Million dollar startup Ripple is getting into the loan business. This was recently announced, announcing their line of credit for customers who use their On-Demand Liquidity (ODL) service. These lines of credit will work with XRP.
The information was published on the company’s blog. According to them, the credit line will allow small and medium-sized enterprises to expand their business where they would otherwise face “stagnant growth.” The latter inhibits their ability to compete with larger companies.
How will these Ripple loans work?
According to Ripple, those companies that use ODL on RippleNet, a network of payment providers, will be able to buy XRP from Ripple, on credit and will be charged a fee on the amount loaned.
According to a company spokesperson, “this is the first time we have tested a product offering in the loan arena.” In addition, it was announced that the service is designed to facilitate lower-cost financing for cross-border payments compared to traditional media.
So far it has only been tested by RippleNet customers through a pilot program, the company said. In the process, ODL uses XRP as a “bridge currency” to facilitate cross-border payments.
For example, a company in country A that needs to pay a provider in country B, but cannot find a forex trader who is willing to exchange them, can convert money in and out of XRP, fast.
In the same example, the loan means that the company in country A does not have to advance the money. This way, you set a rate at checkout and then pay Ripple when it’s convenient.
What can we expect about it?
Even though it is in pilot tests, it seems that Ripple is very serious about entering the loan sector. Right now, Ripple has 6.2 billion XRP (worth around US $ 1.55 billion at current prices).
This represents 6% of the total XRP supply, counting both the 45 billion in circulation and the 48.6 billion in escrow. This is why the company periodically sells XRP on the market.
With this new foray, Ripple is looking to grow even more, what do you think? Do you consider it a good alternative for loans?