Before Percent launches an investment, our credit team extensively examines our prospective borrower partners. We take extensive care to evaluate potential risks, making this information available and known to prospective investors before such an offering is made live on our platform. When an offering closes on Percent, we continue to monitor the critical parties and make our findings available in surveillance reports.
In these instances – that is, all Percent offerings made through June 2022 — Percent has acted as an underwriter of each offering.
Thanks to the recent launch of our Percent Underwriter portal, we can now launch offerings underwritten by third parties, each responsible for the due diligence, structuring, syndication, and servicing of specific offerings. These hand-selected partners take due diligence and risk management as seriously as Percent, while also bringing their own expertise, experience, and relationships with established and emerging borrowers.
What is an underwriter?
An underwriter is a financial expert assessing how much risk a lender would take on if they opt to finance a loan or debt security. They evaluate performance, underlying assets, the size and structure of a loan or debt financing agreement, and the likelihood of the underlying borrower’s ability to repay the debt.
In the world of private credit investing, underwriters examine these and other underlying risks before an offering is made available for investment. Underwriters can also structure transactions in the attempt to reduce risks, all while maximizing potential returns.
What is a third-party underwriter on Percent?
Percent has performed the role of underwriter on our previous private credit offerings. With the introduction of third-party underwriters, these new entities will be responsible not only for performing due diligence on all parties related to an offering, but structuring the deal, syndicating the deal to investors, and servicing the debt security involved.
A third-party underwriter’s due diligence process can be different from that of Percent’s. Though our internal credit committee will review these deals in depth (evaluating key aspects such as the underlying obligor(s) and the deal structure), how underwriters look at underlying assets and parties — as well as how they structure debt offerings — could be different from how Percent would look at and structure them.
As new third-party underwriters come to the Percent platform, each will detail how they perform due diligence, along with any other services they might provide that could potentially help investors evaluate specific third-party underwritten offerings.
How does Percent evaluate third-party underwriters?
Before we accept third-party underwriters on the Percent platform, we take a rigorous look at their underwriting procedures. Thanks to our high standards of excellence, not every interested underwriter will join the Percent platform. Our team looks to work with underwriters with extensive historical underwriting experience and a team of storied experts in this specialized field.
As we onboard underwriters to Percent, we collect the information they use to diligence and structure individual transactions and offerings. Our team analyzes and aims to identify any significant risks and/or deviations from our typical offering, risk, and mitigation structures. From there, we present a memo to our internal credit committee, who can then approve or disapprove this deal and underwriter.
Is the investing process different?
No. Deals underwritten by third parties are syndicated in the same format. Investors have access to a deal page and can indicate their minimum and maximum allocations, as well as minimum desired APY range. Deals that are underwritten by third parties will also be syndicated as such.
We uphold our third-party underwriters to the same standards that we would want as investors ourselves. The offerings they underwrite still go through an intense level of scrutiny from our internal committee, and hold the same features that Percent investors are used to: shorter durations, higher yields, and a wealth of data available to assess prior to investments.
By featuring offerings underwritten by third-party underwriters, we are able to have a greater frequency of offerings on Percent, giving investors the chance to generate more yield across a variety of unique and diversified investment opportunities.