Meet Percent, the platform democratizing private lending

The Offer Sheet readers —

Today, we look forward to introducing you to a platform called Percent. What do they do? They’ve created a very unique investment vehicle - one that allows you to invest as a private lender.

In other words, small businesses or startups might go to a bank to borrow money and the bank, well, makes bank (the extra hour of sleep really has me on top of my pun game this morning). But now - as a private lender that you could be you making a very solid yield - to the tune of potentially 20% APY! (What?! Even in this high interest rate environment that’s pretty incredible).

In our Q&A with Percent, we’ll discuss how their platform stands out, how they make money, what % APY you could realistically expect, who is eligible to invest, and more about private credit in general.

Today, we are excited to be talking with the Percent team, and learn more about how they are changing the game in the private credit market – helping investors unlock returns as high as 20% APY. 

What makes private credit so attractive as an investment vehicle for accredited investors vs. say the stock market or even dare I say it, real estate?

Private credit is like borrowing money, but not from a regular bank. It's when smaller businesses or new companies get loans from special lenders instead of big banks. They do this when they can't get enough money from regular banks or when they need extra cash for their businesses.

It seems like you are the only platform exclusively devoted to private lending. How does Percent stand out among the competition? 

• APY up to 20%, current avg. APY of investments here. 

• Access to private credit markets, which historically have been limited to institutional investors

• Shorter-term investments, with many durations between 9 months to several years, and liquidity available after the first month, if the borrower provides this option. This way investors’ money doesn’t get locked up.

• Low minimums: Only need $500 to get started

• Diversification, with access to small business lending in Latin America, Canadian mortgages, US merchant cash advances, and corporate dept. See here for more info. 

  • For investors that want broad diversification in a single investment, Percent offers Blended Notes. 

  • Transparency at every turn, with access to a wealth of market data on every company and every deal. Compare deals before you invest and track their performance after they close.

• Access to an investor relations team that supports you from onboarding, investment discovery, and portfolio management. They can be reached at [email protected]. 

What are some of the perks you offer first time users? How about readers of The Offer Sheet?!

We are happy to offer a welcome bonus : You can earn up to $500 bonus on your first investment.

How does Percent make money? Please provide details about any fees for investors.

Percent primarily makes money from platform fees charged to borrowers. Percent also charges investors 10% of the stated interest rate. For instance, on a 15% APY deal, the effective APY after fees would be 13.5%. These fees go into allowing Percent to offer investors more investment products beyond our current offerings, and add advanced features like third-party collateral verification. 

What kind of returns can investors expect from investments on Percent? What are the typical hold times for investments? If there is any ongoing cash flow, how much and how frequently (annual? quarterly? monthly?)

Investments on Percent have a current weighted avg. APY of 18.67% as of May 31, 2023. Our track record of performance is here. Investments mature in 9 months to a few years, but many of our investments rollover in as short as 1 month for those looking to access liquidity, at the option of the borrower. Investors typically receive monthly interest and, beginning after the 1st monthly anniversary date from the close date, principal amortization payments as well. Returns are not guaranteed for any investment. 

How are investments selected for listing on Percent? 

Currently, Percent is offering short-term debt investments with competitive risk-adjusted returns. All deals are securities exempt from SEC-registration under Regulation D, adhering to Rule 506(c). Returns are based on the performance of underlying assets such as factored invoices, and merchant cash advances that are selectively sourced through our originator partner network. 

As an accredited investor, what percentage of my savings should I generally be investing in alternative vehicles like private lending to both optimize growth and de-risk?

Industry research shows better returns from a 40/30/30 portfolio, with 30% allocated to alternatives like private credit.

Over a two year period, more diversified portfolios showed a 2.6% higher return rate than the traditional 60/40 equity/fixed income mix, with overall volatility lowered by more than 3%.

Like every investment, private credit involves risk. Percent encourages investors to understand their risk appetite and conduct due diligence before investing.

Who is eligible to invest in deals on Percent?

Deals are only available to accredited investors, generally investors with $200K in annual income or minimum $1 million in net worth, excluding primary real estate. For other ways to qualify, see here. 

How active vs. passive of an investment is it? Once I invest the first time, do I need to continue to try to find more investing opportunities on your platform? Does it work more as individual investments that I cherry pick or more as a fund?

You get to invest on your own terms by specifying your desired yield and minimum investment amount during syndication. At the same time, you can gain exposure to different asset classes and geographies with individual deals, or use Blended Notes to quickly achieve broad diversification across the platform’s deals.

With our proprietary technology, you can see and compare available deals up front. And are able to access comprehensive borrower, deal and market data. 

What is the Percent story and how did this platform come about?

Nelson Chu founded the platform in 2018 with the belief that investing in alternative investments should be more transparent, more accessible, and more liquid than ever before.

It doesn’t matter if you’re a hedge fund manager or an everyday investor, we all want the same things — to build a financial future for ourselves that we can control.

As an investor, why should I consider private credit generally?

• High yield: Corporate borrowers will pay higher rates because they need liquidity.

• Low correlation with public markets

• Growing market 

  

• And continues to grow: here are recent examples in this news of large institutional investors doing more with private credit:

  • KKR recommending investors increase share of private credit in their portfolio