Retail Investors Can Invest In Business Loans – Thanks To StreetShares Regulatory ApprovalMarch 16, 2016 | By: Sean Murray
If not being an accredited investor has kept you on the sidelines of marketplace lending, you’ll soon be able to invest in business loans on the StreetShares platform, thanks to a special regulatory approval by the SEC. While you’re not going to the earn the yields you’d get with merchant cash advance (MCA) syndication, StreetShares makes loans for as short as three months. The available products are 3, 6, 12, 18, 24 & 36 month term loans, according to their website, which are desirable lengths for investors used to MCA. The Funding Circle platform by contrast, requires investors be accredited and loan terms range from 1 to 5 years. If you aren’t eligible to invest through Funding Circle, well that is what will make StreetShares different.
Unlike the laborious process that Lending Club and Prosper took with the SEC to sell loan performance-dependent notes to unaccredited investors, StreetShares got a special approval under the JOBS Act’s Regulation A+. That only allows them to raise up to $50 million over a 12-month period so investing availability may be limited.
In a press release, the company specified that “repayment to investors is not tied to the performance of a particular underlying loan.” The LendAcademy blog is reporting that “StreetShares will provide a vehicle for investors to become diversified through some kind of fund” and that details should be revealed around the time of the LendIt Conference.
Though company CEO Mark Rockefeller of StreetShares might not remember this, we spoke during a lunch break at LendIt 2014 when his company was a brand new startup. At that time, he told me about his “veterans funding veterans” lending marketplace model where the costs would be much lower than what can be experienced in the merchant cash advance industry. Since then his company has won the 2015 #1 global Best Investment Award from Harvard Business School and is now the first small business lender to get approval under Regulation A+.
One other person that is trying to bring small business lending investing to the unaccredited investor community is hedge fund manager Brendan Ross. Ross’s Direct Lending Income Fund filed an N-2 with the SEC at the conclusion of last year to become a “40 Act fund,” a special investment company permitted under The Investment Company Act of 1940 that can accept investments from retail investors. In January, Ross explained to CNBC during an interview that the fund’s structure would be converted so that investors become shareholders in what would essentially be a lending business.
StreetShares plans to officially debut their new program at LendIt next month.Last modified: March 16, 2016
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.