Jul 15, 2025
Mid-market companies power the global economy, yet they face a persistent financing gap. Despite strong fundamentals and proven business models, these companies often find themselves too large for small business loans but too small for traditional bank financing. At cSigma Finance, we’ve built the infrastructure to bridge this gap, connecting quality mid-market businesses with DeFi lenders seeking sustainable yields.
But identifying companies that deserve financing requires more than good intentions. Here’s our rigorous evaluation process that has helped us tokenize over $80 million in business loans while maintaining consistent 15–18% APR for lenders.
The foundation: governance and management evaluation
Quality lending starts with quality borrowers. Our selection process begins by identifying mid-market companies that demonstrate exceptional corporate governance and management practices. Well-managed companies navigate challenges more effectively and deliver the returns both cSigma and our lender community expect.
Our baseline criteria for platform acceptance
Every company on cSigma must meet these fundamental requirements:
Established operations: Minimum 3 years in business
Proven fundraising ability: $20M+ raised in debt or equity
Geographic focus: Operations in developed markets (North America, EU, Hong Kong, Singapore)
Credit track record: Demonstrated history of raising and repaying debt from financial institutions and family offices
These criteria filter for businesses with institutional credibility and operational maturity.
Key governance indicators we evaluate
Beyond the baseline, we conduct comprehensive reviews of business documents, organizational structure, and leadership capabilities. Strong governance manifests in specific ways:
1. Active ownership involvement
Owners and management who take hands-on roles in daily operations demonstrate commitment and aligned incentives. Passive ownership structures often signal potential agency problems.
2. Engaged board oversight
An active board that reviews and questions major strategic decisions provides crucial checks and balances. Rubber-stamp boards are red flags in our evaluation process.
3. Transparent financial reporting
Regular, independently verified financial reports with appropriate oversight indicate organizational maturity. Companies that can’t produce clean financials rarely make good borrowers.
These governance practices serve as leading indicators of organizational health and accountability — qualities that significantly reduce lending risk.
Financial health: beyond the balance sheet
Strong governance alone doesn’t guarantee loan repayment. Our financial assessment digs deep into each borrower’s ability to service debt through multiple economic cycles.
Our comprehensive financial review process
We analyze two to three years of financial performance, examining:
Revenue stability and growth patterns
Profit margin consistency
Cash flow predictability
Debt service coverage ratios
This historical analysis helps us understand not just where a company stands today, but how it performs under various market conditions.
Real-world financial benchmarks
Here are concrete examples of financial metrics that give us confidence in a borrower’s creditworthiness:
Debt-to-equity ratio: 3.5 (5.0 maximum)
This borrower maintains conservative leverage, providing cushion for market downturns while demonstrating they’re not overleveraged.
Working capital coverage: 3x loan obligations
Their working capital plus expected profit and loss over the loan term provides triple coverage for total principal and interest payments.
Accounts receivable quality: <2% write-offs
With steady write-off rates under 2% and average collection periods around 40 days, this indicates strong customer relationships and efficient operations.
Asset coverage: 10x loan value
Long-term assets (equipment and real estate) valued at 10 times the loan amount, pledged as security, provide substantial downside protection.
These aren’t theoretical metrics — they’re real indicators from actual borrowers in our pools.
Additional credit enhancement: building multiple protection layers
Most cSigma borrowers provide security beyond traditional collateral structures. Our approach emphasizes short-duration, self-liquidating assets that reduce risk for lenders.
Primary collateral: accounts receivable
Borrowers typically pledge accounts receivable due within 60–90 days. These short-duration assets provide several advantages:
Quick conversion to cash reduces duration risk
Diversified customer base minimizes concentration risk
Regular collection cycles enable continuous monitoring
Secondary protection: balance sheet assets
Beyond receivables, borrowers may pledge:
High-quality equity positions
Inventory with ready markets
Equipment with strong resale values
Third layer: credit insurance
In most cases, we require borrowers to secure third-party credit insurance, adding an institutional-grade protection layer that further reduces default risk.
The result: sustainable yields from real businesses
By applying this rigorous selection process, cSigma identifies those “hidden gems” in the mid-market — companies with strong fundamentals that simply need the right financing partner to accelerate growth.
This approach has enabled us to:
Tokenize over $80 million in business loans
Deliver consistent 15–18% APR to DeFi lenders
Maintain portfolio quality across multiple market cycles
Provide crucial growth capital to underserved businesses
What’s next for DeFi lending
Our evaluation process represents just the first step in revolutionizing how private credit meets DeFi liquidity. In upcoming posts, we’ll explore how we structure these lending opportunities into credit pools with multiple protection layers, ensuring lenders can access institutional-grade yields without institutional barriers.
Connect with us:
dApp: edge.csigma.finance
Learn More: csigma.finance