How a Loan Works

A Trilobyte loan follows a structured lifecycle from creation to settlement. Here's how a typical loan flows through the protocol.

Step-by-Step

1. Vault Creation

A Pool Manager evaluates a business's creditworthiness and negotiates loan terms off-chain. Once agreed, the manager creates a vault via the Factory contract with the following parameters:

• Principal — The loan amount (e.g. 100,000 USDC)

• Interest rate — Annual rate in basis points (e.g. 1000 = 10%)

• Loan term — Duration in months (e.g. 12)

• Split ratio — Percentage of each repayment routed to the EMI pool for investors (e.g. 80%)

• Funding deadline — Optional deadline for full funding

• Approval deadline — Optional deadline for manager approval after funding

• Grace period — Window before default can be triggered after a missed payment

• Permissioned — Whether only allowlisted investors can participate

The Factory validates all parameters against global settings, checks the manager's collateral and credit limit, and deploys a new Vault smart contract.

2. Fundraising

The vault enters the RaisingFunds phase. Investors deposit funds and receive SEP-41 debt tokens at a 1:1 ratio. A 0.5% protocol fee is deducted from each deposit.

The vault automatically transitions to AwaitingApproval once the full principal is raised.

If a funding deadline is set and the vault fails to raise the full principal by that date, anyone can call check_funding_expiry() to cancel the vault and refund all investors.

3. Approval & Disbursement

The Pool Manager reviews the funded vault and calls approve_and_disburse. This:

• Disburses the funded amount to the borrower

• Calculates the EMI (Equated Monthly Instalment)

• Sets the first payment due date (30 days from disbursement)

• Transitions the vault to Active

If an approval deadline is set and the manager fails to approve by that date, anyone can call check_approval_expiry() to cancel the vault and refund investors.

4. Repayments

The Borrower makes periodic repayments. Each payment is processed as follows:

1. A 0.5% protocol fee is deducted and sent to the treasury

2. The remainder is split by the split_ratio:

   • EMI pool — Investor yield (e.g. 80%)

   • Cash pool — Borrower operating capital (e.g. 20%)

3. The outstanding principal is amortised

4. The payment counter advances and the next due date is set

5. Yield Distribution

Investors can call claim_yield at any time during the Active or FullyRepaid phases to claim their pro-rata share of the EMI pool. An investor's share is proportional to their debt token balance relative to the total supply.

$$\text{claimable} = \frac{\text{balance}}{\text{total\_supply}} \times \text{emi\_pool} - \text{already\_claimed}$$

6. Settlement

When all payments are made, the vault transitions to FullyRepaid. The manager's collateral is released. Once all investors have claimed their yield and the borrower has withdrawn remaining cash, the vault can be finalised — transitioning to the terminal Finalized state.

Visual Overview

Pool Manager creates vault
         │
         ▼
    ┌─────────────┐
    │ RaisingFunds │ ◄── Investors deposit
    └──────┬──────┘
           │ fully funded
           ▼
   ┌───────────────┐
   │AwaitingApproval│ ◄── Manager reviews
   └───────┬───────┘
           │ approve & disburse
           ▼
      ┌────────┐
      │ Active │ ◄── Borrower makes payments
      └───┬────┘     Investors claim yield
          │
    ┌─────┴──────┐
    │            │
    ▼            ▼
┌──────────┐ ┌───────────┐
│FullyRepaid│ │ Defaulted │
└────┬─────┘ └───────────┘
     │
     ▼
 ┌──────────┐
 │ Finalized │
 └──────────┘