A businesswoman runs a small distribution company. She has never pledged an invoice twice, never inflated a report, and she pays on time. She needs working capital to fill a large order and gets a cash advance. The cost works out to roughly 60% a year.
No one is scamming her. The lender charges that because it has no way to tell her apart from the borrower who does pledge twice, so it prices her as if she were him. She is paying, in her rate, for someone else's fraud.
That is the premium honest borrowers pay, and it is the least discussed cost in private credit. Cole Snell, a serial founder now building infrastructure for non-bank lending, put it at the center of our conversation on All You Can Debt: when a market lends on trust, fraud risk doesn't disappear. It gets spread across everyone.
What trust costs
During the conversation, Cole repeated his thesis several times: markets need to trade trust for truth. And more than once, he said it backwards. Trust and truth sound too much alike, and he ended up laughing at his own slip. But the slip is more faithful to the market than it seems: the industry has been saying it backwards for decades.
Lending on trust means lending on reports, relationships, and paperwork that no one checks against the source. It works until it doesn't, and when it fails, the bill isn't paid only by the creditors involved. After Tricolor and First Brands, every credit committee revisited its assumptions, every lender widened its risk cushion, and that cushion gets passed on to the rate of every new borrower. The fraud of a few becomes everyone's cost of capital.
Cole's dream for the businesswoman at the distribution company is modest and revealing: that she pays 30%, which is still insane, or 10%, which is finally a business. The gap between those numbers isn't technology. It's how much the lender can prove without having to believe.
The law started paying for truth
There is a sign this is changing, and it comes from an unexpected place: American commercial law. On June 3, 2026, Article 12 of the UCC took effect in New York, already adopted by more than thirty states. It creates a new way to perfect a security interest over electronic records: control. Cole explains it with a bill in your pocket: if you hold it and someone claims it's theirs, the judge assumes it's yours until the other person proves otherwise. The consequence is huge: a security interest perfected by control beats one perfected only by a public filing, even if that filing came first.
For the first time, the law rewards proof over paper. But the transition opens its own gap. For years, every asset will have two versions, the physical one and the digital one, and a traditional lien search won't necessarily show who controls the second. Cole admits it himself: a world with two copies of every asset is more primed for double pledging than the one we have now.
The way out we discussed comes from Latin America, where every invoice passes through the tax authority at birth and the private market plugs in on top. The registries that work have the state somewhere in the loop. Cole, a self-described libertarian, accepted it with a line we didn't expect from him: this is government good, not government bad.
The discount exists if someone verifies
Control answers who owns the asset. It doesn't answer whether the asset exists, or whether its cash lands where the contract says it should. And as long as those questions keep depending on trust, the premium will still be there, charged to the honest.
At Vaas, we build the layer that removes it: existence, ownership, and cash flows of every asset, verified against the source and not against the report, every day. For the lender, verification isn't an extra cost. It's what lets it stop charging the businesswoman at the distribution company for somebody else's fraud.
The full conversation with Cole Snell, including how he went from selling artisanal cheese to building credit infrastructure, and why he thinks Delaware's lien records are opaque almost on purpose, is on the episode of All You Can Debt.
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