The participation agreement can serve as a legally binding agreement between the originator and investors. With Yieldstreet offerings, the participation agreement will be signed by the originator, and also the manager of the SPV.
The manager will sign the agreement as a proxy, allowing investors to purchase the participation in the loan.
Once a lead or primary lender has offered to sell off parts of a loan, a participation agreement will be set up to outline primary lender duties and those involved. The agreement will indicate the interest rate and other related terms of the participation.
Important participation agreement outlines:
Providing a binding agreement contract between the primary lender and participants establishes the rights, responsibilities, and duties of those involved parties. The agreement creates a legally binding arrangement between each participant to provide the necessary funding.
These agreements can act as a safety net for the primary lender, as those participating can not withdraw from the loan without prior notice. The core of the participation agreement should clearly state the role each participant has in the loan, and how duties should be divided and fulfilled.
Participation agreement limits liability for the primary lender. Through the means of participation loans, primary lenders can create a broader and more diversified loan portfolio.
When a primary lender has notified involved participants about possible loan participation, an agreement should be drawn up as soon as all participants have reviewed the loan outline. The agreement will then be drafted, taking into consideration the various conditions concerned for each participant.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.