> For the complete documentation index, see [llms.txt](https://docs.arenas.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.arenas.fi/financing-request-lifecycle.md).

# How Your Capital Is Lent

Your deposit only leaves the pool when a borrower has been **approved** and then **draws down**. It comes back when they **repay**. Each step is performed by a different party, and no single party can move your capital alone.

***

### The states

```mermaid
stateDiagram-v2
    [*] --> REQUESTED: borrower creates request
    REQUESTED --> REQUESTED: modifyRequest
    REQUESTED --> APPROVED: approver authorises (full or partial)
    REQUESTED --> CLOSED: closeRequest / declined
    APPROVED --> ACTIVE: borrower draws down from pools
    APPROVED --> CLOSED: closeRequest
    ACTIVE --> Repaid: principal + interest back to pools
    Repaid --> [*]
```

| State         | Meaning                                                                     | Your capital                              |
| ------------- | --------------------------------------------------------------------------- | ----------------------------------------- |
| **REQUESTED** | A borrower has asked for financing, and it is awaiting review.              | Untouched.                                |
| **APPROVED**  | An approver has authorised an amount and opened a **timed receive window**. | Still untouched. Approval moves no money. |
| **ACTIVE**    | The borrower has drawn down.                                                | Lent out, earning interest.               |
| **CLOSED**    | Cancelled or declined before draw-down.                                     | Never left the pool.                      |

***

### Step 1: Request

A borrower who holds the market's **access token (NFT)** asks for an amount, a minimum acceptable amount, and either a **rate ceiling** (interest accrues over time) or a **fixed repayment amount** over a set duration. The borrower has also signed the market's off-chain **financing agreement**, which is what backs repayment to your pool.

***

### Step 2: Approval

An **approver** vets the request and either approves it, possibly for a **partial** amount, or declines it. This is the credit check that stands between borrowers and your deposit.

> **Approval moves no money.** It authorises an amount and opens a receive window. Your capital is only drawn in the next step.

The receive window is fixed at approval and does not change even if the market is reconfigured later.

***

### Step 3: Draw-down

Inside the receive window, the borrower draws the approved amount. Liquidity is taken from the pools' **intents**, **cheapest rate first**, so whether your capital is used depends on the rate your pool offers. See [Intents & Liquidity](/intents-and-liquidity.md).

A draw-down never takes more than the approved amount and never uses an offer priced above the borrower's rate ceiling. It can partially fill if capacity is short.

***

### Step 4: Repayment

Once a financing is active, **anyone** (not only the borrower) can repay, in full or in part, at any time. Repayment covers:

* **Principal**: the amount drawn from the pools.
* **Interest**: what accrued on interest-accrual financings.
* **Other obligations**: any additional charges defined by the market.

Repaid funds go **back into the pool**, which increases the value of your pool shares.

***

### If a borrower does not repay

There is no on-chain collateral and no price-based liquidation. Recovery runs through the **off-chain agreement**, and anything recovered is paid back to the affected pool. If the recovered amount is less than what was owed, the pool, and therefore your pool shares, absorbs the difference. See [Risks](/risks.md).