Revenue-Based Lending Operations

In addition to the core lending operations, a Revenue-Based line of credit has some extra features.

A Spigot is automatically deployed with a Line of Credit according to terms agreed.

Tokens from Borrower Revenue Contracts are escrowed by the Spigot to repay and secure the Line of Credit according to the split that's agreed up front.

Borrower Repayments and Lender Withdrawals

Use Tokens from Borrower Revenue Contracts to repay Credit Lines

Tokens are from time to time pulled from a Revenue Contract and made available in the Spigot.

These tokens can be used straightaway to repay Credit Lines according to their order in the repayment queue.

As part of this, the system checks that the tokens from the Borrower Revenue Contracts are the same tokens actually needed to repay the Credit Line. If need be, and using a decentralised exchange, it exchanges them to the required token.

Store Tokens from Borrower Revenue Contracts in Reserves

Instead of repaying a Credit Line straightaway, tokens from Borrower Revenue Contract can be stored for later. If they need to be exchanged then the system will do so. What results is a store of Reserve Tokens that both secures the Line of Credit and is on standby to repay Credit Lines as and when.

This feature is useful for a Borrower for several reasons

• Gain flexibility in managing repayments based on the current state of the system and the source of repayment funds.

• Time the exchange of tokens if you have a view on potential price movements.

• Increase the Collateral Ratio [Reserve Tokens will be considered as Collateral in the next version when calculating the Collateral Ratio of the Line of Credit.]

See here for a more comprehensive overview of all the repayment options

Other Features

Adding an additional Revenue Contract to a Secured Line of Credit

A Borrower can propose additional Revenue Contracts to further secure the repayment of debt and/or to replace a Revenue Contract already providing security. The Servicer can assist here.

Updating the whitelisted functions that a Borrower can call on a Revenue Contract

It's possible to update the whitelisted functions that a Borrower is allowed to perform on a Revenue Contract. As a reminder, these are the functions that the Borrower can still call on those contracts for business as usual whilst they are providing Revenue Tokens to repay debt. The Servicer can assist here.

Updating the split of Revenue Tokens between a Borrower and Lenders

The split of Revenue Tokens between a Borrower and Lenders changes if (1) the parties to the lending agreement wish to change the split or (2) programmatically based upon the status of the Line of Credit.

Automatic release of Spigot after full debt repayment or during a credit event

Control of an entire Spigot is automatically released back to the Borrower (if all Credit Lines have been been fully repaid). This enables a Borrower to easily reuse a Spigot and it's attached Revenue Contracts as security for a new Line of Credit. If however the Line status becomes liquidatable, control of the Spigot can pass automatically to the Servicer. See Loan Impairment and Recourse for what happens next.

Removing control over a single Revenue Contract

Control over a single Revenue Contract can be transferred back to a Borrower after a Line of Credit secured by that Revenue Contract has been repaid. The Revenue Contract in this case is 'removed' from the Spigot, the reverse action of being 'added' to the Spigot earlier.

Reusing a Spigot for a new Line of Credit

When all Credit Lines have been repaid and closed and a Spigot released back to a Borrower, the Borrower can rollover the already configured Spigot and use it as security for a new Line.

Continuity is an important feature for future products we will build on top of Spigot. This makes it easier to continue reusing the same Spigot and make setting up new lines easier and cheaper (less gas costs) and less likely for human error.

Liquidating a Spigot

If a Borrower doesn't repay and close all Credit Lines by the Deadline, the Borrower has defaulted and the status of the Line may be changed to liquidatable.

The Servicer can proceed to liquidate whatever collateral/security is available by sweeping the Spigot which henceforth receives 100% of Revenue Tokens due to the impaired status of the facility.

See the dedicated section for more information about credit events.