Types of off-chain loans: invoices, business loans and more
Types of off-chain loans: invoices, business loans and more
"Off-chain loan" or "RWA loan" covers a lot of ground. The types differ in who borrows, what backs the loan and how it's repaid.
Invoice and receivables finance
A business borrows against invoices its customers haven't paid yet. When the customer pays, the loan is repaid. These loans are usually short, often 30 to 120 days, and repay themselves from the underlying payment.
Trade finance
Similar to invoice finance, but tied to the movement of goods: financing a shipment between buyer and seller, repaid when the goods are sold or the buyer pays.
Business and SME loans
Loans to small and medium-sized businesses for growth, stock or working capital, repaid in instalments from revenue. They may be secured on business assets or the business as a whole.
Equipment and asset-backed loans
Loans to buy machinery, vehicles or other equipment, with the equipment itself as collateral.
Consumer loans
Many small loans to individuals, such as instalment or point-of-sale loans. Each is small, so they're usually assessed as a large, diversified group rather than one by one.
Real estate and project loans
Loans against property or to fund construction. These tend to be larger and longer, and are repaid from sale, refinancing or the income the project produces.
What they have in common
Each one is ordinary credit, repaid from real economic activity. For on-chain investors, the questions are the same across all of them: what backs the loan, how is it verified, and how does the money get back to you?
Related: Trade finance and factoring, Consumer lending as an RWA and Project financing.