Risk Factors

RISK FACTORS AND CERTAIN CONFLICTS OF INTEREST

AN INVESTMENT IN THE NOTES IS HIGHLY SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK, INCLUDING WITHOUT LIMITATION THE RISK OF A PARTIAL OR TOTAL LOSS OF A PURCHASER’S ENTIRE INVESTMENT. 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, INCLUDING, BUT NOT LIMITED TO, THOSE CERTAIN RISKS SUMMARIZED BELOW. THE ORDER IN WHICH THE FOLLOWING RISKS ARE DISCUSSED IS NOT INTENDED TO BE INDICATIVE OF THEIR RELATIVE IMPORTANCE. NO GUARANTEE OR REPRESENTATION IS MADE THAT THE COMPANY WILL ACHIEVE ITS INVESTMENT OBJECTIVES OR THAT PURCHASERS WILL RECEIVE ANY RETURN ON THEIR INVESTMENT. THEREFORE, THIS OFFERING IS INTENDED ONLY FOR INVESTORS WHO CAN AFFORD TO LOSE ALL, OR SUBSTANTIALLY ALL, OF THEIR INVESTMENT.

Cautionary note regarding forward-looking statements

This Memorandum, the Note Offering, the Platform and the other Note Purchase Documents contain forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included herein and therein regarding investments, debt instruments, investment companies, investment strategies, future operations, future financial positions, future revenues, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about expected rates of return and interest rates, the attractiveness of the Platform, the Company’s financial performance; regulatory developments; the performance of a borrower of an Underlying Loan; the value of a property used as collateral for an Underlying Loan; and estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

“Forward-looking statements” contained in this Memorandum, the Note Offering, the Platform and the Note Purchase Documents are intended merely as estimates, projections, predictions or beliefs regarding these future, events, activities, occurrences or performances, unless they expressly state otherwise. For various reasons, including those set forth in this “Risk Factors and Certain Conflicts of Interest” Section of this Memorandum, there can be no assurance that actual events will correspond with these forward-looking statements. Factors beyond the control of the Company may affect the assumptions on which the forward-looking statements are based, and therefore diminish the illustrative value of these forward-looking statements. These forward-looking statements should in no event be considered a guarantee that such future events, activities, occurrences or performances will in fact happen. The information in this Memorandum, the Note Offering, the Platform and the Note Purchase Documents concerning the prior experience of CrowdOut, the Company or any of their respective principals or affiliates, is not necessarily indicative of the results to be expected by the Company. The Company disclaims any obligation to update any such factors or to p ublicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

You are strongly encouraged to read this Memorandum and all materials related hereto completely and with the understanding that actual future results may be materially different from what the Company projects or expects. The Company does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Any discussion herein referencing risks arising out of the Note Purchase Documents and the rights and obligations of a Purchaser arising from such Purchaser’s ownership of the Notes is intended to be summary in nature and is qualified in its entirety by the terms of such document.

RISKS RELATED TO BORROWER AND COMPANY DEFAULT

The Notes are risky and speculative investments for suitable investors only.

You should be aware that the Notes offered pursuant to this Offering are risky and speculative investments. The Notes are special, limited obligations of the Company and depend entirely for payment on the Company’s receipt of payments under the Underlying Loan of a corresponding Note Offering. Notes are suitable only for a prospective Purchaser of adequate financial means. If you cannot afford to lose the entire amount of your investment in the Notes you purchase, you should not invest in the Notes.

The Notes are special, limited, unsecured obligations of the Company and not secured by any collateral or guaranteed or insured by any third party.

While CrowdOut and, if applicable, a Lender, intend to fund or otherwise acquire Underlying Loans that will be secured by a lien on assets, the Notes you hold will not be secured. If the borrower of the Underlying Loan defaults, you will have no remedy and the Company will not be obligated to make payments to you under the Notes. You will not be able to pursue collection against the borrower and are prohibited from contacting the borrower about the Underlying Loan.

Payments on the Notes depend entirely on payments the Company receives on an Underlying Loan of a corresponding Note Offering. If a borrower fails to make any payments on the Underlying Loan corresponding to your Note, payments on your Note will be correspondingly reduced and may be subordinated to certain Servicing Fees.

RISKS RELATING TO THE TERMS OF THE NOTE

Borrower or Company prepayments will limit or eliminate your ability to earn additional returns on a Note.

When a borrower of an Underlying Loan pays some or all of the principal amount on the Underlying Loan earlier than originally scheduled this is referred to as prepayment. Upon a prepayment of the entire remaining unpaid principal amount of an Underlying Loan of a Note Offering corresponding to your Note, you may receive your share of such prepayment and any prepayment penalties (if such prepayment penalties exist), but further interest will not accrue after the date on which the payment is made. If the borrower prepays a portion of the remaining unpaid principal balance on an Underlying Loan of a Note Offering corresponding to your Note, the term for repayment of the Underlying Loan will not change, but you will not earn a return on the prepaid portion, and your anticipated total investment return may thus decrease. In addition, you may not be able to find a similar rate of return on another investment at the time at which the Underlying Loan is prepaid. If the Company prepays its Notes (without the borrower of the Underlying Loan first prepaying its loan obligation) you will not be entitled to any prepayment penalty.

RISKS RELATED TO CROWDOUT, THE COMPANY AND THE PLATFORM

There is no assurance that the Company will be able to achieve its investment objectives, as a result of which you may lose some or all of your investment.

There is no guarantee that your investment will ever be returned or repaid or that the Company will receive any payment with respect to an Underlying Loan. You should not subscribe to purchase Notes unless you can readily bear the consequences of such loss. Even if the Company achieves profitability, an investment in the Notes should be viewed as a long-term, illiquid investment.

RISKS RELATED TO COMPLIANCE AND REGULATION

The Company is subject to the risks relating to compliance with applicable law.

Although the Company will seek to comply with all federal, state and local lending regulations, there is no assurance that the Company will always be compliant or that there will not be allegations of non-compliance even if the Company was or is fully compliant. Any violation of applicable law could result in, among other things, damages, fines, penalties, litigation costs, investigation costs and even restrictions on the ability of the Company to conduct its business.

RISKS RELATED TO CONFLICTS OF INTEREST

You should be aware that there may be occasions when the Company and its affiliates will encounter potential conflicts of interest in connection with the Company’s activities. The below discussion enumerates certain actual and potential conflicts of interest that should be carefully evaluated before making an investment the Notes. By acquiring a Note, you will be deemed to have acknowledged the existence of such actual and potential conflicts of interest and to have waived, to the fullest extent allowable by law, any claim with respect to the existence of any such conflict of interest.

Origination Fees, Servicing Fees, commissions, pre-payment penalties, and other fees and costs payable to the CrowdOut, the Company and their affiliates may impact the investment decisions of CrowdOut or the Company.

The Company is entitled to significant compensation under the terms of the Notes and the Underlying Loans. No independent third party has determined the fairness or reasonableness of any compensation (including the fairness or reasonableness of the Origination Fees, Servicing Fees, commissions, or any other fees earned by the Company (collectively “Company Compensation”)). None of such Company Compensation was or will be determined by arm’s-length negotiations.

CERTAIN UNFORESEEN RISKS

THE FOREGOING IS A SUMMARY OF CERTAIN SIGNIFICANT RISKS RELATING TO AN INVESTMENT IN THE NOTES. THIS SUMMARY SHOULD NOT BE INTERPRETED AS A REPRESENTATION THAT THE MATTERS REFERRED TO HEREIN ARE THE ONLY RISKS INVOLVED IN THIS INVESTMENT.

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