Vendor Finance: Borrowing

Vendor Finance
3 min readDec 13, 2022

Borrowing is simple on Vendor Finance! This article is to show just how simple it is! Remember as a borrower you will NEVER be liquidated. You can default your collateral by choice, this is done by not repaying by the expiry. In the case of a default, you will hand over all of your collateral to the lender.

To borrow all you need is the collateral that the pool is accepting to get your loan!

To start your borrowing journey, head over to the “Borrow” tab. This is where you will find all the available pools to borrow from! You can also filter by specific tokens and liquidity size!

After choosing the pool you wish to borrow from, you will be presented by the following screen! This is where you would deposit collateral and receive a loan!

Terms to know as a borrower:

  • The Lend Ratio is very simple, it is the fixed amount of lend token you will get as a borrower for every 1 unit of collateral you deposited.
  • The Expiry is the time at which the loan will expire, this is also the time at which you will need to repay by as a borrower. If you do not repay by this time, you will default and lose all your collateral!
  • The Annual Interest Rate (APR) by default is decaying which means it annualizes the interest rate throughout the term period. You will always be paying this APR. This is a fixed rate, so once you borrow, you are locked into that rate.

To repay head over the to “My Pools” tab -> Borrowed -> then find the pool you borrowed from. Click repay

Strategies for borrowing

  • You can leverage long a token by looping. Your collateral will be the token you want to leverage long. To do this you would borrow a stable by depositing collateral, sell that stable for more collateral, deposit, borrow, and repeat until desired. You now have a leveraged position but a fixed amount of interest owed and zero chance of liquidation. To close your position you will need external capital to repay since the collateral is locked and your loans will get increasingly smaller in size.
  • You can short a token by borrowing then selling that token for a stable-coin, then buy the token back at a cheaper price and repay. This means you will profit from the difference in the token price from when you sold and rebought to repay the loan.
  • Borrow/Lend arbitrage is possible! You can borrow stable-coins from one pool then become a lender with those borrowed stables for your own lending pool. This is risky as you must make sure your lending pool ends before your borrowed funds loan term.

All of the above strategies are risky and there is no guarantee these will work for you. These are strategies we have seen users apply and is not financial advice!

That’s it! You now have taken a loan! You can repay at anytime before the expiry. You can also do partial repayments if you would like!

Bonus: Rollovers

Rollover is a process of migrating your debt from the original pool (origin pool) to a different pool with a longer repayment due date (destination pool). If a rollover pool is created and made available by a lender there is no need to unwind your farm as a borrower. Simply repay the interest and migrate your debt. You now have extended your loan.

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