If you are an accredited investor, Percent is an investment option you should be aware of. Percent has democratized the realm of private credit investments, which was previously limited to a select group of connected individuals and institutions.
Now, thanks to evolving SEC regulations over the past decade, a broader spectrum of investors can dive into private loans for startups, small businesses, and individual consumers. This expansion offers numerous investment opportunities, adding diversity to one’s portfolio.
Through Percent, accredited investors can start with as low an investment as $500, granting access to this once-exclusive asset class. With partnerships spanning over 40 corporate borrowers, the platform facilitates the funding needs of businesses across various sectors and sizes. These enterprises, often bypassed by conventional banking systems, find the essential financing they need via Percent.
The platform aims to provide a detailed insight into private credit investments, addressing its workings, anticipated returns, and investment durations for potential investors. As we dive deeper into this Percent Review, we’ll assess whether Percent is the best investment for accredited investors or just a pretender.
What is Percent?
Established in 2018, Percent, previously recognized as Cadence, made its mark in the alternative investment domain, emphasizing private credit investments. This category spans a variety of sectors, such as merchant cash advances, consumer loans, corporate loans, and venture debt tailored for rapidly expanding businesses. Despite the traditionally high entry barriers in private credit, Percent aimed to democratize access, presenting these lucrative opportunities to a wider range of investors.
Serving as a bridge, the platform introduces accredited investors to businesses in need of short to medium-term, high-yield debt financing. As an assurance measure, these businesses put forth assets like residential mortgages, trade receivables, and corporate loans as collateral.
This arrangement provides investors an element of security, often not commonplace in the realm of alternative investments. Such a clear and customer-centric approach has bolstered Percent’s reputation, with a portfolio of numerous successfully funded deals vouching for its platform’s efficacy.
Investors on Percent essentially step into the lender’s shoes, accruing interest on the loans provided. The returns materialize over the loan’s duration, influenced by the particular payment terms set. Typically, the investments available on Percent have a median duration of nine months. However, options are versatile, ranging from a few months to several years, with some even offering liquidity in just a month.
Percent Investment Offerings
Founded to cater to diverse financial objectives, Percent provides Asset-Based Notes, which are loans anchored by collateral. This can range from consumer loans, backed by items like cars or jewelry, to trade receivables linked to invoice amounts. SMB leases also fall under this category, where businesses can leverage assets like property or machinery. If borrowers falter on repayments, the collateral can be seized.
Trade Receivables allow investors to buy a company’s account receivables at a lower rate. When the invoices mature, the investor garners returns.
Consumer and SMB Loans
Consumer Loans span installment and vehicle loans, often protected by assets such as homes or cars. On the other side, SMB Loans, either secured or unsecured, cater to small and medium businesses. Some may come with personal guarantees from the business owners.
Offering a broad investment perspective, Blended Notes are a mix of multiple assets. This single investment grants exposure to several deals on Percent. With a starting investment of $5,000 (though some might ask for more), it comes with a 1% management fee. Monthly interest is paid out for the first year, followed by combined principal and interest amounts.
Tailored for rapidly growing companies, these loans serve as interim funding bridges. Repayments generally occur when companies secure their subsequent funding round.
Percent’s investment structure has a straightforward fee arrangement. For single note offerings, the platform doesn’t levy any management fees. Instead, they deduct a percentage from the yield. This percentage is typically 10% of the advertised interest rate for the deal.
For those opting for the Blended Note programs, a 1% management fee is applicable, in addition to the percentage taken from the yield. This transparent fee structure ensures investors are clear about their returns and associated costs.
What is an Accredited Investor?
If you are unsure if you are an accredited investor or not, here is how you can decide. An accredited investor refers to an individual or organization permitted to invest in securities not registered with the SEC, often because they have a higher financial threshold and can handle riskier investments.
The Securities and Exchange Commission outlines that an accredited individual investor is someone who:
- Had an annual income surpassing $200,000 (or $300,000 combined with a spouse) in the previous two years, with an expectation of similar earnings in the present year.
- Possesses a net worth exceeding $1 million, individually or combined with a spouse, excluding their main residence’s value.
- Holds Series 7, Series 65, or Series 82 financial securities licenses as a financial expert.
This specification aims to ensure that investors possess the financial knowledge and capability to engage in potentially higher-risk investments and can manage potential losses.
Besides individuals, entities eligible to be accredited investors encompass banks, broker-dealers in investments, insurance providers, certain charitable bodies, any organization where all the equity holders are accredited investors, and trusts that have assets surpassing $5 million.
What Types of Investments Can Accredited Investors Make?
If you are an accredited investor, you have access to investment vehicles that non-accredited investors do not. These investments typically include higher risk and also higher reward. Here is a list of some of the investment options for accredited investors:
- Crowdfunding: Online accumulation of funds for ventures, with equity crowdfunding allowing stake ownership in companies or real estate ventures.
- Real Estate Syndication: A pooled investment model where multiple investors finance pricier real estate projects led by a syndicator.
- Convertible Investments: Securities like bonds that can transition into common stock, offering growth potential and loss protection.
- REITs: Trusts managing funds invested in diverse properties, from condos to hospitals, offering multiple real estate investment opportunities.
- Venture Capital: Financing for startups in exchange for company ownership, supporting businesses from inception to growth.
- Hedge Funds: Professionally managed funds with fewer regulations, offering investment in diverse and sophisticated asset classes.
- Private Equity Real Estate: Investment in real estate through pooled funds, encompassing a range of property ventures.
- Hard Money Loans: Short-term loans by non-traditional lenders using assets as collateral, serving as alternative financing solutions.
Is Percent The Best Investment For Accredited Investors
Is Percent the best platform for accredited investors? Let’s look into the specifics:
Percent has carved a space in the private credit investment world. The platform offers various debt types and blended note portfolios. One advantage is the lack of fees on individual deals. They’ve also partnered with esteemed corporate borrowers who extend loans to small businesses and individuals. As an investor, the steps are simple: register, choose a deal, and invest.
Since starting in 2018, Percent has completed 415 deals, attracting over $800 million in investments. A crucial detail is their average default rate of 1.89%. These loans, however, are backed by assets, providing a safety net for investors.
In terms of returns, investments on Percent typically last 9 months and boast an average annual percentage yield (APY) of 17.04%. For perspective, the U.S. average APY for high-yield savings accounts during this period hovered around 4.50%.
To date, Percent has returned $713.4 million in principal to investors and paid out nearly $30 million in interest. Concluded investments have seen an average weighted APY of 12.8%.
In conclusion, given its offerings, reliability, and substantial returns, Percent stands out as a great choice for accredited investors wanting to gain access to the private credit sector.
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