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Why the zipMoney Ltd share price went gangbusters today

Thankfully for its shareholders, the zipMoney Ltd (ASX: ZML) share price has ended its losing streak in style today.

At the time of writing the payments company’s shares are up 13% to 70 cents.

What happened?

This morning the company announced the completion of a $260 million asset-backed securitisation warehouse program for its consumer receivables.

Banking giant National Australia Bank Ltd (ASX: NAB) led the program, providing $200 million in senior funding.

According to the release the new facility will have a two-year tenure, resulting in a significantly lower average cost of funds.

This is expected to have a meaningful impact on the company’s future profitability, putting it in a great position to breakeven by FY 2018 as planned.

Pleasingly zipMoney will receive a boost almost immediately as it re-finances approximately $70 million of existing receivables. This will have a material impact on its interest expense this year.

Should you invest?

Overall I can’t say I’m surprised to see its share price rally today. I believe this is a big step forward for the company and puts it in a better position to profit from the rapidly growing buy now, pay later market.

But whilst the company has a number of big name companies using its service like Webjet Limited (ASX: WEB), MICHAELHLL FPO (ASX: MHJ), and Forever New, my preference in the industry remains its rival Afterpay Holdings Ltd (ASX: AFY).

As of the end of the third quarter, zipMoney had 193,456 consumers using its service, whereas Afterpay boasted over 575,000 consumers.

There may well be room for two players in the market, but I would rather back the market-leader.

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The Motley Fool Australia owns shares of National Australia Bank Limited. Motley Fool contributor James Mickleboro has no position in any stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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