Frequently Asked Questions

CNote is an investment platform that allows you to earn a competitive financial return while increasing economic inclusion and supporting financially-underserved communities across America.

CNote invests your money with community lenders who have a long track record of financial stability and are committed to supporting low-to-moderate income communities and investing in women & minority entrepreneurs.

Your investment helps small businesses grow and funds community development projects like affordable housing, building more economically inclusive communities.

CNote’s Flagship Fund is an investment product that currently pays a 2.75% annual return (interest paid monthly) and generates that return by investing in a diversified network of certified community development financial institutions (CDFIs) that drive capital into financially-underserved communities across America.

View the Flagship Fund Product Page to learn more about the offering.

To learn more about the specific terms of the investment you should review the Offering Circular, if you are an accredited investor looking to invest in the Flagship Fund you should review the Subscription Agreement.

The Wisdom Fund is a fixed income vehicle that increases capital access and lending for women-owned businesses. It is a co-created effort to bring new thinking, experimentation, and sustainable solutions to drive wealth creation for women, specifically low-income and women of color in the United States.

Visit the Wisdom Fund page to learn more about the targeted impact, partners, and the structure of the fund.

To learn more about investing in the Wisdom Fund you may want to review the Private Placement Memorandum.

The CNote Promise Account is a fully insured product that gives larger investors and institutions a single place to put their cash to work for positive social impact while achieving an attractive return.

The Promise Account provides the flexibility of 90-day liquidity and the peace of mind that comes from FDIC and NCUA backing, all while helping communities around the country thrive.

The Promise Account is currently only available to accredited investors.

Most new accounts are funded and earning interest within ten business days of signup. This timeline can vary because we match the capital invested by our users with the capital needs of our partner CDFIs. Once you request the transfer into your account, we aggregate it with requests from other CNote users and process them in batches. This process can take a few days, and sometimes longer if the batch occurs close to a weekend or holiday. Once we initiate a batch transfer, funds are pulled from your connected financial institution and moved to our FDIC insured holding bank for disbursement to CDFIs.

After your money is transferred into your CNote account, our algorithms pool and diversify your funds with those of other CNote clients for deployment across multiple CDFIs. Your money is then transferred to our CDFI partners and starts earning interest. It takes 6 business days from when we initiate a transfer (send a request to your host financial institution) for the funds appear in your CNote account and start earning interest.

CNote was founded by two successful women who spent years working in finance. They saw that the investment industry typically favored the wealthy and connected. They saw an opportunity to create financial products that increased inclusion rather than perpetuated inequality.

Our mission at CNote is to make financial freedom more accessible to the masses. The money you invest in CNote brings new opportunity to underserved communities which helps fuel the real engine of growth in this country, the small business. Those success stories lead to more jobs, more income, and hopefully empowers these new investors to make more conscious decisions with their capital.

Visit CNote’s About Us section to read our full story.

When you invest in CNote, you are issued promissory notes (“Notes”) that are offered to eligible investors pursuant to Regulation A+ and Regulation D under the Securities Act of 1933, as amended.

For more information on risks related to investing in our Notes, please see our latest filings with the Securities and Exchange Commission, which can be found here: Offering Circular. Additionally, you may want to review the Subscription Agreement for Reg D offerings. If you are interested in investing in our “Wisdom Fund” Notes, please review the Private Placement Memorandum.

People typically invest in CNote for two reasons, to generate a positive return on their investment and because they want to invest their money in causes they care about.

Many of our users want to build a more inclusive economy and don’t think that entrepreneurs should be denied a small business loan because of their gender, race, or the community they happen to live in. By supporting lenders that provide capital access to underserved communities, CNote Members know their money is building a more inclusive economy.

CNote’s CDFI loan fund investment products (Flagship Fund, Wisdom Fund, Customized Products, Rapid Response Fund) are not insured against loss.

CNote’s Promise Account product is insured through either Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) depository insurance programs which are backed by the full faith and credit of the United States.

Note: CNote is not an investment adviser or a broker-dealer. The investment process and terms of all CNote investments are controlled by the legal offering documents for a given investment, which include the note and subscription agreement, not by educational or reference materials contained herein. The offering documents of any CNote investment will specify whether that offering is insured or not. Investors should carefully consider their investment objectives and review all offering documents for a given investment opportunity before taking action.

CNote’s Flagship Fund has no minimum and anyone can invest. You can start with $1 or $500,000.

CNote’s Wisdom Fund is an accredited-only offering with a $100,000 minimum.

CNote’s Promise Account is an accredited-only offering with a $250,000 minimum.

CNote’s Rapid Response Fund is an accredited-only offering with a $100,000 minimum.

Customized products have varying minimums. Inquire with our sales team to learn more about customized product construction and minimums.

CNote’s Flagship Fund offers quarterly liquidity on up to 10% or $20,000 of your investment (whichever is larger). For most customers, this means they can withdraw their entire balance any quarter. CNote has the discretion to allow larger withdrawals as well and we always work closely with customers to meet their needs. You can initiate withdrawal requests directly from your secure, online CNote Account.

Quarterly liquidity dates are January 1, April 1, July 1, and October 1 and we require 30 days’ notice.

For example, if you want to make a withdrawal on July 1, please submit your request on or before June 1. As mentioned above, we work with our Members on a case-by-case basis to meet immediate and unexpected liquidity needs, typically with no issue. If you do need to make an unanticipated withdrawal you can email  support@mycnote.com  and we’ll do our best to get you your money when you need it.

Here are a few additional things to note about withdrawals. When you put your dollars to work with CNote, we use those dollars to support community lending partners so that low-income communities, and often-ignored segments like women and minorities, can build their businesses. This means your money does not sit in a big grey vault where it collects dust, it’s actually loaned out to real businesses and entrepreneurs. For large account balances in excess of $200,000, there is a 10% liquidity cap, meaning you can withdraw up to 10% of your full balance in any given quarter. Just a friendly reminder that we are working with CDFIs to put those dollars to work while you sleep. Withdrawing your $1M one quarter after you put it in is neither helpful for you (little interest accrued) nor the community members we serve. At CNote, responsible investing means both transparency and access for you, and fairness to the underserved communities that are counting on all of us. Please know this policy before you sign up.

CNote’s Wisdom Fund has a fixed sixty-month investment term and funds cannot be withdrawn prior to that maturity date.

No. CNote does not charge customers any fees.

Traditional finance loves fees, we don’t.

CNote Notes generate taxable interest on your principal investment.

CNote issues a 1099-INT form reporting interest income for all CNote members that earn more than $10 in interest in a calendar year.

Note: your individual situation may impact the rate of taxation for your interest earnings.

We do not charge CNote members any fees.

We make money by investing your money in our partner CDFIs and retaining any funds in excess of the rate of return we pay to your account.

Your CNote account does not have an account number like a traditional bank, in part, because we are not a bank.

For your convenience, your login and password are your gateways to your CNote account.

We provide confirmation of your investment(s) through legally-binding agreements that every user receives.

We support business, nonprofit, trust, and institutional accounts as well. If you would like to open multiple accounts please contact support@mycnote.com.

Yes.

CNote supports trust accounts.

Yes.

CNote supports business accounts.

Effective May 11, 2018, new federal regulations modify how nearly all financial institutions verify business customers. You can read the official guidance on these new rules here. To comply with federal law, when you open a business account, CNote must collect the contact information for one controller and up to four beneficial owners of your business.

A controller is a single individual that has significant responsibility to control, manage, or direct the activities of the business (examples include an Executive, Senior Manager, General Partner, or President).

Beneficial owners are defined as each individual who directly or indirectly owns 25% or more of the equity interest in the business. It is possible for a business to have zero beneficial owners (example: a business owned equally by ten individuals, each with a 10% stake, would have no beneficial owners).

Accordingly, each business will have between zero and four beneficial owners and one listed controller.

Finally, if the ownership or control structure of your business changes, you should update that information in your CNote account. Any account changes will require a new verification process to clear before any new transactions can be processed.

CNote provides financial advisors and planners a simple path to access CNote as a product for their clients. You can learn more about our Advisor program here.

We also offer a free 30 minute phone call with a CNote Team Member to answer any questions and to provide information about onboarding best practices. To schedule your call, email info@mycnote.com.

Yes, we are happy to provide users with a beneficiary designation or a joint ownership form. Once you sign one of these forms it will be stored in your account dashboard and accessible for download at any time. If you’d like to designate a beneficiary or joint account, email support@mycnote.com and we’ll guide you through the process.

Currently, the Flagship Fund has an expected annual return of 2.75%, subject to change according to the terms of your CNote Promissory Note.

Effective January 1, 2019, we raised rates for all users to 2.75% from 2.5%.

Effective December 15, 2020, the Wisdom Fund has an expected annual return of 1.00% for all new investors.

This change was made in response to the capital needs of our community lender partners, the prevailing interest rate environment, and most importantly, to make sure small business lending to women of color remains accessible and affordable.

Those invested in the Wisdom Fund prior to this effective date will remain at the contracted interest reflected in the terms of their CNote Promissory Note.

The return on CNote’s Promise Account is variable and is reflective of the current interest rate environment.

For the most current rate, we encourage you to email info@mycnote.com

CNote generates a competitive return by lending to rigorously-diligenced U.S. Treasury Department-certified Community Development Financial Institutions (CDFIs).

Prior to CNote, investing in CDFIs was generally limited to large foundations, wealthy individuals, or banks. CNote has made CDFIs as an asset class, along their financial returns and social impact, available to everyone.

CNote’s returns are not guaranteed.

CNote is not a bank and investments in CNote are not FDIC insured.

For more information on risks related to investing in our Notes, please see our latest filings with the Securities and Exchange Commission, which can be found here: Offering Circular. Additionally, you may want to review the Subscription Agreement for Reg D offerings. If you are interested in investing in our “Wisdom Fund” Notes, please review the Private Placement Memorandum.

The Flagship Fund’s 2.75% rate of return is not a fixed rate, meaning it can change over time. As the prime rate changes, CNote will likely adjust our rates to maintain a competitive return.

To illustrate, effective January 1, 2019, we raised rates for all users to 2.75% from 2.5%.

The interest rate on your CNote account is directly correlated with the cost of capital that we offer to our CDFI partners. Our intention is to provide competitive returns to CNote members while making sure we do not contribute to predatory lending.

CNote investments are not insured and are not risk free.

CNote is a low risk investment product. As described below (see section on CNote’s Triple Protection Plan), there are several layers of protection for your investment, but again, it is not totally risk free.

To understand the risk of investing with CNote, you need to understand where your money is invested. CNote invests in Community Development Financial Institutions, commonly called CDFIs. CDFIs are U.S. Treasury certified financial institutions that provide financial services in low-income communities and to people who lack access to traditional financing.

So does that mean that CDFIs lose money often because they loan to low-income communities?

Actually, no. CDFIs have been around for over 20 years, and in that time they’ve racked up an impressive record of financial performance. As a whole, all of the CDFIs that CNote invests in have historical loss rates less than 1% and CNote’s CDFI partners have not lost a single investor dollar to date. Period.

If CDFIs are so great, why aren’t big banks or companies investing in them?

Actually, they are. CDFIs receive investments from just about every major bank – likely including yours. CDFIs are a trusted, and much studied, financial innovation that have a proven track record of security and social impact. They were just never readily accessible to everyday savers like you and me before.

To illustrate, here’s an official Bank of America video explaining the CDFI model and their heavy investment in the same.

CDFIs have been around for more than 20 years and are not new. What is new is the opportunity for regular people like you and me to invest in CDFIs. CNote is the first company that provides the average investor access to these investment vehicles. Generally, in the past, CDFIs only received money from very wealthy individuals and large institutions. We’ve changed that. CNote allows you to invest like those big institutional investors, except instead of signing a check in the boardroom you can invest your dollars sitting in your bedroom.

So, are they really that safe?

Every investment has some level of risk, and past successes don’t guarantee future performance, but CDFIs have fared well in many financial conditions. Indeed, after the great recession of 2008, CDFIs helped fill in many of the lending gaps created by bank failures and a paucity of lending. CDFIs on the whole did not face any significant financial jeopardy as a result of the broader economic distress during the economic downturn. Indeed, they generally fared as well as, if not better than, most banks. The chart below shows net charge off rates (loan loss percentages) from 2000 to 2015. Larger percentages mean more loan losses. As you can see, CDFIs fared well before, during, and after, the financial crisis.

CNote’s partner CDFIs are all certified by the U.S. Treasury Department, and we select them only after a lengthy diligence process where we review their historical financial performance.

Ok, CDFIs sound safe, but what happens to my money if something happens to CNote?

CNote is not a holding company or a bank — we don’t actually hold your money. When you invest your money with CNote, we deploy it with our CDFI partners and they are contractually obligated to pay back your principal and interest even if CNote goes out of business.

To illustrate, even if a giant asteroid hit the CNote offices and wiped us all out your money wouldn’t be vaporized or be lost in the cloud as a series of ones and zeros, it would be with one of our CDFI partners, earning interest, and waiting for you.

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.

Security is core to CNote’s values.

We appreciate the deep trust our customers must have to invest and share sensitive personal information with CNote.

To that end, we have formal security practices that mandate all customer data to be transmitted over secure connections and stored in an encrypted format.

We maintain full audit logs of all activity and have strict policies regarding the disclosure, transmission, and manipulation of customer data.

These procedures may prevent our team from sharing information or making account changes when requested over email or other non-secure communication channels.

CNote also has a Vulnerability Disclosure Program (VDP) which allows security researchers acting in good faith to help us maintain a high standard for security and privacy for our users, partners, and employees.

For obvious reasons, we do not disclose all the various tools and methods we employ to maintain the security of our platform but know that our dedicated engineering team spends a significant amount of time thinking about how to best protect your data from even the most sophisticated of intrusions.

Social impact is the positive change that comes as a result of some action. CNote’s definition of positive change is increased financial inclusion, social justice, and equality. At CNote, we are working to close the wealth gap by increasing the amount of capital allocated to minority and women-led businesses, creating new jobs, and strengthening local communities.

CNote customers can see tangible social impact through their investment in our platform. Check out some of our small business success stories here.

CNote provides regular impact reporting.

We provide quarterly impact metrics along with annual reporting that provides a more comprehensive overview of CNote’s operations and social impact.

You can view our most recent impact reports here.

Our last two annual reports are available here (2018) (2017).

Our reporting takes two forms, the qualitative stories we produce that highlight small business lending successes and the impact they have on communities across America and the quantitative impact metrics we track through our CDFI partners.

Currently, the key quantitative metrics we track in relation to CNote investments are:

— The number of jobs our investments help create or maintain

— The percentage of capital deployed to women-led businesses

— The percentage of capital deployed to minority-led businesses

— The percentage of capital deployed to low-to-moderate income communities

Community Development Financial Institutions (CDFIs) are U.S. Treasury Department certified financial institutions created under authority of the 1994 Riegle Community Development and Regulatory Improvement Act. They are certified by the CDFI Fund.

CDFIs main mission is to promote economic development and job creation in communities, especially low income and financially under-served communities.

To learn more about CDFIs, read this comprehensive overview.

Community development financial institutions (CDFIs) are dedicated to delivering responsible, affordable lending to help underserved communities join the economic mainstream.

For over 20 years, CDFIs have had a proven track record of making an impact in those areas of America that need it most.

To date, CDFIs have created over 1 million jobs and provided over $100 Billion in affordable capital.