Security and Recourse

Who holds the security?#

All security is taken and held by the Credit Originator over its End Borrowers, in its own right. It is the Credit Originator that enforces it and pursues recovery. You have no direct security over the Credit Originator or the End Borrowers; what stands behind your loan is the Credit Originator's security and controls (described in How lending on Kasu works" Section) and listed per strategy in The Lending Strategies.

What 'Security and Recourse' means in each Lending Strategy#

The instruments differ by strategy and are listed on each Details page. In plain terms: a guarantee is a promise by a person or company to repay if the borrower cannot; an equitable assignment of receivables makes the borrower's receivables over to the Credit Originator as security, so it can collect them directly if the borrower defaults; a right of offset lets the Credit Originator route all of a borrower's collections to itself until a debt is repaid; step-in rights allow it to take over the borrower's position to recover what is owed; post-dated cheques, used in some jurisdictions, are instruments the Credit Originator can present on default, with an accelerated route to enforcement. Security mitigates, but does not eliminate, the risk of loss, and no assurance is given as to the amount or timing of any recovery.

Where the Credit Originator ranks among a borrower's other lenders#

An equitable assignment of receivables, and the other security described above, are taken over businesses that usually already have a bank. That is expected, and it is worth understanding.

The End Borrowers on Kasu are creditworthy businesses, and creditworthy businesses are bankable. Most have an existing banking relationship, and a bank will typically hold a general security over the business that ranks ahead of the Credit Originator's security. Having loans from more than one lender at once is normal for an established business, and the Credit Originator's facility is designed to sit alongside a bank's, not to replace it.

The Credit Originator takes this into account before it lends. Its credit assessment of each End Borrower considers the borrower's existing debt and who ranks where, its remaining debt capacity, its ability to service all of its debt from cash flow, and the financial covenants it must keep, so that the borrower's total obligations, not only its loan through the Credit Originator, are within what the business can carry. The structural controls described per strategy are also what let the Credit Originator recover from the specific cash flows it has funded, rather than relying on a general claim over the business.

None of this removes the point: if an End Borrower fails and its bank enforces first, the Credit Originator's recovery, and therefore repayment to lenders, may be reduced or delayed. The Risk Warning page lists this among other risks.