Participating in Borrower Pools

Backers evaluate Borrower Pools and provide first-loss (junior tranche) capital to the Pools.

Learning about Borrower Pools

How Borrower Pools work

Read about investing in Borrower Pools on the Backers page. Read about Borrowers and their incentives on the Borrowers page.

Understanding the risks

It is important to understand that you can lose money by participating in the Borrower Pools. If a Borrower doesn't repay the amount they borrow, you will lose your relative portion of that amount. By participating as a Backer, you are taking higher risk by providing first-loss capital—when a Borrower pays back a portion of what they owe, that payment is first applied to the Senior Pool before it is applied to Backers. Therefore, it is possible for Borrowers to make partial repayments and for you to still lose 100% of the amount you supplied.

When Borrower Pools are open

You can only participate in a Borrower Pool when a Borrower Pool is open. A pool can be open either because 1) a new Borrower pool is raising capital, or 2) a portion of an existing Borrower Pool has opened up. Otherwise, the dapp will show that the pool is Full and you will no longer be able to supply more capital. You can look out for announcements to see when new Borrower Pools are going to be open by subscribing to the Backer Updates newsletter.

Announcements

Typically, once a Borrower Pool is open, the community shares announcements using Discord and/or Telegram. This announcement will contain a Pool Overview (an example is linked), which describes the Pool deal in depth. It typically holds the key terms of the loan agreement, the repayment schedule, FAQs, and other resources.

Accessing Credit Analysis Memos

The Credit Analysis Grant is a community-led grants program, approved by the community in July 2022, to compensate skilled community members to write Credit Analysis Memos for borrower pools. The credit memos do not contain any investment advice. For more details, please visit this FAQ page.

Each credit memo will be an NDA-gated, multi-page report that follows the same specific format: 1) summary, 2) overview, and 3) credit analysis. The credit analysis section will include details on historical financials, portfolio performance, deal structure, and risk.

The Credit Analysis Memos will be displayed on the dapp within their respective Borrower Pool pages. Users will have to sign into an NDA in order to access the report. Please note, as of February 6, Credit Analysis Memos are only available for the LendEast and the Cauris #2 Borrower Pools.

Accessing the Data Rooms for more details

Usually, the Pool Overview includes a Non-Disclosure Agreement for you to sign. (Read more about NDA's here.) This will give you access to the due diligence data room containing information provided by the Borrower. Each individual Goldfinch Backer is responsible for doing thorough due diligence on their own investments and deciding whether it's a good opportunity for them.

In addition, after you sign the NDA, there is usually a deal-specific Telegram group and/or Discord channel you will be invited to join. There, you can ask Borrowers questions directly, both about who they are and the specifics of the deal.

Supplying to Borrower Pools

Each Borrower Pool has a unique set of requirements, which are announced on the Goldfinch Discord server. But typically, the steps are:

1. Join Discord or Telegram and keep an eye out for announcements about Borrower Pools opening. If you aren't sure whether there were recent announcements, ask in the Discord.

2. Verify your identity.

3. When the pool is open, visit https://app.goldfinch.finance/earn and click on the pool in the Borrower Pools list.

   1. Note: when a Borrower pool is full, it will say "full" in the top right corner of the row.

4. On the pool page, click Supply to view the form. Review the agreement that is linked to understand what you are signing, enter your full name (this is your signature), and enter the amount of USDC you want to supply.

   1. Note: You will be required to enter your full legal name as was provided when registering your UID, and this name will be added to the Borrower's off-chain transaction agreement. This gives you all the associated rights, benefits, and security of the transaction you are investing in.

   2. Note: Sometimes, pools will have a cap on the maximum amount that can be supplied. You may need to adjust your investment amount accordingly.

5. Review the terms and click I Agree.

6. Approve the transaction in your wallet.

7. Done. You should now see the USDC balance you supplied in your balance at the top of the page.

   1. Note: When you supply to a Borrower Pool, you receive an NFT that acts a "digital receipt" representing the amount you supplied. Learn more about this in the Backer section of the documentation.

Withdrawing from Borrower Pools

After you supply capital, you can withdraw up until the time when the Borrower Pool is closed (which typically happens once when the Pool is full). After the Borrower draws down the capital, you will not be able to withdraw until the Borrower makes repayments. As the Borrower makes repayments, you will be able to withdraw your relative portion of those repayments.

1. Navigate to the Pool's page in the dapp.

2. Click Withdraw and enter the amount of USDC you want to withdraw from the Pool.

3. Click Submit.

4. Accept the transaction in your wallet.

5. Done. Following network transaction times you should see the USDC you withdrew in your wallet.

FAQ

What cryptoassets can I supply to Borrower Pools?

Borrower Pools only support USDC investment.

When do I receive yield?

You receive yield each time the Borrower makes an interest payment into the Borrower Pools.

Do I need to sign a Non-Disclosure Agreement (NDA) to invest as a Backer?

Technically no, but it's strongly recommended that you do sign the NDA in order to review the full due diligence materials about the Borrower Pools you participate in.

What happens if I provide a fake name when I supply capital?

You will forfeit your legal rights to the real-world loan document you are signing. You will still be able to supply capital into the Borrower Pool and receive your portion of repayments made on-chain. However, you will have no real-world legal recourse. The Borrower and other Backers will additionally have no obligations to make any repayments to you in the event that there is a a default and they come to a decision regarding how to resolve it.

Are Backers able to take legal action if Borrowers default?

Yes, if there is a real-world legal agreement between the Borrower and Backers. When you enter your full name, you are directly signing the agreement with the Borrower that is linked in the form. The process by which a Backer can take action against a Borrower will depend on the specific real-world documents related to the pool a Backer invested in.

Is it necessary for the Backer portion of the pool to be filled before the Borrower locks the pool and draws down capital?

No, the Borrower can lock the pool and drawdown at any time. Moreover, in theory, it is also possible for the Backers to fill beyond the limit, which would reduce the leverage and expected APY for Backers. The limit displayed on the dapp is just imposed on the frontend as a way to ensure the APY stays at the expected level.