❓FAQ

Frequently Asked Questions:

General

→ What is Florence Finance?

Florence Finance is a bridge between crypto liquidity and real-world lending using standardised Decentralised Finance (DeFi) building blocks (“financial lego’s”) and Digital Ledger Technology (“the blockchain”) to help address the Real World SME funding gap and bring Real World yield on-chain.

→ How does it Work?

Florence Finance allows you to put excess USDC/EURA stablecoin liquidity to work to fund real-world loans & earn real-world interest. Florence Finance uses stablecoin commitments to fund loans to real-world SME lending experts and SME lending platforms. Florence distributes the bulk of the real-world interest received back to the stablecoin funders in the most efficient and transparent manner possible (on-chain) and uses the balance to grow the platform and/or buy back $FFM.

→ How do I participate / invest?

Investing in $FFM is a vote of confidence in our belief that banking and credit creation needs to be rebuilt from the ground up. The value of our project is directly related to our ability to BUIDL, to grow our community and the lending activities by getting more people involved in our cause. Whether you want to help us grow by buying/owning the $FFM token, contributing as a Duke Dash NFT holder (points farmer), community member or you would like to utilise the protocol to earn Real World yield is entirely up to you and we encourage all to read our Docs and join the community through our Twitter, Telegram or Discord channels

You can buy $FFM on Arbitrum and Base through UniSwap and you can mint/redeem $flrEUR to participate in our vaults through the Treasury and/or you can buy/sell $flrEUR through the flrEUR/USDC.e liquidity pool on Camelot.

→ Is it Risky?

Florence Finance is not your average crypto project, it has a real world use case, it invests in real world loans through known counterparties with excellent long standing track records in SME Lending. It has a fully doxxed founder & team and multiple years of verifiable on-chain provenance. Florence has had zero credit losses, no smart contract related issues since inception and multiple audits.

The loans and terms at which they have been underwritten are listed transparently for each vault so you can DYOR with respect to the risk/reward.

You are not locked-in so you are free to enter/exit vaults whenever you please. As there is plenty of flrEUR liquidity in the treasury and the fllrEUR/USDC.e liquidity pool you can always swap your flrEUR for either USDC or EURA.

Lastly, There is no 3rd party liquidity “locked” in our protocol other than in the treasury and the Nitro LP on Camelot, so even if there was ever a smart contract level bug/hack the funds lent out are SAFU in the real world.

Why Florence?

→ Why address the SME Funding Gap?

SME’s represent about 90% of all businesses globally in number and employ around half of all people in jobs, i.e. they are of tremendous societal importance!

SME’s are highly dependent on Banks for credit and in the wake of the GFC, banks have become larger and more regulated which in turn has heightened the bar for SME’s to be eligible for bank credit.

It is estimated by the IMF, the World Bank and others that the unfunded SME credit gap (i.e. credit which is not provided and that could be put to good economic use) is currently larger than 10 trillion USD globally and over 2 trillion in the EU.

Providing additional/alternative sources of SME credit is the key to building the financial system of the future.

→ Why bringing real world yield on-chain will drive adoption through real world use case?

DeFi lending, other than pure overcollateralized on-chain lending, has been plagued with bad actors and bad practices as early projects failed to uphold sound real world credit practices. That said, the crypto ecosystem needs to evolve from majority speculation/entertainment driven, to real world use cases. Being able to bring real world yield on-chain is going to be a deciding factor in driving real world (“normie” adoption.

→ Why BUIDLing an alternative savings asset/product will enable defunding of “the system”?

By BUIDLing an alternative savings platform Florence can act as a bridge for bank deposit holders to safely bring their deposits on-chain. By re-deploying those deposits to those that are most disenfranchised by TradFi we effectively kill two birds with one stone 1) solve the SME funding gap & 2) defund the existing overleveraged banking system.

→ Why decentralise credit creation?

By providing credit to multiple smaller and more specialized SME lenders Florence directly enhances their ability to compete with and take market share from TBTF and hard to access banks, thus decentralising credit creation and reducing the effects of regulatory capture..

Borrowing

→ What kind of loans does Florence provide?

Florence Finance does not lend directly to SMEs. Our concept is based on lending to experts in SME lending and SME lending platforms. Generally, we provide funding on terms similar to existing/other funders of these lending platforms and rank pari-passu. The SME lenders that we fund compete with banks in the lending market and are largely price (interest rate/spread) takers as the EUR lending markets today are dominated by banks.

We aim to create an alternative source of funding for SME lending platforms to enhance their ability to lend and reduce the dependence on banks for SME credit. We’re also aiming to drive the adoption of crypto on the whole by providing real world yield on-chain.

→ Who are the lenders?

Florence Finance has fully KYC and AML-compliant primary funding partners. All of the loans on our platform are initially funded by them and then tokenized in respective Vaults.

Loan Vault tokens – we’re talking about tokenized lending-pool participations here – can be gained by third parties through minting flrEUR through our Treasury and/or buying flrEUR in the secondary market through the flrEUR/USDC.e Camelot LP and exchanging these flrEUR for respective Loan Vault tokens/positions.

→ I want to become a borrower. How do I get approved?

It’s as easy as pie. Apply online and share your necessary compliance information. Apart from that, we’ll only need to know about the size and nature of your credit request. Leave everything else to us – we look forward to your application!

Lending

→ Let’s assume I become a lender and fund a pool. What happens to my capital?

Depending on whether you mint or buy flrEUR your capital will either be transferred to the Florence Treasury or the Liquidity Providers to the flrEUR/USDC.e Liquidity Pool. If there is excess liquidity in the treasury and/or the LP we could, in future, fund new loans from there. To date that has not been done and all liquidity remains locked to ensure easy entry/exit to the vaults by 3rd party participants.

Depending on the agreement with borrowers funds from maturing loans are either repaid, rolled (extended) or used to fund new loans under existing agreements. Upon repayment, Florence Finance will deposit the principle in the Treasury for 1:1 redemption by flrEUR token holders. The interest-bearing portfolio of the respective Loan Vault is thereby reduced thus incentivising redemption by Loan Vault token holders. There is however no guarantee of redemption as long as funds can still be utilized within the pool mandate. This basically means that if you wish to exit your position, you are dependent on the secondary market to the extent the Treasury is empty.

→ Are there any risks involved in lending?

The main risk associated with participating in the Lending Vaults on Florence Finance is credit risk. This basically refers to the uncertainty that arises through a default of the borrower or the SME’s they have lent to. Determining the default risk of a borrower and/or a specific loan in a lending pool requires specialised credit skills/models and due diligence. Today this is handled by Florence Finance and its partners as it would be hard to bootstrap in a fully decentralised fashion. Over time, we aim to promote credit information transparency and simplify it, so that it can become more decentralized. In the interim, we're looking to build a default reserve that can absorb minor default losses should they occur.

Security

→ Is my money safe with Florence Finance?

Florence Finance is not a bank and has never been designed to be a bank. We explicitly don’t take custody of your digital assets. However, Florence Finance is a clever and future-forward alternative. It represents a decentralized platform that enables the transformation of digital assets (stablecoins, that is) into real-world loans or credit assets through its customers (SME lending platforms). The Florence Finance Lending Vaults exchange stablecoins for credit exposure (LP tokens) with a yield – whether in stablecoin, flrEUR or FFM token – proportional to the credit risk taken. Given this all that happens on-chain, and all the interest received is used to either reward funders (yield), to grow and improve the platform and/or buy-back $FFM (in the future). There is no safer, better, or more efficient way to create, administer and get access to this kind of credit exposure that we know of.

→ What about smart-contract and hacking risks?

The Florence Finance protocol has been up and running for multiple years, first on the Ethereum network and now on Arbitrum. Our smart contracts have been audited and subjected to people trying to arbitrage/hack them, first in a testing environment and then live for over 3 years now. So far we have not had any smart contract related losses/events.

Legal

→ Under what kind of law or jurisdiction does Florence Finance operate?

The Florence Finance protocol is a limited liability company (LLC) registered in the DMCC (commodity-free trade zone and designated crypto sandbox) in Dubai, UAE. The lending operations are administered through a limited-liability sister company named Florence Finance Europe BV, registered in the Netherlands.

→ Is Florence Finance regulated?

As Florence Finance focuses on B2B-lending activity, which is unregulated in the EU, and funds its activities in crypto (which are not deemed deposits or money by EU regulators), it is currently not subject to financial or banking regulation in either Dubai or the EU. Given the nature of our business and our customers, however, we aim to upkeep industry standards by proactively addressing governance, ethics, KYC and AML related matters. In that manner we should be able to easily comply should our company/operations become regulated in the future.