# Project Collateral

Collateralization is a core safeguard on 8lends: every loan must be 100% backed by real-world assets, protecting investors and reducing default risk.

1. #### Asset Types & Initial Valuation
   * **Tangible collateral -** inventory, equipment, real estate, receivables - must cover the full loan amount.
   * **Example**: A manufacturing company pledges its CNC machinery; Maclear’s team verifies its market value before any KYB/DD work begins.<br>
2. #### Legal Lien & Ongoing Monitoring
   * After due diligence and pool approval, 8lends records a legal lien on the assets.
   * Collateral is periodically monitored to ensure it remains sufficient and unencumbered.
   * **Example**: A logistics firm’s vehicle fleet is appraised by an external valuer at origination, then spot-checked quarterly by the platform to confirm each truck still meets the required collateral value.<br>
3. #### Default & Liquidation Process&#x20;

   * Upon a Project default (see [**Defaul**](https://8lends.gitbook.io/eightlends/gitbook-karanyuk/project-journey/default)), 8lends acquires full legal authority to liquidate the assets - via open auction or private sale at management’s discretion.
   * Platform enforcement fees (see [**Fees**](https://8lends.gitbook.io/eightlends/8lends-business-model/fees-and-platform-payments)) are deducted from gross proceeds; the net amount is credited back into the lending pool for user distributions.
   * **Example**: If a retail business defaults, its pledged inventory may be sold in a bulk auction; after a 5 % enforcement fee, the remaining funds are distributed pro-rata to CT-token holders.

**Note**: All collateral management is manual and off-chain - assets are not tokenized nor auto-liquidated on-chain, so users should expect a processing delay between default and final distribution.

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