Versara Trade, a trade finance platform powered by crypto credit enhancement, aims to help the growing SME market obtain funds critical for growth – funds that are currently simply unavailable. The first model of its kind, Versara will leverage crypto-assets to enhance credit options for borrowers and mitigate risk factors for credit providers, thereby bridging gaps in trade finance availability, which is a major issue facing small and medium-sized enterprises (SMEs).
Backgrounds & Challenges
Overall, the biggest challenging facing SMEs today is a lack of trade finance availability: many traditional financial institutions are unwilling to lend a hand (or a line of credit) to economically disadvantaged SMEs because of the risks associated with lending to small players. This restricts their opportunities for growth and development. Moreover, even where lines of credit are available, there exist substantial needs for credit enhancement options as well.
Cryptocurrencies can help solve these major pain points, but in measured steps.
The global market is slowly beginning to realize the immense benefits that blockchain projects and alternative currencies can bring to the world. Thanks to blockchain technology and the many benefits it brings (such as tamper-proof transactions and impenetrable security, privacy, and transparency), many governments and institutions have slowly changed their stance on cryptocurrencies and we now see more and more large, traditional investors entering the crypto fin-tech space.
Before we actually get there, however, we need to overcome challenges that currently stand in the way of widespread crypto adoption by leveraging the advantages of blockchain technology to deliver solutions that deal with real economic issues. As Brad Garlinghouse, the CEO of Ripple, famously (and very rightly) stated, the value of many crypto projects will fall to zero over the long term; the long-term value of tokens and projects will depend on the utility provided by the project.
Introducing Versara
With this in mind, the business model proposed by Versara Trade combines the merits of fiat currencies with the advantages of cryptocurrencies to meaningfully and positively impact financial markets. Acting as a credit enhancer to traditional financing, Versara can help millions of individuals and SMEs around the world fund and grow their businesses and take them to the next level. Versara will do this by improving traditional asset-based lending (ABL) and by using cryptocurrency as extra collateral (which is known as “crypto credit enhancement”) as well as by providing blockchain-powered invoices, risk diversification options using proprietary AI algorithms, and by constructing efficient financial models to make trade finance accessible to the retail investor.
By doing these things, Versara promises to deliver viable and effective solutions to credit risk mitigation and access to financial capital. As a result, traditional financial partners have signaled a readiness to work with the technology, and we believe that credit enhancement tools based on cryptocurrency can bridge important gaps where needed, giving the $600 billion emerging SME market better options for growth and expansion.
Two-Level Credit Enhancement
As mentioned above, SMEs are often unable to obtain credit because of the perceived risk to lenders of not getting their money back from high-risk and unverified borrowers. Versara solves this issue by creating two safeguards that will ensure that lender funds are returned, even in the event of default by the borrower.
Pool-specific credit enhancement is the first line of defense against default. An over-collateralized pool of cryptocurrencies is created using funds from crypto-guarantors, and this fund is used to pay fiat lenders in case of default of any loan given out.
Platform-wide credit enhancement is the second line of defense against default. It is similar to pool-specific credit enhancement, but instead of using funds from a pool of crypto assets to pay off lenders in case of default by borrowers, this pool draws from a platform-wide cross-collateral pool, and it is only tapped into if the pool-specific credit enhancement line of defense is depleted of funds.
Onboarding and Underwriting
In order to overcome the second biggest challenge in the face of providing SMEs with loans, which is basically a KYC (Know Your Customer) challenge, Versara users can only be onboarded via referral by other verified users, or by a thorough verification process that verifies invoices based on country, currency, maturity date, and credit profile, along with advanced risk assessment algorithms that screen and filter would-be users before they are able to join the platform.
Platform Benefits
Platforms and networks of this type can only be effective if they provide tangible benefits to all parties involved in trade. Here are the benefits that various groups can expect to reap by using Versara:
Sellers of goods benefit by having easier access to traditional factoring or asset-based lending while enjoying lower costs as compared to invoice financing.
Buyers of goods are rewarded for simply verifying invoices and other documents, and they enjoy easier access to financing as well as better repayment terms.
Crypto guarantors who provide cryptocurrency to the credit enhancement pool benefit by being able to easily participate in a huge trade finance market, while also gaining access to a new breed of high-yield investment products.
Fiat lenders enjoy diversified credit risk tools, access to an asset-based lending market with additional credit collateral, and lower risks of total default.
Project Roadmap
The idea for Versara was conceived in October 2017. After putting together the right team for the job, angel investment to fund the project was obtained in early 2018. That was followed by the release of the project whitepaper and completion of legal formalities in Q2 2018.
After a beta prototype of the Versara platform was launched in May 2018, a public token sale (ICO) was held in July, followed by additional improvements and to the platform. The platform is being prepped for formal launch in the US in Q1 2019, launch in selected Asian countries in Q2 2019, and launch in selected European countries in Q3 2019.
Team
Sean Liu, our Founder and CEO, is a seasoned manager with more than a decade of experience in financial products. His areas of expertise include security finance, credit derivatives, and other fixed-income instruments.
Dennis Thankachan, our Co-founder and COO, is an experienced investor in technology and telecommunications projects. Prior to Versara, Dennis was a research analyst at both PointState Capital and Och-Ziff Capital Management and worked on equities in the technology, media, and telecommunications sectors.
Daniel Napierski, our Co-founder and CTO, has years of experience providing professional consulting services to clients ranging from startups to global corporations. Through his consulting practice, he has applied his experience to assist companies in adopting agile methodologies and in rapidly producing prototypes that perform.
Conclusion
By leveraging cryptocurrencies in the trade finance industry, Versara promises to help small businesses flourish while giving investors a unique opportunity to grow their wealth. The platform will provide low operating costs thanks to blockchain technology and proprietary algorithm-based underwriting, the use of cryptocurrency as collateral, risk diversification through the aggregation of invoices into structured asset pools, easier access to effective trade financing tools, and through lines of defense against defaults.
Everyone in the ecosystem, from sellers and buyers to lenders and guarantors, all stand to benefit from the system, either in the form of better access to credit, lower costs of operation, or through the use of highly effective trade algorithms and rewards from simply participating on the platform and vetting and onboarding verified users.
Media Contact
Company Name: Versara Trade
Contact Person: Isa Yu
Email: Send Email
Phone: 917.285.4420
Country: United States
Website: www.versara.trade