CNote’s Triple Protection Plan consists of three layers of capital protection built into your CNote investment to help reduce the risk of loss.
First, our CDFI partners have a general recourse obligation with CNote which means they are obligated to pay CNote back even if their borrowers are unable to repay their loans. We negotiated this contractual obligation with our partner CDFIs to assure extra protection for our customers.
Second, state and federal programs exist to protect money invested in CDFIs. For the CDFIs participating in these guarantee programs (all CNote partner CDFIs are participating members), a portion of the loans that CDFIs extend to small businesses are covered. CDFIs are required to maintain their own loan loss reserve fund (pool of money to cover losses) to be eligible for those protection programs. So not only are a portion of the loans protected by the government, but individual CDFIs also carry a loss reserve.
Third, CNote has established a loan loss reserve fund for additional peace of mind for our users.* This means that if for some reason one of our CDFI partners suffers unexpected losses, and the other capital-preservation methods listed above don’t cover them, CNote will step in with its own loss reserve fund to cover some or all of those losses.
CNote’s Triple Protection Plan may reduce the risk of principal loss, yet it is important that all investors recognize that any investment carries some level of risk. CNote does not warrant investments into its Flagship Fund as risk-free.
*This loan loss reserve feature is limited to those investing into CNote’s Reg A Flagship Fund product. CNote’s other products do not have a firm-level loan loss reserves unless specifically warranted and stated in associated offering documents and investment contracts.