search icon magnifying glass

What happens if a borrower defaults?

Luke V

Investments offered on the Yieldstreet platform carry a certain amount of risk, which should be carefully considered on a case-by-case basis, and prospective investors are urged to read the risk factors for each offering. All opportunities on Yieldstreet are asset-based, which means they are backed by an underlying asset such as a real estate property, marine vessel, artwork or legal settlement. If a borrower defaults, we collaborate with the Originator to work aggressively and pragmatically to bring the Borrower into compliance with their payment obligation where possible and pursue litigation where appropriate. Each loan recovery approach is based on the specific facts and circumstances, including those of the borrower, collateral, and the default itself.

Our investments are structured in a manner (but as always, never guaranteed) designed to maximize principal protection of your commitment through certain credit measures and enhancements, such as legal recourse to the Borrower through personal guarantees and pledged collateral. However, the default workout process is complex and can be a lengthy process. It is important to note that, by definition, in any default situation, there is always an associated risk that you may not be able to fully recover your principal commitment.

Yieldstreet evaluates opportunities through the lens of a broad investment philosophy that favors loans with characteristics such as:

  1. Originated by experienced asset managers

  2. Offer low minimums

  3. Shorter durations

  4. Yields targeting 7% or above

  5. Typically low stock market correlation

However, because we work with Originators in different asset classes and provide investments in a variety of industries and markets, and in amounts and for purposes that are themselves varied, there is no one-size-fits-all analysis for any given opportunity. That, in fact, is why Yieldstreet chooses to work with Originators who bring industry and asset-specific experience and networks to the table, which allows them to, in turn, closely vet each investment even before presenting it to us. The nature and extent of the pre-offer evaluation heavily rely on the nature of the investment and the Originator’s expertise.

With that said, Yieldstreet always operates with an investor-first mindset to help ensure that an appropriate plan of action is carried out when defaults occur. Please note that due to the various stakeholders and moving parts involved in Yieldstreet investments, coupled with the unique structure of each offering, it can lead to a lengthy process where investors may receive limited information for periods of time. As these situations can vary widely in terms of complexity, it takes time to properly assess all options and consider appropriate solutions. We always aim to maximize recovery and returns in as timely a manner as possible.

To learn more about the default process and what you need to know, please read our article here.

Last updated: 12 days ago

Contact Yieldstreet

300 Park Avenue 15th Floor, New York, NY 10022