Loan Structure
Locale Lending offers multiple loan types with terms determined by borrower creditworthiness measured through DSCR.
Loan Types
| Type | Amount Range | Term | Use Case |
|---|---|---|---|
| Working Capital | $10K - $250K | 3-12 months | Short-term business needs |
| Equipment | $25K - $500K | 12-36 months | Asset purchases |
| Real Estate | $100K - $2M | 12-60 months | Property loans |
| Personal | $1K - $50K | 3-24 months | Consumer credit |
Loan Lifecycle
PENDING → APPROVED → ACTIVE → REPAID/DEFAULTED
| State | Description |
|---|---|
| PENDING | Application submitted, awaiting review |
| APPROVED | Verification complete, awaiting disbursement |
| ACTIVE | Funds disbursed, repayment in progress |
| REPAID | Loan fully repaid |
| DEFAULTED | Loan in default (60+ days past due) |
Interest Rate Model
Locale uses a Base Rate + Risk Premium model where rates adjust based on borrower DSCR:
Risk Premium by DSCR
| DSCR Range | Risk Premium | Interpretation |
|---|---|---|
| ≥ 1.50 | 0% | Strong coverage, lowest risk |
| 1.25 - 1.49 | 2% | Good coverage |
| 1.00 - 1.24 | 5% | Marginal coverage |
| 0.80 - 0.99 | 8% | Below threshold |
| < 0.80 | 10% | High risk |
Example Rate Calculation
Base Rate: 8%
Borrower DSCR: 1.35
Risk Premium: 2% (DSCR in 1.25-1.49 range)
Final Rate: 8% + 2% = 10% APR
DSCR Calculation
Debt Service Coverage Ratio measures ability to repay:
DSCR = Net Operating Income / Total Debt Service
Components
| Component | Description |
|---|---|
| Net Operating Income | Monthly average income from Plaid data |
| Total Debt Service | Existing debt + new loan payment |
Example
| Component | Value |
|---|---|
| Monthly Income | $8,000 (from Plaid) |
| Existing Debt | $2,000/month |
| New Loan Payment | $1,500/month |
| Total Debt Service | $3,500/month |
| DSCR | 8,000 ÷ 3,500 = 2.29 |
Result: DSCR of 2.29 qualifies for 0% risk premium.
Application Requirements
Before applying, borrowers must have:
| Requirement | Description |
|---|---|
| Connected Wallet | Web3 wallet for transactions |
| KYC Credential | BorrowerCredential (Basic or Enhanced) |
| Linked Bank Account | Plaid connection |
| Transaction History | 90+ days of bank data |
KYC Levels by Loan Size
| Loan Size | Required KYC |
|---|---|
| < $10,000 | Basic KYC |
| $10,000 - $100,000 | Basic KYC + Strong DSCR |
| > $100,000 | Enhanced KYC |
Dynamic Rate Adjustments
Interest rates can adjust based on ongoing DSCR monitoring:
Weekly Recalculation
- Plaid transaction data synced weekly
- New DSCR calculated from recent 90 days
- Rates adjusted if DSCR changes significantly
Adjustment Rules
| Change | Action |
|---|---|
| Rate increase < 2% | Automatic adjustment |
| Rate increase ≥ 2% | Requires admin approval |
| Rate decrease | Automatic adjustment |
Notification
Borrowers receive notifications for:
- Rate changes
- New payment amounts
- DSCR threshold warnings
Disbursement
After approval:
- Borrower reviews final loan terms
- Signs on-chain transaction
- USDC transferred to borrower wallet
- Repayment schedule activated
Next Steps
- Pool Structure — How lending pools work
- DSCR Calculation — Detailed DSCR guide
- Loan Application — How to apply