Percent is an online investing platform that allows accredited investors to participate in private credit offerings. Private credit itself is a lucrative investment sector of privately negotiated loans and debt financing. When done correctly, private credit investing allows investors to earn interest without having to lock their money up in a single offering for extended periods of time. So, is Percent right for you? Keep reading to find out.
One of the most common complaints investors have when it comes to making investments is the long holding period. Real estate investing, for example, can be profitable but often requires investors to put money into deals for several years at a time before they see any profit.
A similar downside can exist with private equity or venture capital investing. It offers more upside, but the risk and holding period are also high. The Percent platform seeks to strike the perfect balance between upside and financial flexibility by making private credit offerings available to investors for short to medium terms. The average duration of its investment opportunities is nine months, with some terms lasting as few as one month if a deal refinances, and some several years.
Whereas most real estate or private equity offerings have holding periods in the three- to five-year range, Percent has lots of offerings with holding periods of nine months or less. Adding to the flexibility offered by Percent is the fact that many of its offerings have buy-ins much lower than that required by private equity or real estate investing. As opposed to everything starting at $25,000, Percent has offerings with buy-ins as low as $500.
- Accredited investors looking for short-term offering opportunities
- Accredited investors looking to make small- to medium-sized investments
- Accredited Investors looking to take advantage of private credit offerings
- Potentially short holding periods on some offerings for greater flexibility
- Great diversity in offerings
- Many offerings with buy-ins as low as $500
- Only open to accredited investors
Percent Ratings at a Glance
What is Private Credit?
Before getting too deep into Percent, it’s important to understand what private credit is and how it works. Private credit is a source of financing that businesses and companies use typically when they cannot access public credit markets (i.e., banks and bond markets).
Percent currently works with over 30 borrowers (predominantly merchant cash advance companies, as well as consumer lenders) who raise debt capital from Percent’s investor base. Let’s say a small business retailer chooses to work with a merchant cash advance company to access the working capital they need.
The merchant cash advance company contractually purchases a percentage of the retailer's future receipts. The retailer will use those receipts to pay the lump sum they receive back to the merchant cash advance company.
This merchant cash advance company provides thousands of cash advances during the year, and may in turn need capital to expand its own operations. It will look to raise its own debt capital, which it can do by working with Percent to structure an investment offering, typically through an unsecured note, but one overcollateralized by assets. Percent's investors can invest in this offering in exchange for the chance to earn interest on their principal investment, and details of the borrower and their transactions will appear on the individual offering page on Percent, so that investors can do their due diligence, look at the underlying assets in an investment, and make informed decisions about which offerings to invest in.
Consumers and small businesses turn to non-bank lenders to get access to capital flexibly and quickly. Non-bank lenders often charge an interest rate significantly higher than what banks may charge on a secured loan. Investors on Percent and in private credit are typically investing in unsecured notes that offer exposure to a portfolio of loans, debt financing, or merchant cash advances that are originated by non-bank lenders. This investment goes to the borrower, who uses it to service their lending clients. Upon successful repayment of the loan and the interest involved, Percent investors are then allocated their principal plus some of this interest upon successful maturation or refinancing of the loan. The interest rate is reflective of the elevated risk that comes from unsecured loans, especially in niche sectors, and represents a higher-risk, higher-reward opportunity for private credit investors.
Percent also offers venture investing, providing high-growth companies with capital, in the form of corporate loans. Companies, especially start-ups or other fast growing companies, often decide to raise venture debt to extend their runway with minimal equity dilution, while investors look to high-yield and short-term exposure to these companies.
How Does Percent Work?
Companies seeking financing work with Percent to structure a transaction tailor-made to their debt capital needs and investor expectations. If the borrower and transaction meet Percent’s or third-party underwriters’ criteria, the offering will be syndicated on the platform with a minimum investment amount, set holding period and projected return (interest rate).
Investors can then place an investment request that will net them a return if the loan pays off. Currently, Percent has a diverse range of borrowers who offer investments in partnership with Percent and other underwriters. Some of the sectors Percent borrowers work in include:
- Small and mid-size business financing
- Small and mid-size business leases
- Trade receivables
- Factoring receivables
- Merchant cash advances
- Consumer loans
- Venture debt
The designers and operators of the Percent platform have spent a great deal of time and money setting it up. The world of investment platforms is competitive, and no platform is complete without a customer service system that puts potential clients at ease. The Percent platform does a good job of recognizing this need and offers exactly what you would expect as an investor.
First off, there is a “Percent Support” chatbox at the bottom right of the screen. You can click on this link, and you have a menu of options to help route your request. The sections included are:
- Features and functionality
- Due diligence and underwriting
Once you click on your chosen section, you can just follow the prompts and get your question handled. If you can’t get an answer for your question through this chatbox, you can send an email through its “contact us” link or call a Percent representative directly Monday through Friday during normal business hours. The follow-up email comes from the team pretty quickly. Overall, Percent’s customer service is right on par with what you would expect of an online investing platform.
Security is an essential concern for any web platform. That goes doubly so whenever you’re talking about an online investing platform that will be asking for major financial contributions and storing sensitive data. After all, a website that has this kind of data is a glorious target for any hacker. So it goes without saying that before you invest, you want to be sure it has taken adequate steps to secure your personal data.
Percent does an admirable job in this department. After the initial sign-up, you can’t complete the process until you verify your email. So, you’ll receive an automated email from the platform at the address you input at the time of signup. Additionally, the platform forces you to choose a password with the following unique characteristics:
- One capital letter
- One number
- One symbol (!, $, @)
You can only change your password through a link the platform sends to your registered email, and you will also be notified immediately after you change your password. Finally, you will have to go through a third-party verification process to prove your accreditation. When you combine all of this, you have a pretty stout set of security features that should make most investors comfortable.
The investment choices are where the Percent platform really shines. A common complaint about many online investing platforms is that they only feature offerings with five-figure buy-ins. While that makes sense considering that most platforms are geared toward accredited investors, not every accredited investor has a spare $15,000 to $50,000 lying around to invest. The flexibility in Percent’s offerings means it has many opportunities with buy-ins as low as $500.
That means you can start small and build a portfolio as you go along. If you do happen to be flush with cash to put behind an offering, Percent has a number of appealing options for you, too. In fact, some offerings are so flexible that they accept contributions as low as $500. That kind of flexibility in investor contribution is difficult to find in other investment offerings, but it’s one of many such offerings on Percent.
Part of that flexibility in offerings is because of the way private credit works. It offers financing to a diversity of businesses in need of capital. So, in addition to having offerings with low buy-ins, Percent also has offerings across the business spectrum. Examples of some of the types of deals you can fund include notes with exposure to:
- Canadian residential mortgages
- Merchant cash advances for business owners
- Operating capital for start-ups and mobile apps
- Consumer installment loans
Investor fees can be found by clicking on the “Security Details” tab on your preferred offering. Most offerings currently have no fees charged to investors, but Percent will charge 10% of the stated interest rate, collected from each distribution in the future. You will also find all the information you need regarding distribution dates, capital call schedule and other investment details here.
To say that using the Percent platform is a breeze would almost be an understatement. The platform flows well from the landing page to the offerings, which are easy to browse. Once you find one you like and click on it, all the particulars of the deal are right at your fingertips, and you don’t have to go on a hunt for the information you need (investor fees, distribution dates).
New users who have questions will be glad to know there is a fully stocked Frequently Asked Questions (FAQs) section that covers the following categories:
- Getting started
- About us
The platform itself is free to use, although individual investment offerings may have different fee structures. Percent provides a good user experience. It offers investors a wide variety of deals and puts the information you need in the places you would expect to find it. An investor who is familiar with online platforms will easily be able to navigate and invest on Percent.
Percent is a solid platform and has a lot to offer investors who are interested in private credit. It rounds out the picture by having a wide array of offerings to choose from with buy-ins and hold periods of all varieties. Whether you have a lot of capital or a little, if you’re an accredited investor, you can build a great portfolio of private credit investments on the Percent app.
You can invest in investment offerings for as short as a few months if a deal refinances or as long as a few years. You will also have the added confidence that comes with knowing your chosen offering is underwritten by a solid team of financial professionals (although there is always still risk of loss). The platform’s Blended Notes program allows investors to invest in a single note providing exposure to all eligible offerings. Venture investing enables investors to invest in corporate loans to typically venture-capital-backed companies that are in between equity fundraising rounds too.
What’s more, you’re going to be able to do it on an easy-to-use, customer-friendly platform. As it stands, the accreditation requirement is the only thing keeping it from a five-star rating. All things considered though, Percent offers investors a great package of profit potential, user friendliness and investor flexibility.
Percent vs. Competitors
The online investing platform business is getting more competitive every day. The only way for a platform to really stand out is by giving investors solid offerings with good profit potential in an easy-to-use fashion. When it comes to that, Percent stands up nicely vs. competitors like Crowdstreet, RealtyMogul or StartEngine in the world of online alternative investments.
The platform carves out a neat niche for itself by making the world of private credit investments open to any size accredited investor. Perhaps the only drawback here is that in spite of having numerous offerings with $500 buy-ins and hold periods with an average duration of nine months, you still have to be accredited to participate in offerings.
However, this restriction has more to do with how the government classifies investments than Percent looking to lock small investors out of the club. Hopefully, at some point in the future, a legislative change will allow non-accredited investors to participate in these private credit opportunities (if only on a small scale). The chance to build a portfolio by starting a $500 investment that can net 10% to 18% APR would appeal to a lot of investors.
How do I know if I’m an accredited investor?
There are several ways of establishing accredited investor status:
- You have earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years and reasonably expect the same for the current year.
- You have a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
- You are an investor with certain professional certifications, designations or credentials, including Series 7, Series 65 and Series 82 licenses while qualifying as a “natural person.” (Investors with other licenses are to be considered and added in the future.)
- You are an investor with a “spousal equivalent,” or a spouse of an accredited investor who pools their assets together to meet the previous net worth and/or income requirements for accredited investors. (For example, if you are married to an accredited investor and share monetary resources, you are now also an accredited investor.)
- You are “knowledgeable employees” of a private fund.
- Limited liability companies (LLCs) and family office entities with $5 million assets under management. U.S. Securities and Exchange Commission- and state-registered investment advisers (but not reporting advisors) of these entities can also now be considered accredited investors.
- Entities including Native American tribes, governmental bodies, funds and entities “organized under the laws of foreign countries” with investments over $5 million — as long as they were not formed solely to invest in a specific accredited investment.
Frequently Asked Questions
What does private credit mean?
Private credit is an asset class of privately negotiated loans and debt financing from non-bank lenders. These investments include small business and consumer loans, venture debt and other forms of private debt. Small businesses, startups and individuals seek private credit when they cannot access public credit market.
Are private credit investments risk free?
All investments involve risk and may result in loss, including loss of principal. Percent and its partners perform extensive due diligence on companies raising debt capital and their underlying assets. In addition to using industry standard layer of protection through Special Purpose Vehicles (SPVs), it has implemented collateral verification from MTAG Services, LLC, which provides independent validation of receivables and other data reported by originators and introduced enhanced default protection to its Blended Notes.