Investors seeking diversification from the stock market sometimes turn to alternative asset classes. Also known as private credit investing, this type of credit is an asset class 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 small business or consumer loans with durations from one to nine 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 in it.

What Is Percent?

Percent was founded in 2018 as a digital investment platform that matches borrowers with investors. They are a loan marketplace that allows accredited investors to invest in loans with short and mid-term duration.

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 are heavily invested in the stock market.

Invest In a Variety of Loans

Percent investment opportunities range from short-term consumer loans, to trade receivable loans, to other forms of business lending. Each opportunity is an independent investment, so investors can research the deals to find one that suits their investment profile.

In addition to the company’s core investment product, it also offers venture loans for high-growth companies. These loans get repaid when the company in question receives its next round of funding.

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).

Loan Terms Range From 1 to 9 Months

Many of the typical loans on Percent’s platform tend to be short-term to facilitate cash flow for a small business. With loans this short, investors can receive their principal and interest quickly.

Percent Prime loans have terms ranging from 10 to 36 months. Percent charges a 1% annual management fee for loans in the Percent Prime program.

No Fees for Standard Single Note Investments

A note is a type of IOU from a borrower to a creditor or investor and has similar features to bonds. Investors receive interest payments and are repaid the principal (the original amount invested) at a later time. These can be used for investment purposes and can be used to enhance the return of a bond. 

Investors who opt to invest in single notes will not have to pay any investment fees. Investors who opt for Blended Notes, Percent Prime (long-term notes), or Venture notes will pay fees on their investments.

Dutch Auction Sets Yield

Percent uses its investor community to help set yields on new investment opportunities. It sends out demand-based emails to determine how much investors are willing to invest at certain yields. These surveys help set the price. Deals are then funded during a two-week investment window.

Blended or Single Note Investments

Percent’s standard, the fee-free platform allows investors to invest in single loans. However, investors can also opt to invest in Blended Notes, which offer greater exposure to the portfolio of loans on the Percent platform. Investors who opt for Blended Notes must pay a 1% management fee.

Are There Any Fees?

Mostly, Percent doesn’t charge any fees on its standard retail investment platform. Accredited investors who invest in individual loans from one to nine months won’t get charged fees.

However, Percent charges a 1% management fee in a few cases. These include Percent Prime and Blended Note. 

The final investment offered through the Percent platform is a Venture Loan. The loans are issued to high-growth companies. They typically have short durations and are designed to be repaid in the next round of venture funding. Investors pay 10% of the yield on these loans.

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 YieldStreet charge as much as 2% 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 loans. 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 Peerstreet, which has a similar investment and fee structure, but focuses exclusively on real estate loans.

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. 

During the sign-up process, investors must self-attest to the status as accredited investors. This article explains the rules for becoming an accredited investor. 

The most common requirements include: 

• An income greater than $200,000 as an individual or
• $300,000 as a couple or
• Having more than $1M in net worth outside of your primary home

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

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 funds held in an FDIC-insured bank account.

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 loan. 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 — just four years, 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 loans 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 loans and detailed information about every deal, investors may think they can control performance on the platform. 

However, syndicated loans are 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.