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Broker-Deal Approval and New Fee Structure on Percent

On August 11, 2023, Percent secured its broker-dealer license through FINRA (the Financial Industry Regulatory Authority in the U.S.), marking another milestone moment in our continued evolution. Given private credit’s recession-resilient nature and the current boom we are seeing in the asset class, becoming a registered broker-dealer is the next step in our pursuit to provide an even more elevated customer experience for all of our clients.

As an approved broker-dealer, Percent can now connect investors with more of the investment opportunities they seek. Therefore, we will be implementing a new fee structure for all new deals on the platform, which will enable us to offer you a higher frequency of new deals. 

Beginning Friday, September 1, 2023, all new deals in which you invest will begin paying fees to Percent from the distributed interest that you receive during the life of that investment. When this new fee structure launches, each investment opportunity on the platform will have a fee that is equivalent to 10% of each advertised interest payment (not your principal), automatically collected from each distribution. For example, for an offering with a 15% APY, our new fee will translate to 1.5% providing a net APY to investors of 13.5%.

Why are fees changing on Percent?

Fees will enable Percent to leverage our broker-dealer license and invest resources that expand capabilities and products so that you can access even more opportunities. By becoming a broker-dealer and implementing a fee structure, we will now be able to:

  • Onboard underwriters and their borrowers who require their investment platform partners to be a broker-dealer in order to market their deals, and

As a result, you can expect an increased frequency of deal flow that can provide you with a broader spectrum of investment opportunities at various rates and durations.

How will fees work on Percent?

Percent’s new fee structure will be equivalent to 10% of each advertised interest payment (i.e. APY), not your principal

For example, if an investor has invested in a deal with an advertised interest rate of 15.00%, payable monthly, the new net interest rate to the investor will now be 13.50% APY, after paying a 1.50% APY fee to Percent (10% of the advertised interest payment). The fee will be collected automatically by Percent only upon the distribution of any interest payments that are made as per the payment schedules of the respective offerings (which are generally monthly). 

For any questions regarding the new fee structure, how to calculate these fees, and what it means for your investments, please reach out to our IR & Syndication team. They are here to help you throughout your journey with Percent.

Frequently Asked Questions

How often are the fees charged?

The fees will be netted automatically from all equivalent interest payment distributions, which are generally monthly, but can also be either quarterly or annually, depending on the deal. We are aligning ourselves with investors. If you do not get paid, we do not get paid.

Will the fee be reported in the transaction history?

Yes. We are working on providing the entire transaction history to investors, including all banking transactions, investments, principal and interest payments, as well as fees for each deal which will be associated with the deal ticker.

Will the interest income on the 1099 be net of the fee?

No, the interest income will be gross the fees, but we will provide a breakdown of fees on your account statement for tax purposes.

I’m an investor in Percent Blended Notes and am charged a 1% advisory fee. Will this fee remain or also be replaced by the new fees you are implementing?

If you are an investor in Percent Blended Notes you will continue to pay a 1% advisory fee, payable monthly, on the notional amount outstanding, in addition to the new fees we are implementing on a per underlying deal basis. Given the tailored nature of these vehicles, including priority allocations with a more passive investment approach, we consider this fee structure to remain competitive vis-a-vis other fund-like investments with feeder structures that charge on average an all-in 2-3% in fees in addition to carried interest (generally between 15-20%). 

Will I need to sign any agreements related to the new fee?

Yes. Upon your first investment on Percent as of Friday, September 1, 2023, you will be asked to sign a new Service Agreement as part of the e-signature process alongside other typical investor documentation. This agreement will cover all of your future investments on Percent as well and you will have a copy of this executed agreement in your “Other Documents” section.

What happens if my deal defaults?

Percent will only be paid the service fee when you receive an interest payment, and the service fee will continue to be based on any interest distributions payments of the deal. If a deal defaults and no interest payments are made to you, then no service fees are paid to Percent. We only get paid if you get paid.

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