decline

For comparison, these declines are approximately twice as severe as the broader S&P 500's performance over the same period.

_{Source: reuters.com}

Impact to Alternative Business Lenders

While experts discuss the big-picture economic effects, lenders working in alternative lending are dealing with immediate problems:

1. Import-Dependent Borrowers Are Struggling: Retailers and manufacturers relying on imported goods are experiencing significant cost increases due to tariffs as high as 104% on Chinese products and 84% on other imports. Many stockpiled inventory in anticipation but are now facing liquidity constraints due to overstocked warehouses and slower turnover.
2. Collateral Value Fluctuations: For asset-based lenders, the tariffs are necessitating recalibration of collateral valuations, especially for inventory-heavy businesses dependent on imports. This directly impacts loan-to-value ratios and available credit.
3. SMB Margin Compression: Small-to-medium businesses face reduced margins as they struggle to pass rising costs onto price-sensitive consumers. This directly affects their ability to service debt and is forcing alternative lenders to adjust risk assessments.

Strategies for Lenders to Thrive in a Changing Market

Practical Underwriting Adjustments

Smart alternative lenders are making specific adjustments to their underwriting models:

1. Supply Chain Disruption Analysis: Leading lenders are implementing more sophisticated analysis of supply chain vulnerabilities in credit decisions. This includes evaluating borrowers' ability to source alternative suppliers and pass costs down the value chain.
2. AI-Driven Risk Assessment: Alternative lenders are leveraging AI automation and alternative data sources for faster approvals while maintaining risk controls. This technological edge allows for real-time monitoring of borrower performance and early intervention when stress signals appear.
3. Relationship-Based Approach: Unlike traditional banks, successful alternative lenders are prioritizing deep relationships with borrowers, providing not just capital but genuine financial guidance through economic uncertainty.
4. Flexible Terms: Top lenders are offering extended payment terms or temporary rate adjustments to maintain borrower relationships while managing risk exposure. This flexibility is a key competitive advantage over traditional banks.

Regulatory Realities and Compliance Strategies

The implementation of Section 1071 regulation (now delayed to begin July 18, 2025) requires alternative lenders to collect and report detailed data on small business lending. This regulatory expansion is forcing practical changes:

1. Documentation Standardization: Leading alternative lenders are implementing more consistent documentation practices across their portfolios to meet reporting requirements.
2. Transparent Underwriting Systems: Forward-thinking lenders are developing more transparent underwriting systems that can withstand regulatory scrutiny while maintaining their speed advantage.

Bottom Line for Alternative Lenders

The current market presents both significant challenges and strategic opportunities. Success in this environment requires:

1. Industry-Specific Expertise: Deep understanding of how tariffs impact specific sectors allows for intelligent risk management.
2. Technological Advantage: Leveraging data analytics to assess borrower risk more accurately than traditional banks.
3. Relationship Focus: Providing financial guidance alongside capital to help borrowers navigate economic uncertainty.
4. Flexible Servicing: Platforms enabling dynamic adjustments to loan terms when borrowers face temporary setbacks improve repayment rates.

Alternative lenders who can balance these elements while maintaining their speed and flexibility advantages will likely emerge stronger in an increasingly complex lending landscape.

Our Opinion

The market is experiencing a classic overcorrection, creating an opportunity for the prepared. The tariff situation is stress-testing business models in the alternative lending ecosystem, with significant drops like Affirm's 44% indicating a reassessment of risk.

Lenders are taking different paths: some retreating, others focusing on core strengths, and a few expanding into areas left by traditional banks. The industry is entering a period of consolidation, accelerated by tariffs, which will distinguish strong operators from those who thrived in easier times.

The next 18-24 months will be crucial, offering substantial opportunities for those with the right resources, but the transition will be challenging. The alternative lending market is evolving, not dying, as pressure creates both diamonds and dust.

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