Lending · Private Credit
Documentation and Recourse
The paper that makes the collateral yours.
A smart contract enforces a loan by code; a bilateral facility enforces it by law. That is a strength, because it gives notice, discretion and recourse that code cannot, and a dependency, because it is only as good as the documents and the jurisdictions they rely on. Wesvel facilities are papered to make the lender’s position clear before anything is tested.
The document set
A facility agreement setting term, rate, loan-to-value, eligible collateral, call and liquidation mechanics, events of default and governing law. A security agreement granting the lender a security interest in the collateral. A control agreement with the custodian perfecting that interest. Where the borrower is an entity, corporate authorizations and, where appropriate, guarantees from affiliates.
Perfection and priority
A security interest in a digital asset is perfected by control, under commercial law that has been updated in most major jurisdictions to address digital assets specifically. Perfection by control gives the lender priority over other creditors of the borrower in the collateral. Without it, the lender is one unsecured claim among many. Where the borrower is in a jurisdiction that has not adopted equivalent rules, the structure is adjusted or the facility is not offered.
Events of default
Failure to cure a margin call, failure to pay at maturity, insolvency, breach of representation, and material adverse change in the borrower. Default gives the lender the right to accelerate and to instruct the custodian. Most facilities never reach default, because the margin mechanics resolve deterioration earlier, but the rights exist and are drafted to be exercisable quickly.
Recourse beyond the collateral
Facilities may be recourse or limited-recourse. Under a recourse facility the lender may pursue the borrower for any shortfall after liquidation; under limited recourse it may not. The choice is priced and documented. In either case the primary protection is the collateral, and the facility is sized so that recourse should not be needed.
Practice
How Wesvel approaches it
- 01Every facility uses a complete document set reviewed by counsel in the relevant jurisdictions before closing.
- 02Security interests are perfected by control at closing; a facility does not fund until perfection is confirmed.
- 03Events of default and remedies are drafted for speed of exercise, not only for completeness.
- 04Recourse terms are explicit, priced and disclosed.
More in Lending
- How a Facility WorksThe anatomy of a collateralized digital asset loan: borrower, collateral, custody, term and the controls between them.
- Collateral and Loan-to-ValueWhich assets qualify as collateral, how loan-to-value is set from their liquidity and volatility, and why the haircut is the whole loan.
- 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.
- 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.