Borrow Factors

Borrow Factors

Borrow factors (BFs) are risk-adjusted borrow values assigned to each asset on K-Lend. This determines the borrowing capacity of a debt asset within a loan, based on its Asset Risk Score.

This is parallel to loan-to-value ratios (LTVs), which indicate borrowing limits from the collateral asset perspective.

K-Lend combines LTV and BF to express a weighted borrowing capacity based on the asset composition of a position. This allows the protocol much more flexibility in assessing the risk of each position on the platform.

For example, let’s assume you want to supply $100 of SOL as collateral and borrow either USDC or BONK:

• SOL is a widely circulating collateral asset, and its maximum LTV ratio = 80%

• USDC is deemed a less risky asset than BONK.

  • USDC Borrow Factor = 1

  • BONK Borrow Factor = 2

• Borrow capacity is expressed as: (Collateral Amount * Collateral LTV) / Borrow Factor

• USDC borrow capacity against SOL = ($100 * 80%) / 1 = $80

• For BONK, due to a BF of 2, you can borrow up to $40.

Similar to the above expression of risk-adjusted borrowing capacity, the liquidation point of any loan is also calculated as a weighted expression of LTV and borrow factor.