Investments on our platform are either structured using a special purpose vehicle (SPV) or borrower payment dependent notes (BPDN). A description of each is included below.
Special Purpose Vehicle (SPV)
An SPV is an investment structure that is technically a subsidiary of the company that created it (Willow Wealth). That means it is reported on a separate balance sheet, has a scope that is just a subset of the parent company’s activities and is financially independent of the parent company and from other SPVs under the parent’s umbrella. Essentially, each investment structured as an SPV is its own limited liability corporation (LLC).
Willow Wealth acts as the managing member of each SPV. In the simplest terms, this means that we service and distribute the funds and inform investors of any important administrative matters. If any complications arise in the portfolio, Willow Wealth—as managing member—will handle them.
The ownership of an SPV is split among all investors in the offering at a basis corresponding to your contribution to the deal. Similarly, when the borrower starts paying interest, it is to the investors on a pro-rata basis on an agreed payment frequency. For example, if the borrower is raising $100,000 and you invest $10,000 in the offering, you will own 10% of the SPV and the underlying loan. If the loan pays 10% interest per year, you will receive $1,000 in interest for each year that the loan is outstanding.
Borrower Payment Dependent Notes (BPDN)
Borrower payment dependent notes (BPDN) are debt obligations of Willow Wealth that are tied to the performance of a loan made by Willow Wealth. BPDN helps Willow Wealth structure debt transactions more efficiently by allowing for a greater number of investors in a given transaction, and lower investment minimums.
For each BPDN offering, a new SPV will be formed as a wholly-owned subsidiary of the BPDN Issuer (i.e. the Issuer will create Series 1 SPV). That SPV exists to fund, acquire and originate a loan with a borrower, or enter into a participation agreement directly with the originator of a loan (such loan or participation, the corresponding asset).