B4Finance and Crypto-Backed Lending
The requirement for lending services to power the continued growth of any real estate market is an established fact.
However, the unique requirements of the digital asset economy (as well as its immature level of external/institutional economic integration) present unique challenges, as well as unique opportunities.
To this end, Black Tie Digital has established B4Finance, with an initial focus on the provision of lending services to holders of digital wealth who are unable to access liquidity through traditional mechanisms.
An exclusive distributorship arrangement has been signed with Pegasus Capital Advisory (representing Orion Capital Partners) to roll out the B4Finance Digital Asset Lending Program.
$1B AUD has been secured in the first liquidity tranche for lending against digital assets, with significant further capital readily available.
From within the framework of the B4Real platform, the most important use case relates to digital asset-backed property lending (mortgages).
By providing a unique dual-phase lending arrangement, borrowers can:
- 1.Collateralise their digital assets at LVRs of up to 75%, and fixed rates as low as 4.5% pa (accurate as of 15/11/22);
- 2.Use the resultant liquidity as a deposit against property (subject to approval and terms & conditions).
The Digital Asset Lending Program is structured around bullet lending (with zero repayments due until loan maturity) over terms of between 12-48 months and is a non-recourse loan requiring zero guarantees or additional assets from the borrower – as the loan is over-collateralised, both parties benefit from a high degree of confidence and security in projected outcomes.
Margin calls, if issued, allow for a five-day collateral top-up period, and if executed do not incur any additional expense on behalf of the borrower, while removing any remaining leverage from the unlocked liquidity.
In light of this (alongside the PIM Group’s background and relationships within the real estate and finance sectors), B4Finance is able to structure the overall property lending package to allow property buyers to enter the market by collateralising as little as 15% of the property’s value in digital assets.
The custodial nature of the initial deposit avoids the incursion of CGT events and retains complete upside potential for the borrower once their loan is serviced.
The intention is for mortgagees to revalue their properties at the maturity date of the digital asset loan and redraw available capital (which in many cases will have increased due to both property value appreciation and increased equity from mortgage servicing) to unlock their digital asset collateral.
In this format, it is anticipated under all market conditions outside of severe and extended cross-market economic downturns borrowers should be able to return most or all of their collateral within 48 months.
While no leveraged investment (such as property acquisition) is without risk, the non-recourse nature of the underlying loan means that even in the worst market conditions, the primary ramification for borrowers becomes the liquidation of their digital assets, which ultimately leads to the dissolving of the outstanding debt related to the funds used to place a deposit on the acquired property – the mortgage over which remains unaffected (outside of market condition impact).
Taken as a whole, the B4Finance Digital Lending Program has been structured to be the most attractive option globally for holders of digital wealth to diversify into the real estate market.
While it is outside of the scope of this White Paper (and its focus on the B4Real Platform), it is pertinent to note that the B4Finance platform has also already attracted significant interest regarding both personal and business lending.
For further information, see www.b4finance.digital