Lending · Private Credit
Collateral and Loan-to-Value
What is pledged, and how much can be drawn against it.
A collateralized loan is a haircut. The lender advances less than the collateral is worth, and the gap absorbs the price movement that can occur between a deterioration and a liquidation. Setting that gap correctly, per asset and per facility, is the core underwriting decision in this business.
Eligible collateral
Liquid, custodiable digital assets with deep spot markets on multiple venues: principally the major assets, major stablecoins, and, where the structure supports it, tokenized Treasury instruments. Assets are eligible when they can be held in segregated custody, priced from several independent sources, and sold in facility size without moving the market. Thin, newly issued or heavily concentrated tokens are not eligible collateral regardless of the borrower.
Setting loan-to-value
The initial ratio is set from the asset’s realized and stressed volatility, the depth available to liquidate, the expected time to complete a liquidation including any cure period, and the correlation between the collateral and the loan currency. The more volatile and less liquid the collateral, the lower the ratio. A facility against a stablecoin or a tokenized Treasury can be advanced at a far higher ratio than one against a volatile token, because the gap it needs to absorb is smaller.
Valuation sources
Collateral is marked from a composite of independent price sources agreed in the documents, with rules for what happens when a source fails or diverges. A single exchange print cannot trigger a call. Marks run continuously, not daily, because the assets trade continuously.
Substitution and top-up
Borrowers may substitute eligible collateral or add to it during the term under the same eligibility and valuation rules. Substitution into a less liquid asset lowers the permitted ratio; the documents say so in advance.
Practice
How Wesvel approaches it
- 01Eligibility is a written list per facility, and an asset that is not on it cannot be pledged regardless of price.
- 02Loan-to-value is derived from stressed volatility and liquidation depth, not from the borrower’s request.
- 03Marks use a composite of independent sources with documented fallbacks; no single venue can move the ratio.
- 04Concentration of any one collateral asset across the loan book is capped.
More in Lending
- How a Facility WorksThe anatomy of a collateralized digital asset loan: borrower, collateral, custody, term and the controls between them.
- Margin Calls and LiquidationThe thresholds, cure periods and liquidation rules that protect a facility when collateral falls, and how they differ from on-chain liquidation.
- Custody and Triparty ControlWhy collateral sits with an independent custodian under a control agreement, and how instruction rights work through the life of the loan.
- Documentation and RecourseThe facility agreement, security and control documents, and what a lender can and cannot do when things go wrong.
- Borrower Diligence and Use of ProceedsWho Wesvel lends to, what it asks before it does, and why the use of proceeds is part of the underwriting.
- Receivables FinancingAdvancing against accounts receivable, whether by purchase or by loan: eligibility, verification, dilution, concentration and collections.
- Private Credit FacilitiesSenior secured and unitranche facilities to operating companies: security, covenants, monitoring and the role of the sponsor.
- Warehouse Lines of CreditRevolving facilities to lenders and originators, secured on the loans they make: borrowing base, eligibility, bankruptcy-remote structure and takeout.
- Asset-Based LendingRevolving and term credit secured on inventory, equipment and mixed collateral pools, governed by a borrowing base and field examination.
- Structured and Other DebtBridge loans, revenue-based financing, participations, forward-flow agreements and structured notes: the products used where a term loan or a borrowing base is the wrong shape.
- Underwriting and ServicingThe credit process behind every non-digital facility: analysis, approval, documentation, monitoring, servicing and workout.
- Short-Duration Business CreditShort-duration revenue-based credit exposure to operating businesses, and how the mandate underwrites and sizes it.
- Equipment FinancingLoans and leases for vehicles, machinery, medical and technology equipment, secured on the equipment itself, plus sale-leaseback of assets a business already owns.