Credit Markets - A Multidimensional Problem

Kasu views the credit markets problem as multidimensional, resulting in deep systemic issues. Existing RWA lending platforms have paved the way in levelling the playing field for everyday DeFi Lenders to access diverse yield opportunities. But, as time progressed, this has become the RWA industry norm.

At Kasu, we see the problem as much deeper than merely democratising access to credit markets. Whether it's TradFi or RWA lending, two fundamental problems remain:

1. Broken capital chain: Credit Funds do not support Credit Originators until they reach a minimum level of loan under management. This makes it extremely difficult for Credit Originators to achieve scale and breakout growth.

2. Lending is a commoditised product with no deep value-add: No business lending solutions exist to fix the core cash flow problem that initially creates the borrowing need.

PROBLEM 1: Broken Capital Chain

Kasu’s hybrid capital infrastructure solution addresses several critical pain points across both TradFi and DeFi landscapes, creating a more efficient, transparent, and accessible private credit market.

Credit Originators: For Credit Originators to truly scale their lending operations, they require access to long-term, committed capital from institutional TradFi asset managers who provide senior debt. However, TradFi asset managers have rigid conditions attached to their senior debt facilities. Broadly, these comprise: 1) proving an ability to manage ~$5M-$10M Loans under Management first; and, 2) sourcing a minimum amount of junior debt (~20%) to be subordinated to the senior debt.

Hence, the $5M-$10m part of the captial chain is broken!

Kasu solves this critical pain point through its full-stack, hybrid capital solutions throughout the Originator’s entire loan growth journey. This starts with enabling Originators to scale from initial smaller loan books entirely with DeFi capital via Kasu. Once scaled to a minimum loan book size that presents an attractive senior debt funding proposition to a TradFi asset manager, Kasu then arranges a larger senior debt facility with one of its investment bank or credit fund partners. At this point, the existing DeFi capital from Kasu is already in place to provide the minimum junior capital requirement to unlock significant funding from the senior lender.

In summary, Kasu partners with Credit Originators across their entire loan growth journey - from $0-$10m entirely funded by DeFi capital, to arranging its first senior debt facility with a boutique TradFi credit fund ($10-$50m lending) - all the way through to $100M+ though Kasu’s bulge bracket investment banking partners.

DeFi Lenders: Kasu addresses the challenge of access to institutional grade, validated real-world asset (RWA) opportunities by offering any DeFi lender (any size) access to the junior debt tranche of tokenized private credit deals that yield 15-25% APY. DeFi lenders take comfort in the depth of due diligence and risk assessment being handled by the institutional TradFi asset managers who fund the senior debt tranche, providing them with confidence and superior risk-adjusted returns. TradFi Asset Managers: Kasu resolves the pain point of asset managers sourcing high-quality, pre-vetted deal flow. Kasu conducts initial credit due diligence on Credit Originators and assists them scale with DeFi capital to a minimum size that presents an attractive proposition for TradFi asset managers to deploy senior debt. This ensures a pipeline of proven, scalable credit opportunities, facilitating growth and access to diverse asset classes for TradFi asset managers to grow their senior credit exposures. From boutique credit funds - up to multi-billion dollar investment banks - Kasu significantly reduced origination effort of high quality deals for TradFi asset managers.

PROBLEM 2: Lending is Commoditised with No Deep Value-Add

Let's use the analogy of a business whose cash is tied up in debtors. Such a business typically seeks an invoice finance loan to solve their cash flow problem. However, an invoice finance loan fails to solve the root cause of the problem, which is late debtor collections, thereby presenting increased credit risk to Lenders.

Whether it's credit funds, banks, or RWA lending platforms, financiers do not offer any value-add solution to solve the root cause of the cash flow problem. Consequently, they are subjected to fierce interest rate pricing competition, offering no value beyond the commodity of ‘money.' The 'commoditised' nature of the industry therefore results in minimal loyalty from borrowers and other stakeholders.

Therefore, merely moving from TradFi to DeFi (or RWA lending) to circumvent overregulation, excessive fees, and untenable terms associated with traditional lending only solves a very small part of the problem. However, the systemic issues outlined above remain in place—they still exist, only now on-chain.

Kasu solves this problem through its unique technology-driven lending solutions, that optimises businesses' cash flow prior to lending funds.