The road to AAA: What we learned building credit at Brex

Credit is a fundamental part of Brex. Our journey building credit over the past 7 years was full of technical bets, operational growing pains, and hard-earned lessons scaling capital markets. Now, we’re thrilled to announce that KBRA upgraded Brex’s senior bonds to AAA, the highest credit rating in the industry.

When we founded Brex, we didn’t set out to build an AAA-rated credit platform. We set out to solve a real problem: helping startups access essential spending power from day one.

We imagined a fundamentally different credit system — one designed for high-potential companies that shouldn’t be penalized for being new, asset-light, or fast-growing. We built an engine that could balance customer needs and risk at scale, fueled by real-time data and machine learning.

Here’s how we got there, and what we learned along the way.

Phase 1: Building a real-time credit model from the ground-up

The traditional credit model was built for established corporations. It simply doesn’t work for high-growth companies, and it certainly didn’t work for early-stage startups in 2018.

Our early breakthrough was underwriting based on cash, not credit history. We built a dynamic model using real-time bank data and public fundraising information. That decision created our first engine of growth, but it also introduced a wave of complexity. Bank data is noisy, customers change behaviors quickly, and macroeconomic conditions shift faster than traditional risk models can react.

Learning to manage this complexity was key to reaching stellar credit performance. Real-time data allowed us to outperform incumbents by 2x less charge-offs during COVID, for example. Part of our success also came from the technical decisions behind the credit model, switching early on from a hard-coded, rule-based system to machine learning. This transformed every underwriting decision into a default probability, and over time, more fundamental predictions such as future liquidity risk — all without traditional feeds of financial information and relying entirely on sparse (but real-time) data sources such as bank account data, ecommerce sales, etc.

But building great models was only one part of the challenge. Next, we had to prove their durability, year after year, in order to crack the capital markets.

Phase 2: First securitization, and how we got it right

By 2021, our underwriting model was working. We had proven we could reliably underwrite venture-backed startups, many with little operating history, based on their bank data and cash runway — and through cycles. But we knew that long-term success required a scalable and durable credit through debt capital markets.

Securitization was the answer, enabling low cost of funding and capital diversification off balance sheet. Brex’s goal was to become the first modern card issuer to break into the securitization markets, but it came with complexity. To participate in the asset-backed securities (ABS) market, we had to build infrastructure that would satisfy public bond investors, ratings agencies, and legal/regulatory standards, all while maintaining product velocity and risk performance.

We also decided to set up a Master Trust: an innovative structure that gives us the flexibility to issue Series (i.e., securitizations) backed by a single pool of assets, i.e., all of Brex’s charge card receivables. This avoids tying each securitization to individual customer accounts and allows us to add to the Master Trust pool the receivables generated by our customers on a daily basis, which is particularly attractive given the revolving nature of our charge card receivables. Further, a Master Trust does not require us to create a new SPV for each issuance, which results in faster time to market and lower execution costs.

To make this work, we had to build the infrastructure to accurately model and allocate the cash flows from the underlying assets to the different series of ABS (which maps to different investors). Despite the engineering and legal complexity, we believe the long-term benefits of a highly scalable, economical and efficient structure justified the investment.

In 2021, just three years after launching our card product, we issued our first securitization. It priced well, earned an A rating, achieved a 90%+ advance rate, and attracted strong investor demand despite our relatively short track record and new model.

Phase 3: From A to AAA, compounding performance across three market cycles

2022: A in market turmoil

In 2022 as we set out to issue our second securitization, the market turned, rates spiked, volatility increased, and ABS spreads widened. We still decided to go out in the market with our second deal, as we believed that waiting and attempting to time the market was not the right approach.

Our strong performance, with only 3bps of 3-month Average Net Charge Off Rate in the master trust, allowed us to confidently maintain the A rating. Although our second securitization priced wider than our first due to market dynamics, we prioritized the long-term benefits of securing financing and reinforcing to investors Brex's position as a mature and committed issuer aiming for recurring presence in the market.

2024: AA - progress compounds

Building on our experiences from the first two securitizations, our third issuance involved significant enhancements. We engaged extensively with Rating Agencies over several months, proactively sharing performance data and detailed explanations of our underwriting processes.

Prior to marketing, we held an in-person non-deal roadshow with investors. Similar to equity roadshows, this direct interaction yielded valuable feedback, with some investors indicating a willingness to accept a tighter spread in exchange for greater protection concerning the advance rate. We modified the structure to reflect this feedback.

Our third securitization achieved a significant milestone with the upgrade of its senior bonds to AA. This accomplishment culminated in a record-breaking deal for Brex across key metrics, including pricing, size, rating, and investor demand.

2024: AAA upgrade

In March, KBRA upgraded our A1 senior bond from our 2024 securitization to AAA, the highest possible rating. Our years of investment into structural underwriting and capital markets, through multiple business cycles, have resulted in exceptional performance in our portfolio, which finally has now earned the ultimate industry recognition: a AAA rating.

KBRA awarded this rating after a rigorous review of our financials and consistently strong credit portfolio performance:

• Average monthly net charge-off rate of just 0.114%
• Payment rates consistently exceeding 99%
• Excess spread remaining consistently above 40%

Why AAA matters (and why we’re still just getting started)

Reaching AAA reinforces our belief that innovation and discipline can coexist. Machine learning and AI, when applied thoughtfully, can drive real-world performance, not just hype.

We didn’t build Brex to win ratings. We built it to serve companies that deserve better financial services, and the AAA just means we can do that at a greater scale.