Crowdfunding via shared revenue contracts

[TravisRADMD]

After reading about some medical schools offering income sharing agreements in addition to standard loans on WCI blog I decided to look further into income sharing contracts. Turns out there's not much on this topic at all online. I found a couple crowdfunding investment websites such as Nextseed and loanstake that offered investment opportunities in revenue sharing contracts but there was little available and I've never even heard of these websites. Turns out some research out of Foster school of business shows that this might work out better for all parties over traditional lending with potential returns of up to 200%. http://staff.washington.edu/sfatehi/FatehiWagner_18.pdf

Anyone know anything more about this? Seems very interesting but I'm having a hard time determining risk.

[The White Coat Investor]

TravisRADMD wrote:

After reading about some medical schools offering income sharing agreements in addition to standard loans on WCI blog I decided to look further into income sharing contracts. Turns out there’s not much on this topic at all online. I found a couple crowdfunding investment websites such as Nextseed and loanstake that offered investment opportunities in revenue sharing contracts but there was little available and I’ve never even heard of these websites. Turns out some research out of Foster school of business shows that this might work out better for all parties over traditional lending with potential returns of up to 200%. http://staff.washington.edu/sfatehi/FatehiWagner_18.pdf

Anyone know anything more about this? Seems very interesting but I’m having a hard time determining risk.

Click to expand...

How is a return of 200% compatible with "working out better for everyone." Seems like the borrower is coming out behind to me.

[TravisRADMD]

I guess I could have worded that better but I believe the benefit to the borrower is that instead of having a set min loan repayment its a dividend tied to revenue streams of the company. But I was hoping someone with a little more insight on the forum could explain this better.

 

By the way. Big fan. Pretty cool to have you personally respond to my post. Thanks for all your help Dr. Dahle.

[Zaphod]

In the paper their conclusion is it has a higher NPV and lower proability of default than equity/fixed rate loans, this is beneficial to the lender or owner of the securitized debt only. And they specifically talk about situations with non uniform incomes.

This paper goes off the rails in lemma 8 imo. /s