What To Know Before Signing Up To Percent – What Do They Offer And What Are The Risks

Jeremy BiberdorfBy: Jeremy Biberdorf

December 12, 2023December 12, 2023

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In this Percent review, I will outline what to know before signing up to Percent, especially for those seeking to diversify their investment portfolio away from the stock market through alternative assets. Percent is a digital platform that has emerged in the wake of regulatory changes by the SEC, which now allow for more accessible private credit investments. This platform offers a unique opportunity for investors to delve into the private credit sector, which includes investments like small business funding, consumer loans, merchant cash advances, discounted receivables, and venture debt.

Percent allows investments starting as low as $500, with durations ranging from as short as one month to several years, though the average duration is around 9 months. These micro-investments in private credit can be a strategic addition to a portfolio, providing cash flow, short-term investment opportunities, and diversification benefits distinct from traditional stock market investments. However, it’s essential to understand that these types of investments also carry their own set of risks.

Investors considering Percent will find that it’s not just about portfolio diversification but also about potential insulation from global economic trends. My review explains how the Percent platform functions and outlines all the must-know facts. This insight will be crucial for those looking to explore private credit as an alternative investment option.

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What to Know Before Signing up to Percent

I will get into important facts like offerings, risks and pricing, but first I will set the table with a bit of background information.

Percent, How It Works

Percent History

Percent, originally known as Cadence, was founded in 2018 and quickly established itself in the alternative investment platform market, focusing on private credit investments. This realm includes diverse options like merchant cash advances, corporate loans, consumer loans, and venture debt aimed at high-growth companies. The platform’s inception coincided with relaxed SEC guidelines over the past decade, which opened up more investment possibilities, including private credit.

The company’s mission was to lower the barriers to entry in the private credit space, making these investment opportunities accessible to a wider audience, particularly accredited investors. Percent connects these investors with businesses in need of short-term, high-yield debt financing.

A unique aspect of Percent is that these businesses often offer cash-generating assets as collateral, such as residential mortgages, merchant cash advances, and corporate loans, providing a level of security not commonly seen in alternative investments.

With a commitment to transparency and customer service, Percent has built a solid reputation in the industry. It has successfully funded hundreds of deals, demonstrating the platform’s viability and appeal to investors.

Percent works with over 40 corporate borrowers, offering a variety of opportunities for investors to diversify their portfolios. The platform plays a crucial role in helping businesses of various sizes and industries secure the financing they need, especially when traditional banking options are not viable.

Percent Investment Options

Percent gives users a variety of options to choose from. Here is my breakdown:

  • Asset-Based Notes: These include secured loans backed by collateral such as consumer loans, trade receivables, and SMB (small-and-medium-sized business) leases. If borrowers default, the lender can seize the pledged assets.
  • Trade Receivables: Investments in business accounts receivables purchased at a discount, with returns realized upon maturity.
  • Consumer Loans: These encompass investments in installment loans, vehicle loans, and short-term unsecured loans, often backed by collateral.
  • SMB Loans and Leases: These are short-term secured and unsecured loans for small businesses, with some requiring personal guarantees from business owners. SMB leases provide investment opportunities in property and equipment leases for small businesses.
  • SMB Cash Advances: Investments based on a business’s future receipts, distinct from invoice factoring as repayments are tied to future sales.
  • Blended Notes: Combining multiple assets into a single investment managed by Percent’s team, offering exposure to multiple deals with a minimum investment of $5,000 and a 1% management fee.
  • Corporate Loans and Venture Investing: Investments in fast-growing companies that offer high yields but typically require higher minimum investments. These loans are repaid when the company secures its next equity financing round.

Percent.com acts as a marketplace, linking borrowers, underwriters, and investors. It helps corporate borrowers raise capital and offers investors diverse investment opportunities like consumer lending, litigation finance, SMB loans, and corporate loans. Investors can diversify their capital across various options to increase their chances of a positive return.

The platform offers incentives like cash bonuses for first-time investors, based on the amount invested. Investments on Percent can range from short-term options of just one month to longer terms of up to 36 months. Blended Notes offer a diversified investment across various deals, while single note investing has no fees as of April 2023.

Who Can Invest With Percent?

Before going any further in your consideration of whether to sign up for Percent or not, I must note that Percent is for accredited investors only. An accredited investor is someone who has earned at least $200,000 for the past 2 years or has a net worth of at least $1 million.

Percent Pricing

At Percent.com, the fee structure for investors is straightforward. For single note investments, there are currently no charges, but investors need to meet the minimum investment requirement for each option.

The Blended Notes program includes a 1% management fee on assets under management, along with an additional fee calculated as a percentage of the yield. This clear and concise fee arrangement allows investors to understand the costs associated with their investment choices on the platform.

Risks of Percent

Investing through Percent comes with inherent risks that need careful consideration. Credit risk is a primary concern, as there’s a chance borrowers might default, potentially leading to investment losses. The investments on Percent also carry liquidity risk; unlike stocks or mutual funds, they are not easily liquidated before the end of the term.

Additionally, platform risk exists, where operational issues or regulatory changes could impact investment recovery. Economic fluctuations and diversification risks are other factors to keep in mind, as they can affect investment performance.

While Percent ensures bank-level security and uses Special Purpose Vehicles (SPVs) to protect investments against company failure, it’s crucial to understand that investments on the platform can be high-risk, with the possibility of losing some or all of your money. They default rate of Percent loans is less than 2%.

Final Thoughts

My exploration of Percent has covered its diverse investment options, fee structure, and the inherent risks involved. As an innovative platform for private credit investments, Percent offers unique opportunities for diversification beyond traditional stock markets.

However, understanding what to know before signing up to Percent is crucial. Potential investors should weigh the risks of credit, liquidity, platform stability, and economic changes, along with the importance of diversification. With this knowledge, you can make an informed decision about whether Percent aligns with your investment strategy.

For more information and to consider whether Percent is right for your portfolio, Click Here.

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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

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