The Investment Process
We strive to ensure transparency and trust, both for our borrowing companies and our investors. For that reason, prior to any offerings, we undertake a significant vetting process of our potential Borrowers.
Below is an overview of the investment process, both for the borrowing company and investors.
We identify potential Borrowers.
We screen them for investment criteria.
We negotiate and sign a term sheet with the borrower.
We syndicate the loan to our sophisticated, proprietary investment network.
You are invited to participate through our “note” system. This is where you come in.
Final loan documents agreed by borrowers and CrowdOut.
Loan closed and funded.
Post close: We monitor and service the loan.
Post close: You receive interest and/or principal payments.
How Our notes work
We issue a private offering strictly to qualified individuals and entities that are accredited investors. Investor participate in a class of special limited obligations of the Company referred to as Platform Notes (or Notes).
Each Note will correspond to an Underlying Loan that is made by the Company’s parent, CrowdOut Capital LLC (CrowdOut), or a third party institutional investor or bank (a Lender).
Our Note Payments will be entirely dependent upon the payments that the we receive on the borrower loans (sometimes referred to as Underlying Loans).
Here is a graphical illustration of the process:
An investment in the notes is suitable only for sophisticated investors who fully understand and are capable of bearing the risks involved in investments generally and in an investment in the notes in particular.
Risks related to investment can be broadly grouped into the following categories:
- Risks related to borrower and company default;
- Risks relating to the terms of the note;
- Risks related to CrowdOut, the company and the platform;
- Risks related to compliance and regulation;
- Risks related to conflicts of interest;
- Certain unforeseen risks.
Additional detail can be found in our Private Placement Memorandum and here: Risk Factors
CROWDOUT OFFERINGS ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
Our revenue is derived through fees related to the origination and servicing of loans. Broadly, our fees can be broken into two categories: fees charged to borrowing companies and fees charged to investors.
Fees Charged to Borrowing Companies
We charge borrowers an origination fee for loans that are funded by CrowdOut, and/or a referral fee for loans or portions of loans that are made by other Lenders.
The Origination and Referral Fees may vary based on prevailing market rates, state and federal lending laws and other considerations identified by the Company.
Additionally, CrowdOut may charge borrowers its fees and expenses associated with originating and underwriting a loan.
Fees Charged to Investors
We charge loan servicing fees to its investors equal to ten percent (10%) of interest collected. In the case of a Participation Purchase, a separate Servicing Fee may be charged to the Lender of the corresponding Notes.