Private credit, namely, finance supported by assets (ABF), is among the fastest growing corners of global finance. Already a market of $ 6.1 billion, Apollo Global Management, the directionable opportunity of more than $ 20 billion.
However, despite its scale and their growing role in the financing of companies and consumers worldwide, the industry is still executed in Excel sheets. The result? The swelling of the middle office and the back-offcement, drag and financing costs up to 30% higher than they should be.
It is like tracking their working hours in a yellow and sticky note, sending it by mail and waiting for 15 days to be paid in 2025. No one would tolerate this way of working.
These inefficiencies come from how ABF is handled today.
Unlike corporate credit, where the full faith and the balance of the borrower provide the anchor, ABF is based on the contractual cash flows of the underlying assets: think of BNPL loans, accounts receivable of the supply chain or financing of small businesses. To manage this complexity, funds such as Apollo and Blackstone Structure custom for creators.
These creators can generate thousands of loans per month, but reductions generally occur weekly in the best case. In the middle, capital is inactive, investors absorb cash resistance (that is, the erosion of the returns caused by inactive capital instead of deploying in loans generating yield) and creators resort to the use of costs of expensive capital to close gaps.
Regular managers display large equipment to monitor the agreements, verify the guarantee and manage waterfall payments. This is intensive in labor, prone to errors and expensive.
A transformative change is now underway, ready to accelerate the growth of ABF and also where the Web3 technology battery comes into play.
In the heart of this, it is not only a better infrastructure enabled by Blockchain, but also better money, better because it is programmable.
The new participants can use programmable credit facilities and Stablecoin rails to originate faster, finance cheaper and scale. By tokenize credit facilities and integrate intelligent contracts in each step of the life cycle, managers can automate verification, enforce compliance in real time and execute reduction and payments instantly. Matching that with programmable stablcoins for funds and liquidation allows creators to eliminate cash resistance. Platforms such as FENCE and INTAIN are already demonstrating that this works in practice: handling of cascades of origin, reports and payments with code.
Source: Fence.finance
The implications are deep. Large managers such as Apollo and Blackstone can throw operational swelling, while smaller funds, emerging managers and family offices can participate without staff armies. Chain infrastructure can ultimately help democratize access to a market that has historically closed to all larger institutions. Over time, the headlines that remain linked to the manual processes that take advantage of traditional rails run the risk of losing land before specialized credit funds that adopt infrastructure in the chain.
In the midst of an enthusiasm renewed by cryptography and attention to the broadcast of Stablecoin, ABF is already applying technology to solve real friction and capture the rapid expansion market opportunity. Look at this space.
