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Borrowing Limits

Storage Provider's borrowing limits
Before jumping into the limits of the Pool, it's important to understand two metrics: debt-to-equity (DTE) and debt-to-income (DTI). The DTE and DTI ratios are used to limit the amount SPs can borrow from the Pool.

Debt-to-equity ratio

The debt-to-equity ratio - otherwise known as the "skin in the game" ratio - measures the amount of borrowed funds against the SP's equity value.
​
DTE=borrowedFunds/equityValueDTE = borrowedFunds / equityValue
​
For example:
Borrowed Funds
Equity Value
Debt-to-equity
0 FIL
1000 FIL
0%
500 FIL
1000 FIL
50%
1000 FIL
1000 FIL
100%

Debt-to-income ratio

The debt-to-income ratio measures the expected weekly payment against the expected weekly earnings of the SP.
​
DTI=ExpectedWeeklyPayment/ExpectedWeeklyEarningsDTI = Expected Weekly Payment / Expected Weekly Earnings
​
For example:
Expected Weekly Payment
Expected Weekly Earnings
Debt-to-income
0 FIL
100 FIL
0%
25 FIL
100 FIL
25%
100 FIL
100 FIL
100%

Borrow limits

The Pool enforces two borrowing limits:
  1. 1.
    DTE < 100% - the SP can only borrow an amount less than or equal to the amount of equity they bring to the protocol. As the SP earns more equity through block rewards, it can continuously borrow more.
  2. 2.
    DTI < 25% - the SP can only borrow an amount such that the weekly expected payment can be covered by 25% of the SP's weekly expected earnings.
Some examples of accepted/rejected borrow requests:
Borrow request
Expected DTE
Expected DTI
Accept ✅ / Reject ❌
100 FIL
80%
20%
✅
100 FIL
110%
10%
❌ - DTE too high
100 FIL
80%
30%
❌ - DTI too high
The GLIF Website will be updated with an SP calculator, which will show you your borrow amounts.

The Borrow Cycle

The borrow cycle
The Pool is meant to grow with the SP. As the SP borrows funds and pledges them to the Filecoin network, their expected earnings increase, allowing them to borrow more. As the SP earns block rewards, its equity value increases, increasing the SP's borrow cap.