Matching crowdfunding debt deals to a possible two year cash need
Consider an investor with 15k available and roughly a 40% chance of needing that cash in about two years for equipment. That uncertainty rules out most equity crowdfunding deals, which typically run three to seven year holds with no exit, and it also argues against pooled equity funds whose redemption programs the manager can suspend at will. Debt deals fit that timeline better. Short term renovation loans commonly run 9 to 11% annual, 12 to 24 month terms, monthly or quarterly interest, with minimums around 5k, which lines up reasonably well with a two year window. What that fixed return gives up is upside: 9 to 11% is the return whether the project goes brilliantly or merely adequately. On the downside, first position lien holders are generally paid before other capital, but the actual recovery value of a first position claim on a half finished renovation depends entirely on the local market and the state of construction, which is hard to assess from outside. Another detail worth flagging is that many of these loans allow the borrower to extend the term unilaterally, which can turn an 18 month loan into a 30 month one without the lender's consent. A reasonable approach for a near term cash need with some uncertainty is spreading capital across a few debt deals with staggered maturities rather than concentrating in one, and treating any allocation here as capital that may not be liquid exactly on schedule.
