Borrowers are participants who are looking to raise debt capital from investors via the protocol.
How does it work?
Borrowers can create borrower pools by providing information and proposing the terms and conditions of their loan. This is similar to writing a term sheet, outlining the details of the debt funding they are seeking from investors.
It is important to note that there is no guarantee that investors will fully supply funds into the borrower pool. The success of a loan depends on the borrower's ability to provide enough information and convince investors that the loan is a sound investment. This is why it's essential for borrowers to put their best foot forward, providing as much detail as possible about their business, their goals, and the terms of the loan they are proposing.
Once the loan pool has reached the minimum funding levels, the borrower will be able to access the funds from the smart contract and transfer them into their wallet. The proceeds of the loan can then be used to grow the business and achieve the goals outlined in the term sheet. With Bluejay Earn, borrowers can secure the financing they need to grow their business.
How does repayment work?
Borrowers make repayment directly to the borrower pool as per the interest rate, repayment cycle, and repayment scheme. Investors who are holding Loan Pool tokens ("LP tokens") will receive funds that are in proportionate to the repayment amount.
Borrowers may also pay more than the required amount or pay back the principal in full + interest incurred. This will be considered as an early repayment and the loan cycle will be completed. There are no early repayment fees during the current stage.
If the borrower is late on its repayment, a grace period is extended to the borrower and the loan goes into Delinquency state (Refer to Glossary).
If the borrower continues to miss repayment at the end of the grace period, the loan goes into Default state (Refer to Glossary). At this stage, borrowers are subject to pay for additional late fee which is added on top of the initial interest rate.
Borrowers are incentivized to make their repayments timely in due course as any late repayment or default could negatively affect their on-chain credit worthiness. As wallet addresses of borrowers are public, the on-chain credit history of the borrower becomes public to future investors. Secondly, the borrower will want to maintain good standing and good reputation with the protocol's investors so that they can continue to access credit via the protocol.