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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.