You can learn more about Borrowers and the role they play in the protocol in the Borrowers section of the Protocol Mechanics documentation.

• Borrowers are able to raise unitranche loan structure allowing them to pay a single interest rate with all interest and principal payments made into a single portal

• Borrowers have the ability to propose any investments based on any terms, and transaction structures to the Goldfinch community

• The Goldfinch ecosystem was built to be generalized allowing for many Borrower archetypes that could raise capital through it. Some examples Borrower types include, but are not limited to:

  • Credit Funds

  • Fintechs

Below are some articles highlighting past borrowers on the protocol:

• Goldfinch Provides Cauris with $5.1M as Part of a $100M DeFi Fintech Debt Fund

• Goldfinch Borrower Spotlight: Greenway (via Almavest)

• Goldfinch provides Tugende with a $5M debt facility to scale its operations in Kenya

Let's take the below deal terms as an example of how back-leverage works:

Hypothetical Transaction:

• Facility Size - $5,000,000

• Borrower Coupon - 12%

  • Senior Net Coupon = % Gross Coupon - 20% Junior Relocation - 10% Pool Reserve

  • Junior Net Coupon = % Gross Coupon + 20% Junior Relocation - 10% Pool Reserve

• Leverage Ratio - 4x

• Backer Investment: $1,000,000

• Senior Pool Investment: $4,000,000

Senior Pool Economics: 8.4%

Backer Economics: 20.4%

The table below shows the economics for both the Backers and the Senior Pool for a Borrower Pool with details above. You can download this sheet here.

The Goldfinch protocol introduces key non-traditional features that Borrowers should be aware of. Below are a few of these features. They are detailed in the following two pages, grouped as follows:

1. Debt Facility Mechanics

2. Transaction Documentation

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The Goldfinch protocol helps to simplify debt capital aggregation by operating on the principle of 'trust through consensus. The protocol provides investors around the world the ability to earn yield uncorrelated to crypto markets by helping them invest in:

• Curated real-world debt opportunities from around the world which are assessed by the fellow community members

• On-chain tokenized assets, allowing for secondary markets to flourish

• Democratizing access to yield but allowing anyone to invest with no minimums

You can learn more about Goldfinch and how it works in the Goldfinch Overview section of the documentation. Then, dive into the Protocol Mechanics sections of the documentation to learn in more detail about how it functions, along with the role that Borrowers play in the network.

There are two types of capital providers on the Goldfinch protocol. They are:

• Liquidity Providers who supply capital into the Senior Pool, and

• Backers who supply capital into individual Borrower Pools.

You can learn more about these roles in the Protocol Mechanics sections of the documentation.

At a high level:

• The Senior Pool is a ‘blind pool’ of second-loss capital that is diversified across Borrower Pools on the Goldfinch protocol. This means that Liquidity Providers (LPs) who provide capital into the Senior Pool are capital providers in search of diversified exposure across all Borrowers, and do not want to take on individual Borrower risk.

• In contrast to LPs, Backers are active capital providers. They carry out in-depth due diligence on individual Borrowers, and ultimately ‘Back’ these Borrowers by investing first-loss USDC in the Borrower’s Pool. The more Backers who ‘Back’ the pool, the more trustworthy the protocol believes the Borrower to be.

Here are a few simple archetypes of structures, Borrowers such as Credit Funds and Fintechs could design and propose to the Goldfinch community.

Key Universal Structural Considerations

While there are many use cases for the Goldfinch ecosystem (see below), there are two universal questions which should be carefully considered prior to approaching the Goldfinch community.

1. "How will the transaction security which typically can be assigned to a single party in a transaction be perfected, and accessible to investors?"

2. "Who at the outset of pool close would be the primary delegate acting on the best interest of the other Backers when it comes to managing communications"

Credit Funds

There are a multitude of use cases Credit Funds could deploy capital raised through the Goldfinch ecosystem into. The following illustrates just a few:

• Raise parri-passu or senior capital into your fund (or fund like) structure to then on-lend

• Co-invest into a new prospective borrower via raising new money capital

• Co-invest into an exiting borrower via raising new money capital (i.e. fill uncommitted allocation)

• Refinance existing investments via sub participate exiting investments at a different cost of capital

Checklist of Features Credit Funds Could Incorporate

• Facility and Security Agent - A single party appointed by the other Backers to manage the perfected security, and core communication between the Borrower and investor group

• Backup Servicer - A 3rd party with the ability to step in as the fund administrator in the instance the Credit Fund were to default

• Capital Custody - A capital custody platform(s) to manage Crypto or fiat capital

Fintech Structural Diagram

The following is a potential "plug and play" structure speaking to the key universal structural considerations.

Checklist of Features Fintechs Could Incorporate

• Facility and Security Agent - A single party appointed by the other Backers to manage the perfected security, and core communication between the Borrower and investor group

• Backup Servicer - A 3rd party with the ability to step in to collect funds from the Fintechs end borrowers

• Capital Custody - A capital custody platform(s) to manage Crypto or fiat capital

As a Borrower (or Lead Backer) you will directly interact with the protocol by withdrawing and depositing USDC (a US dollar-backed stablecoin) into the protocol using your wallet. Below is a diagram that explains your interaction with the protocol:

Read on for a list of third-party service providers to help facilitate your movement from crypto to fiat and vice versa.

Below are some important structure and legal considerations to take into account as you look to get started on the Goldfinch Protocol, including cashing in and out of the ecosystem, Investor KYC/AML requirements, key mechanics to consider including Debt Facility Mechanics and Transaction Documentation, Senior Pool participation for Borrowers, and Backer transferability of debt positions.

Investors in the Goldfinch ecosystem are required to mint a Unique Identity NFT (UID) in order to gain access to Goldfinch pools. The UID represents that an investor has passed through various OFAC, AML, Sanctions checks which are conducted by Persona. You can learn more about the need for a Unique Entity Check on Goldfinch here, and about the Unique Identity NFT process here.

Raising capital through the Goldfinch ecosystem can be summarized in four basic steps, which you can learn about in more detail in the Protocol Mechanics sections of the documentation.

Step 1: A Borrower proposes a Borrower Pool to the Goldfinch community, sharing deal terms, structure, and due diligence materials with the Backers. Borrower Pools are specific to individual Borrowers, representing the credit lines from which Borrowers draw capital to funds their real-world lending. Each pool is created by the Borrower encoded with a set of deal terms (including pool size, interest rates, repayment schedule etc.) that match the loan that Borrower Pool represents.

Step 2: The Backers then perform due diligence on the Pool opportunity. This diligence is based on the information shared, directly communicating with the Borrower, and negotiating key terms of the transaction. Backers then supply capital once a transaction agreement has been signed by both the Backers and the Borrower.

Step 3: The Senior Pool automatically allocates its capital to fill deal tickets. Senior Pool capital contribution to the deal based on the Leverage Ratio calculation, which follows the actions of Backers—to date leverage is set at 3x and in future will be determined automatically by the protocol.

Step 4: The borrower draws the USDC raised from the protocol as a unitranche facility.

These four steps typically take a week to complete.

Fund: Almavest

Background: Almavest is a credit fund that provides debt capital to fintech lenders, and carbon reduction project developers globally. In August 2021, Almavest launched a Borrower Pool on the protocol to raise ~$2M. The purpose of this Borrower Pool was to fund a basket of fintech lenders in the Global South.

Process: Over one week, the Almavest team underwent due diligence by the Backers, presenting them with a dataroom, and being on hand to answer questions posed by the Backers. This included a live video Q&A session you can find here.

Once the due diligence period was done, the pool opened on August 31st for funding.

Outcome: The junior portion of the Borrower Pool was filled by 72 Backers, who provided $540,826. The Senior Pool provided an additional $1,622,478 (3x the Backer contribution) to complete the $2,163,304 raise. This entire process was completed in 30 minutes. Below is a screenshot from the Almavest Borrower Pool. You can find the live page here.

Almavest Pool Snapshot

Almavest Timeline and Key Dates

• Announce Investment to Community

  1. Announce deal to backers with key timelines

• Deal Proposed With Terms

  1. Surface NDA, Dataroom, and Summary of Terms Backers are expected to review

• Backers start submitting questions

  1. Create a dedicated channel to accept and respond to questions through

• Q&A with Backers

  1. Create a curated AMA session

• Pool opens for funding

  1. Confirm date you wish to open the pool for Backer funding

• Deal funded & finalized

  1. Drawdown capital into wallet, and wire to crypto business account to be converted to fiat ccy

  2. Post final docs up in dataroom for final selected investors

Revolving Credit Facility

Borrower Pools on the Goldfinch protocol work like a revolving credit facility. Borrowers have the ability to withdraw and repay (as many times as they like) any amount provided the total outstanding amount at any time is less than the Borrower Pool's credit limit. There are no prepayment penalties. However, it is worth noting that any amount of capital left unutilized in a Borrower Pool can be withdrawn by Backers at any time. This means that although the protocol offers a revolving credit facility, it is not a committed facility. It is designed this way to give Backers liquidity, and to ensure that borrowers do not pay fees on unused capital)

Facility Tranches

Each borrower pool has the ability to accommodate multiple tranches of the same facility. This allows borrowers to grow the size of capital they draw from the protocol without having to launch new Borrower pools.

Interest Payments

The Goldfinch protocol is built to expect interest payments to be made every thirty days, starting from the day a Borrower draws down funds into their wallet. Interest is calculated on an Actual / 365 basis

Facility and Security Agents

As no centralized party provides any administrative roles for transactions on the Goldfinch protocol, Borrowers need to externally source and bear the cost of any facility/admin/security agents required in agreements.

NFTs as a representation of Backer Participation

Once a Backer invests into a pool on the Goldfinch protocol, they receive a non-fungible token (NFT) that represents their investment into the pool. You can learn more about the function of that NFT in the Backers section of the documentation. It is important to note that this NFT could be freely transferable to any other Backer, such as by the implementation of backer secondary markets as outlined in the protocol's community-driven roadmap.

This could mean the Backers in your Borrower Pool could change during the life of the loan (e.g. backers trade their loans), although interacting with the Borrower Pool smart contracts will still have the same UID requirements.

Currency Denomination

The Loan Documents should be denominated in USDC (a USD backed stablecoin)

Loan Instrument Documentation

Borrowers should use traditional debt agreements as the starting point for their loan documents. The on-chain / tokenization elements of the transaction happen via the Goldfinch protocol and do not need to form the basis of your loan documentation

Borrower Repayment Clause

The loan documents should dictate that all Borrower payments be made only through the Goldfinch protocol. This is to ensure accurate waterfall calculations between the Backers and the Senior Pool. This waterfall is calculated by the Protocol. Note that these repayments mechanics are binding, and may not be changed by any party (neither the Borrower nor Backers) in a Borrower Pool. Below is a sample language that may be used in your loan documentation to reflect the above:

Payments. All payments due shall be paid by the Borrower on the Goldfinch Protocol which will in turn distribute the Senior Participant Payment and Lenders payments. Payments should be made by the same wallet that received the funds and be paid to the same wallet that disbursed the funds.

Lender of Record

It is important to note that the sole parties to the final transaction are the Borrower and Backers. Goldfinch is not a party to any transaction agreement. Backers individually sign and collectively act as the counterparties to the relevant transaction agreements. After the close of each pool, the list of participating Backers shall be provided to the Borrow by the community. This list constitutes digital signatures by each Backer. Also note that if the Borrower or a related entity to the Borrower contributes to the Borrower Pool, they will have to recuse themselves as a lender. Lender Signatures: In the process of funding a Borrower pool, each Backer electronically signs the loan documents for that pool. Once the pool is fully funded, the community will provide the Borrower with a complete list of Backers along with the time stamp on the Backer's signing. This list is to be appended as an Exhibit to the final loan documents Lender Decisions: Any and all lender decisions may be communicated via the electronic data room. Along with each communication, evidence must be provided of on-chain agreement amongst lenders (for example, in the form of a governance vote) has been made to serve the notice Borrower Responsibility: As a Borrower, you are responsible for including all relevant disclosures, representations, and warranties related to your particular jurisdiction, facts, and circumstances in the Loan Documentation. Please also note that Borrowers cannot act as Facility and Security Agents. These will have to be sourced externally Single Certificates: To the extent that any certificates or other documents have to be created as part of the facility, they should be pledged to the Lenders collectively (i.e. a single document). The Goldfinch protocol will allocate the rights automatically to each Lender on a pro-rata basis. Pro-rata rights to Lenders: Please note that if for any reason the debenture amount does not equal the facility amount, rights are allocated on a pro-rata basis to the Lenders

Backer Transferability

Restrictions on a lender's ability to transfer their positions must be removed from all loan documentation. The Protocol will update borrowers as to changes in their lenders. Please note that any redemption interest of principal repayment of each loan can only be made by a lender who is KYC’d

Repayment Accounting and Documentation

Interest on the Goldfinch protocol is calculated every thirty days. Traditional clauses that otherwise define the repayment schedule, such as adjustment for business days, must be changed to reflect the protocol's payment mechanism. Below is a sample catch-all phrase that Borrowers can use, for an abundance of clarity:

Notwithstanding any other provision in this Agreement, the Parties acknowledge and agree that the amount of interest payable by the Issuer to the Lenders and the date on which such payment is due shall be subject to the schedule set out in the Goldfinch Protocol, which absent manifest error, shall supersede in the case of any inconsistency with Exhibit “B”.

Repayment Accounting and Documentation

Borrowers are required to provide covenant compliance certificates to the Lenders at a predetermined frequency. This requirement is to be included in the loan documentation.

Tax gross-up

Borrowers must gross-up taxes, including withholding tax payments. The Protocol must receive a fixed amount of interest specified for the loan. This is to be reflected in the Loan Documentation

Electronic Delivery of Documents

All documents and notices must be delivered in digital form and must not require wet-ink signatures or physical receipt. This applies to documents from both Borrower and Lenders and includes, amongst others,:

• Executed documents related to the loan

• Any notices to enforce rights

• Any reports required per document reporting requirements

Other Important Definitions

See below other definitions to be included in the transaction documentation:

• “Goldfinch Protocol”, means the Goldfinch protocol, a decentralized crypto borrowing platform found at the following website https://app.goldfinch.finance/earn.

• "USDC" means is a tokenized U.S. dollar, for which the value of one USDC coin pegged 1:1 to the value of one U.S. dollar.

• "Unique Identifier" or "UID" means an NFT that represents an entities KYC status that enables them to participate on the Goldfinch protocol

It is important to note that neither the Senior Pool nor the investors in the Senior Pool are lenders of record. The Senior Pool participates in the economics of the transaction by virtue of the protocol design (i.e. the smart contract).

All Senior Pool investors sign up to the following agreement, covering Reg D and non-US requirements, ahead of being able to access the Goldfinch protocol.