# Defaults To improve borrower liquidity and predict the amount of inventory required during the loan term, no liquidations or margin calls are included in the Protocol’s design. LombardFi believes the borrowers targeted will avoid reputational risk at all costs while the material improvement in the flexibility of their inventory management should result in substantial competitive advantage for LombardFi when compared to other solutions on the market. Last but not least, the improved capital efficiency should result in higher returns on capital generated by the institutional borrowers, ultimately passing part of the additional yields to the Lenders. In case the borrower does not meet their obligation to repay the loan on the maturity date, the borrower defaults and lenders take control of the collateral pledged. The collateral is distributed on a pro-rata basis between the debt holders, depending on their share of the pool. In case of a default, the event is officially announced across LombardFi’s communication channels and the borrower is prohibited from being listed on the [authorized interface](https://lombard.fi) of the Protocol. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.lombard.fi/protocol-design/defaults.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.