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Crowdfunding via shared revenue contracts

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  • Avatar TravisRADMD 
    Participant
    Status: Physician
    Posts: 14
    Joined: 08/24/2019

    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.

    #241271 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4546
    Joined: 05/13/2011

    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.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #241307 Reply
    Liked by wonka31, Zaphod
    Avatar TravisRADMD 
    Participant
    Status: Physician
    Posts: 14
    Joined: 08/24/2019

    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.

    #241331 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6193
    Joined: 01/12/2016

    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

    #241333 Reply

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