Investor Insights September 2020

Business, Investor Insights — September 16, 2020

We’ve been originating loans to small- and medium-sized businesses in the U.S. for nearly two decades. The risk and return profile of these loans is appealing; we believe the interest rates on these assets provide a return in excess of what is warranted based on the underlying risk. Furthermore, providing capital to these small businesses improves the communities they are operating in by creating jobs and facilities to generate clean energy.

Our international investors benefit from a provision in the U.S. tax law that allows them to earn interest on their investments free from U.S. income tax. Generally speaking, non-U.S. investors who (1) are not engaged in the conduct of a U.S. trade or business and (2) provide documentation evidencing that it is, in fact, a non-U.S. investor can invest in eligible loans and receive this “portfolio interest exemption” from U.S. income tax.

We operate under a “season and sell” model developed by our accountants and advisors to aid our investors in complying with the requirements of the portfolio interest exemption. This process includes:

Separating the process of originating and decisioning loans from the investments in those loans so that our investors are not “effectively connected” to the U.S. loan origination business.

Originating loans using U.S.-based capital; selling loans to investors after a seasoning period that could last from a number of days to a number of months.

Selling all loans to investors at their fair market value.

Not offering preferential rights, such as rights of first refusal, to any investors in loans.

Collecting documentation to evidence the non-U.S. status of each foreign investor.

To further enhance our non-U.S. investment program, we’ve been working with legal counsel in the Cayman Islands to create a new fund structure for our non-U.S. investors which is regulated by the Cayman Islands Monetary Authority (“CIMA”). This new CIMA fund will streamline the process operationally, but also provide for a regulated fund structure for AVANA investors. We’ll continue to share additional details on this process as we move nearer to the transition to this fund structure.

In the meantime, please don’t hesitate to contact us directly should you have any questions.


Sundip Patel
CEO and Co-CIO
Michael Sheneman
CFO and Co-CIO