Lending Strategies

Lending Strategies#

A Lending Strategy (strategy) represents a Credit Originator's lending focused on a specific industry and/or loan type. For example, Apxium's Professional Fee Funding Lending Strategy focuses on funding the invoices of accounting firms. It's Taxation Funding (Tax Pay) Lending Strategy funds the taxation payable for the SMB clients of these firms. Similarly, InvoiceMate's Payment Finance Lending Strategy funds the payment settlement cycles of Payment Service Providers (PSPs).

Kasu currently offers four Lending Strategies (The Lending Strategies). Each has its own Details page in the app, which is the single place its facts live.

Lending Options and Priority Ranking#

Within a strategy, you choose a Lending Option: a position in that strategy's Priority Ranking, with its own Effective Interest Rate. The options are named by rank: Senior, Upper Mezzanine, Mezzanine and Junior, though not every strategy offers every rank.

Priority Ranking governs one thing: the order in which losses are borne if End Borrowers default. The most junior option bears losses first, then Mezzanine, then the more senior options; recoveries are applied in the reverse order. "Senior" therefore means furthest from loss and "junior" means closest to it, and the rates follow: options that bear losses earlier carry higher rates. In the ordinary course, interest and withdrawals are available to every option on the same footing, subject to available funds.

In some strategies the most senior position is held by an Institutional Lender (for example, Rixon Capital in Apxium's strategies in Australia) under a formal subordination deed, and is not open to Kasu lenders. Where that is the case, the Details page shows it so the full structure is visible. A subordination agreement applies specific conditions that enables the Institutional Lender to hold withdrawal priority (and other priorities) under its senior ranking position.

A note on the word "Mezzanine": in the wider market, mezzanine funds are a kind of private credit. On Kasu, Mezzanine is the name of a position in a strategy's Priority Ranking. Choosing a Mezzanine Lending Option does not put you in a mezzanine fund; it sets where you stand in that strategy's repayment queue.