Alternative investment manager Yieldstreet—which allows individuals to invest in loans backed by real estate, art, shipping vessels, and other asset classes—is launching a new platform dedicated to private business credit, Fortune has learned.
Yieldstreet’s base of accredited investors will now have access to private business loans backed by collateral including inventory, equipment, accounts receivable, and other assets. The firm effectively crowdfunds its investors’ contributions—which start at a minimum investment of $10,000—to provide them access to fixed-income products that are usually reserved for the likes of hedge funds and institutional investors.
The private credit platform will target short- to medium-term secured loans typically ranging from $3 million to $30 million in value. It is Yieldstreet’s fifth asset class, following verticals dedicated to the real estate, legal, marine, and art financing sectors.
Yieldstreet CEO Milind Mehere told Fortune that he believes the current market environment is ripe for the platform’s launch. He noted the prevalence of “small and medium-size businesses” now revving back up in the wake of the coronavirus lockdown, many of them in need of fresh liquidity to finance their operations.
“For us, the timing feels right. We feel that in the next 12 to 24 months, a lot of businesses will be looking for new capital that’s time- and cost-effective,” Mehere said. “As there was a market correction and a tightening in lending, we feel you’ll get access to better borrowers, better deal flow, and good-quality paper.”
With the private business credit sphere valued at an estimated $1 trillion annually, Mehere said he expects the platform to deploy hundreds of millions of dollars in capital over the next 12 months. Yieldstreet has brought in credit industry veterans Larry Curran and Barbara Anderson to lead the vertical, with the pair serving as managing director and senior director & head of underwriting, respectively.
“All of our transactions will have several common themes,” Anderson told Fortune. She said Yieldstreet will be looking to finance “high-growth” companies with “experienced management teams, good technology, and access to capital to support that growth in addition to the leverage that we bring to the table.”
As far as the assets that the platform will be investing in, Anderson added that Yieldstreet is “less concerned about what [the asset] is, and more about the underlying aspects of each borrower”—with the goal of helping companies grow their businesses and improve their credit profiles over time.
While Yieldstreet will be originating some of the debt on its own, the firm will also partner with banks and other outside lenders to provide additional capital to their deals. For now, the platform will exclusively focus on primary, direct issuance deals ranging from short-term loans, to a targeted “sweet spot” of 12- to-36-month terms, to some 60-month terms, Anderson said.
“The pandemic has brought about some need for shorter-term credit facilities—people who are looking for a bridge, or an injection of liquidity to get by,” she noted. The private credit platform currently has more than $50 million in transactions in the pipeline, Anderson added, and hopes to close its first deals “in the next month or so.”
The new vertical comes in the wake of challenges encountered by some of Yieldstreet’s other platforms in recent months. In April, the Wall Street Journal reported that investors had expressed their dismay about underperforming maritime loans—including some backed by disappearing collateral that had forced Yieldstreet to take borrowers to court. Separately, BlackRock, the world’s largest asset manager, pulled out of plans to manage a fund alongside Yieldstreet, the WSJ also reported.
“In the unusual event that an investment fails to perform, Yieldstreet acts to protect its investors and keeps them informed of its progress,” a company spokesperson told Fortune. “Nothing is more important to Yieldstreet than its investors.”
To date, Yieldstreet has funded more than $1 billion in investments and returned $600 million to its investors, according to the firm.