Percent Review: Invest In Private Credit

Investors seeking diversification from the stock market sometimes turn to alternative asset classes, including private credit. Private credit consists of privately negotiated loans and debt financing from non-bank lenders, including:

• Small business loans
• Consumer loans
• Venture debt
• Other forms of private debt

Investors may turn to private credit investments to improve cash flow or to insulate themselves from global economic trends. In the last decade, digital alternative investment platforms have enabled alternative investments on a scale that wasn’t previously possible. 

Percent is one such digital platform. The company allows investors to invest as little as $500 in notes offering exposure to small businesses, consumer loans, merchant cash advances, discounted receivables, and venture debt with durations as short as one month to as long as several years, with average durations of 9 months. These micro-investments add diversification to a stock-based portfolio, but also come with risks. 

We explain how the Percent platform works and when it may make sense to invest on it.

What Is Percent?

Percent was founded in 2018 as a digital investment platform that matches borrowers with investors. They are a private credit marketplace, connecting investors with debt originators or business borrowers, and enabling those investors to invest in deals with short and mid-term durations.

Accredited investors seeking high-yield alternative investments can invest $500 or more in business and consumer loans with high yields and short duration.

What Does It Offer?

Percent offers alternative investments to serve as a valuable form of diversification and cash flow for individuals who may be heavily invested in the stock market.

Invest In a Variety of Consumer and Small Business Loans

Percent investment opportunities range from short-term consumer loans, to trade receivables, to other forms of business lending. 

Consumer and small business loans can be either secured or unsecured. Secured loans might be a car note or loans backed by other assets. Some small business loans are also guaranteed by the business owner personally. Each opportunity is an independent investment, so investors can research the deals to find one that suits their investment profile.

Trade Receivables are unpaid invoices that are purchased from a business at a discount. This is not a loan but a sale of assets. Small Business Cash Advances are similar but it's not purchasing unpaid invoices, instead it is buying future receipts. If the business is not able to generate the promised revenue the terms are often updated to reflect business' downturn. 

Corporate Loans

Percent also offers short term corporate loans for high-growth companies. These loans cover fast growing companies until they receive their next round of funding. The loans are then repaid when that new funding is acquired. 

Blended Note Investments

Blended Notes offer greater exposure to the portfolio of loans and debt financing on the Percent platform. Blended Notes are groups of loans that you can invest in with just one transaction. Rather than investing in a single borrower's loan Blended Notes allow you to spread those same funds over a wider variety of borrowers.

The portfolio is managed by an investment manager and investors are informed of the underlying assets on a weekly basis. For the first 12 months, interest-only payments are paid monthly and the amount is based on the aggregate interest payments received. After 12 months, the payments will consist of both principal and interest. 

This investment charges a 1% management fee.  

Are There Any Fees?

Percent charges 10% of the advertised interest you receive. For example, if an investment advertises a 10% interest rate and you invest $1,000, you can expect to receive $100 in interest. Percent would take 10% of that interest, or $10. Instead of receiving a payment of $100 you would receive $90.

Also, Percent charges a 1% management fee for its blended Notes product.

How Do I Contact Percent?

For standard questions, the best way to contact Percent is through its online chatbot. Prospective investors and clients can also call 646-876-5141 or email [email protected].

Percent is based out of New York City. Its Manhattan office address is 909 Third Ave #968 New York, NY 10150.

How Does Percent Compare?

Percent is one of the only companies in the small business and short term loan investing space. Plus, compared to most other alternative investments, it's fee structure appears lower. Competitors like WillowWealth charge as much as 4% on their investments. 

Percent’s Blended Note option offers excellent exposure combined with relatively low fees (1% annually) that could give investors the diversification they want.

The one drawback to Percent is the limited array of deals. The majority of investment opportunities on the platform are short-term business and consumer loans. Investors seeking longer-term assets will need to look elsewhere.

Investors could also look at more specialty-lending products like Save, which has a similar investment and fee structure, but focuses more on broader investments behind the scenes. 

How Do I Open An Account?

To get started with Percent, you’ll need either a passport or a State ID. Percent follows Know Your Customer requirements which involve photo recognition. You can start your application for a Percent account through their website. 

Once you’ve completed the sign-up process, you can view opportunities on the site and fund your Percent account.

Only Accredited Investors Can Participate

Percent’s investment opportunities are only open to accredited investors. This includes individuals who earn more than $200,000 annually ($300,000 as a couple) or those who have a net worth above $1 million (excluding the value of their primary home).

Is It Safe And Secure?

As part of the Know Your Customer requirements, Percent follows bank-level security. Personal information is encrypted and is not shared without consent. 

People who opt to invest at Percent have their un-invested funds held in an FDIC-insured bank account.

Investments are protected against company failure by Special Purpose Vehicles (SPVs). SPVs are legal entities that can carry on operations in the even that Percent goes out of business. 

However, investments on the Percent platform can be risky. Investors may lose some or all of their money if a borrower fails to repay the underlying asset. Investors must be cautious about this type of investment since it carries a high degree of risk.

Is It Worth It?

Percent has been in business for a relatively short time — since 2018, but its track record during that time has been impressive. Business notes are a volatile asset class, but the investment performance is not closely correlated to the stock market. This could make deals on Percent a great investment opportunity for accredited investors seeking alternative investments.

The one caution when investing through Percent is that investors may experience a false sense of control. With short-duration notes and detailed information about every deal, investors may think they can control performance on the platform. 

However, private debt is a risky asset class, and investors could lose their principal investment and the yield. Keep this in mind if you decide to invest in these types of assets on Percent.

Percent Features