%Percent Private credit app

[Gazingus]

Daily Upside carried a link for this app today. Accredited investors (self-certifying, I think) can create a portfolio, research deals, and participate at various minimum levels. A quick scan showed minimums from $500-2500, terms around 1 year, and yields in the teens. Anybody have experience with this?

 

[disneysteve]

I’d be interested in more info. I looked into peer to peer lending years ago but it wasn’t legal in my state. I wonder if this is.

 

[jrgators]

I link would be useful. Anyways, I did peer to peer lending with Prosper a long time ago because they made it illegal in my state. I found the rates of return to just be average based on the risk because, while some loans were paid back, several were never. Percent looks similar to 'Angel Investing' but perhaps at lower thresholds.

 

[disneysteve]

I link would be useful. .

https://percent.com/

 

[Gazingus]

It's not P2P. You could see how much the entity is trying to raise, how much raised so far, and when the opportunity was closing. You could also find how many loans they have oustanding and the debt on those.

I created an account, but haven't funded it. Sounds interesting and might throw some fun money at it, but a primer on how best to start would be helpful.

 

[Gazingus]

Here is a description:

What is private credit investing?
Private credit is an alternative asset class consisting of privately negotiated loans and debt financing from non-bank lenders.

Private companies, which don't have access to public markets, must turn to private credit markets to finance their operations and growth. Borrowers include small businesses, startups, and others.

Most private credit investments are secured by an asset such as a loan portfolio, a business, trade receivables, or assets with other cash flows or value associated.

These investments are largely uncorrelated with public stock and bond markets, and also offer higher yields and shorter durations than most debt investments.

Put simply, investing in private credit allows you to lend money to small and medium-sized businesses, usually with a relatively high interest rate.

Percent is a company that connects the lenders (you) and borrowers, and handles all of the legal details and complexities involved. More on that next.

What is Percent?
Percent (formerly known as Cadence) was founded in 2018.

It is an alternative investment platform that gives accredited investors access to private credit, a $7 trillion market.

The company connects underwriters, borrowers, and investors for transacting a variety of private credit investments.

Historically, private credit was reserved for institutional-level investors and hedge funds.

However, due to updated SEC regulations, Percent was able to pave the way for individual investors to fund short-term loans with high average interest rates and relatively low default rates, all with just $500 in minimum investment.

Thanks to Percent, yield-focused investors now have access to debt investments outside the highly competitive and increasingly volatile public bond market.

Key figures
All figures are as of November 30, 2023:

Amount invested: $936 million
Deals funded: 495
Average return: 13.17% annualized interest rate (APY) on matured deals
Average investment term: 9 months
Default rate: 1.75%
Minimum investment: $500
Investor fees: Varies, ~2%
Retention: 89% of Percent customers choose to invest again after their first deal
Welcome bonus: Up to $500

 

[jazz4cash]

What is The Daily Upside? It looks like a newsletter full of advertorials. This artical is over a year old:
https://www.thedailyupside.com/econ...the-shifting-world-of-private-credit-markets/

With only $500 min investment I am curious but the Percent.com website references crypto investments and debt secured by crypto. I'm gonna pass.

 

[Gumby]

I'm trying to value this on a risk adjusted basis if you pay a 2% fee, there is a 1.75% risk of default and the return is 13%. I assume you pay the "investor fee" regardless of whether there is a default and that you lose all the principal and interest if there is a default.

Risk adjusted return is ((.9825 x (0.13-0.02)) - ((.0175 x (1.0+0.02)) = 9.02%


Edit to add: I have also ignored the risk that Percent itself could be a scam and steal or lose your principal.

 

[disneysteve]

How exactly does one go about becoming an accredited investor? I skimmed the SEC site that lists the criteria. We make it as far as assets/net worth but not as far as income. I would have when I was working full time but not now.

 

[Gumby]

I get the impression that they are independent qualifications. Either net worth or income alone will suffice.

 

[braumeister]

I get the impression that they are independent qualifications. Either net worth or income alone will suffice.

Yes, I'm pretty sure that's true. There are several criteria, and the outfit can pick which one they want to use.

In many cases, if you apply to invest in something that requires you to be an accredited investor, you supply your information and the company will decide if they will consider you accredited or not. That has been the situation on the few times I've done it.

 

[Sunset]

I'll pass on lending money that that banks consider too much of a risk. There is a reason the banks think it would be bad to loan the money.

I'd also wonder how slanted the information is, when the default rate is 1.75% that seems pretty low but maybe it's only counted at the end of the loan term even if the borrower only made 1 payment in a few years. Which would suppress the total.

 

[jazz4cash]

I'm trying to value this on a risk adjusted basis if you pay a 2% fee, there is a 1.75% risk of default and the return is 13%. I assume you pay the "investor fee" regardless of whether there is a default and that you lose all the principal and interest if there is a default.

Risk adjusted return is ((.9825 x (0.13-0.02)) - ((.0175 x (1.0+0.02)) = 9.02%


Edit to add: I have also ignored the risk that Percent itself could be a scam and steal or lose your principal.

I assumed the return was net of fees but your calculation confirms my gut feel that it is mediocre on a risk adjusted basis. Thanks. Still curious, though.

 

[Gazingus]

I think I'm going to put a toe in the water. I'll report back.

 

[DrRoy]

I did some P2P lending on Prosper for a few years, but it did not seem to be better on returns than bonds, with higher risk, so I let it all mature out.

 

[jazz4cash]

I think I'm going to put a toe in the water. I'll report back.

I’m tempted if I can get in for ~$500