# First Loss Capital

In some cases, it may be a condition imposed by Kasu that a Credit Originator must contribute a set amount (or a percentage of the total Lending Strategy amount) of its own funds as First Loss Capital. This depends upon the credit due diligence outcomes undertaken by Kasu on each Credit Originator. Should a Credit Originator be required to contribute first loss capital, these funds act as a capital reserve account that cannot be deployed into loans to earn interest. The purpose is to add further protection to Lenders by absorbing losses prior to the lowest ranking Tranche. 

You can view whether a Credit Originator has contributed any First Loss Capital in the ‘Details’ tab of each Lending Strategy. It is noted that Kasu has undertaken Due Diligence on Apxium, and has not requested First Loss Capital. This decision was largely made on the basis of Apxium’s zero loss history after 8 years of lending. 

There is no set minimum or maximum amount of First Loss Capital, and Kasu determines the appropriate amount to allocate based on the specific Lending Strategy, Credit Originator credit history and track record and associated risks. 

In summary, First Loss Capital offers several benefits to Lenders:

* **Enhanced Protection**: It provides an extra buffer against potential losses, particularly benefiting those in higher-risk Tranches.
* **Increased Confidence**: Knowing that the Credit Originator has provided an additional layer of protection provides Lenders with more confidence in participating in the strategy.
* **Alignment of Interests**: By committing their own capital as First Loss, Credit Originators demonstrate accountability and confidence in their own risk management strategies.

While First Loss Capital provides added protection to Lenders’ capital, it's important to remember that it doesn't eliminate all risk for a given lending strategy. Kasu will typically request First Loss Capital from a particular Credit Originator that possesses higher risk than Credit Originators who are not required to contribute First Loss Capital.


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