Lending Strategies Explained
Last updated
Last updated
Kasu’s launch Delegate and technology partner is an award-winning ‘SaaS+Fintech’ business, . Through this partnership, Kasu and Apxium deliver innovative Accounts Receivable Automation Software and Smart Payments technology. This enables Kasu to offer innovative Lending Strategies underpinned by the most intelligent Receivables and Payables financing solutions for real-world businesses.
Lending Strategies are at the core of Kasu's unique product offering. They allow Lenders to participate in real-world private credit opportunities that are otherwise only available to wholesale and institutional investors, ensuring Kasu continues to democratise access to the highest quality business lending opportunities in an inclusive and equitable manner.
The following provides a summary of the key elements of Lending Strategies:
Kasu exclusively partners with proven loan originators and risk managers (Delegates) that offer business lending opportunities to Lenders on Kasu. These business lending opportunities are segmented by industry sectors and/or lending asset classes known as Lending Strategies. Within each Lending Strategy, Delegates may offer additional categories of risk and return (APY) offers. This occurs by structuring (or separating) a Lending Strategy into a maximum of three loan Tranches: Senior, Mezzanine and Junior. This allows Delegates to offer additional segmentation layers of business lending opportunities to Lenders within a single Lending Strategy. Each loan Tranche offers a ranking priority in the capital structure in terms of recovery of funds in the event of losses.
Delegates offer Lending Strategies to Lenders on Kasu. Delegates must exemplify a proven historical track record of outstanding loan portfolio performance and credit quality, demonstrating outperformance in their lending asset class specialisations. They bring unique proprietary deal flow, which is enhanced by Kasu’s technology that delivers superior risk management, ensuring Lenders are presented with the highest quality yields. They manage all loan servicing, repayments, credit underwriting, risk management etc. based on their proven track record.
Kasu’s inclusive and equitable approach to democratising access to private credit markets allows all types of Lenders to participate (big or small). Lenders deploy USDC to the particular Lending Strategy(ies) and loan Tranche(s) that align with their financial objectives and risk profiles, by submitting a Lending Request. Kasu can also facilitate the conversion of certain cryptocurrencies to USDC via 1inch during the Lending Request process. Small Lenders (Lenders who typically deploy less than 350,000 USDC) are provided with choice and control over how Delegates deploy funds. They are informed exactly which End Borrowers their funds are loaned to at any given time, including the moment funds are redeployed to other End Borrowers. Further promoting control and choice for Lenders is the opportunity to ‘opt out’ within a prescribed time period of identifying an End Borrower to which funds will be deployed.
It is important to note that small Lenders’ funds within Lending Strategies are not ‘pooled’ like a managed fund (Lenders who typically deploy less than 350,000 USDC). Rather, they have control and choice over the deployment of their funds from one End Borrower to another. This process is curated by Delegates, with smaller Lenders provided with a high degree of choice to opt out of every time their funds are deployed from one End Borrower to another. Full transparency over the identification of each End Borrower is provided to such Lenders so they can be fully informed of their decision to opt in/out. As part of the opt in/out process, it is noted that Lenders will automatically opt in should they not otherwise notify Kasu within 48 hours of being informed of the deployment of their funds. Please refer to the for a detailed explanation.
This ultimately provides smaller Lenders with choice and control around the allocation of their capital, including decision-making influence around the degree of funding support provided to particular End Borrowers. It also empowers such Lenders to take control over their personal circumstances when it comes to the use of their capital.
Funds in each Lending Strategy are used to finance loans to qualifying businesses in the 'real world,' by offramping USDC to fiat currency. For example, the currently available on Kasu provides funding to Accounting Firms in Australia and North America against their outstanding invoices that are yet to be paid by their clients, thereby enabling them to manage working capital more efficiently.
Lenders earn interest on their USDC loans, which is accrued on a per epoch basis (an epoch being every seven days) and added to each Lender's loan balance at the start of each new epoch. This is commonly referred to as capitalised interest, whereby Lenders can earn compound interest each week. Accessing interest earned occurs through the same mechanism as accessing initial loaned capital, requiring Lenders to submit a Withdrawal Request.
Given that interest accrues every epoch, APY represents the total effective interest return over a year assuming a Lender leaves both their principal and earned interest in the Lending Strategy without withdrawing funds. APY therefore takes into account the effect of compound interest (auto-compounding), unlike APR, which only shows simple interest. Therefore, if a Lenders withdraws any funds, their effective interest return may be lower than the stated APY.
Lenders can request to withdraw part, or all of their loan balance(s), which includes accrued interest. The acceptance of Withdrawal Requests is subject to the available liquidity within the specific Lending Strategy from which the Withdrawal Request is made.
Kasu uses an epoch-based system to manage transactions associated with Lending Strategies in an orderly manner. At the end of each epoch (being every seven days), there is a Clearing Period (which occurs over 48 hours) during which time the outcome of Lending Requests and Withdrawals Requests is determined by the Delegate, based on liquidity requirements.
By participating in Kasu Lending Strategies, Lenders earn interest on their capital in return for supporting the operations and growth of real businesses in tier 1 economies. The diversity of Lending Strategies and loan Tranches allows Lenders to assess a range of business lending opportunities that suit their specific needs, each offering a unique APY based on the varying degrees of risk across their respective industry sectors and lending asset classes.