Private Credit Asset Classes on Percent

By
Percent
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September 25, 2023

Disclaimer: As of February 2025, Percent has transitioned from using Annual Percentage Yield (APY) to Coupon Rate for all new investment opportunities. Any references to APY in this post now correspond to Coupon Rate.

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Percent is the platform for private credit investments. For investors who are learning about this investment asset class, private credit includes numerous types and sub-types of investment offerings which each have their own unique purposes, offering structures, etc.

Percent offers its underwriters, borrowers, and investors a variety of private credit investments in which to transact. This includes opportunities within three main sub-asset classes: asset-based securities, corporate loans, and limited partner investing in funds.

Get to Know Percent's Asset Classes

1. Asset-Based Securities: Sometimes called asset-based finance or asset-based lending, this is a note in which repayment comes from cash flows generated by a particular asset, which serves as direct collateral. This collateral can be in the form of a portfolio of underlying loans, receivables, advances, or contracts that have future cash flows associated with them. The main type of asset classes we work with at Percent are outlined below:

• Small and Medium-Sized Business (SMB) Financing: This asset class includes: 1) loans and merchant cash advances to small and medium-sized businesses, generally used to finance business expenses; 2) SMB leases, which allow businesses to finance their investments in equipment without buying the equipment outright; and 3) discounted receivables, where companies use their accounts receivable as collateral to borrow money (bridging the gap between receiving orders and the final delivery of goods to the customer), also known as factoring. Small businesses may have trouble getting loans for a variety of reasons (size, length of time in business, etc.), and turn to non-bank lenders for financing.

• Consumer Loans and Consumer Advances: Consumer loans and advances include residential mortgages, personal loans, “Buy Now, Pay Later” installment loans, student loans, credit cards, earned wage access (or payday advances), litigation finance (practice where a third party unrelated to the lawsuit provides capital to a plaintiff involved in litigation in return for a portion of any financial recovery from the lawsuit), and many other forms of consumer debt. The investment opportunity could reflect an individual loan or, more frequently, entire loan portfolios.

These loans are available on Percent and can provide returns of 20%+ APY combined with recurring income. The minimum investment can be as low as $500.

2. Corporate Loans: This asset class on Percent includes: 1) cash-flow lending, where you invest and expect repayment to come from underlying cash flows or liquidation of assets; and 2) venture debt, where you invest in a company to bridge the gap between fundraising rounds.

• Cash-Flow Lending: These loans are generally underwritten to cash flows of the company or the value of the company’s assets as they grow their business. This type of corporate debt can be a suitable funding option for businesses that already have a more established presence or trajectory with predictable cash flows from operations. The debt can be repaid from business cash flows or liquidation of assets.

• Venture Debt: This specialized type of debt financing is taken out by private, often venture-backed companies to bridge the gap between fundraising rounds and exit opportunities. For the company, it allows minimal dilution of the capitalization (cap) table as well as a stopgap between future fundraising rounds. This is generally a good option for start-up companies that do not have yet a track record of predictable cash-flow. For investors, it provides exposure to said company with potential returns in sight (as opposed to Venture Capital (VC) investments, which have no specific end date). Learn more.

These loans are available on Percent and can provide returns of 25%+ APY combined with recurring income. The minimum investment can be as low as $500.

3. Limited Partner Investing: This investment opportunity allows investors to participate in a managed private fund set up by a General Partner (GP). The fund is typically composed of private assets and investors have the chance to participate as Limited Partners (LPs). The GP sets the fund’s strategy and uses the capital provided by LPs to invest in assets that meet that strategy. For LPs, this is a passive investment that typically generates income and/or periodic distributions, with specific expected returns outlined by the managers. Learn more.

These offerings are available on Percent. Returns will depend on the performance of the underlying investments of the fund and may or may not provide current income. The minimum investment will generally range between $50,000 - $100,000.

4. Percent Blended Notes: Percent also offers Percent Blended Notes (PBNs) which provide diversified exposure across multiple asset classes in one turnkey investment. Each PBN has customized eligibility criteria and allocation rules that determine which deals from Percent's marketplace get selected. Learn more.

• Diversification: Exposure to multiple borrowers, asset classes, credit profiles, and regions in one investment.
• Algorithmic Portfolio Growth: The PBN dynamically allocates capital into newly available deals that meet eligibility criteria, ensuring disciplined exposure.
• Priority Access: Funds invested in a PBN get first-mover access to Percent's most in-demand deals.

PBNs target returns between 10-16% net of fees over their 1-3 year duration.

Where to Start?

Whether you're brand new to private credit or looking to deepen your involvement, our platform offers a tailored entry point to match your investment strategy and goals.

1. Begin with a Single Investment: For those seeking a straightforward start, many individual offerings on Percent require a minimum investment of just $500, allowing you to dip your toes into private credit with ease and confidence.
2. Explore Diversified Solutions: Embrace the power of diversification with Percent Blended Notes. PBNs offer a seamless way to spread your investment across multiple asset classes, credit profiles, and regions, all with a single, strategically managed investment. With PBNs, you gain the advantage of algorithmic portfolio growth and priority access to in-demand deals, targeting net returns of 10-16% over a 1-3 year horizon.
3. Expand Your Portfolio: As your familiarity and comfort with private credit grows, consider diversifying further by exploring the full spectrum of asset classes available on Percent, including asset-based securities, corporate loans, and limited partner investments in private funds.

Customize Your Private Credit Portfolio: At Percent, we believe in empowering investors with choices that align with their unique investment philosophies. From individual deal selections to the broad market exposure of Percent Blended Notes, our platform is designed to accommodate your evolving investment needs and aspirations.