Does the Partnership use leverage to increase profits?
The Partnership does not borrow to arbitrage. Arbitrage is the practice of taking advantage of a price differential between two or more markets. In our case, that would mean borrowing for the purpose of making loans at a higher interest rate to take advantage of the rate differential. The Partnership does, however, utilize a Line of Credit (LOC) for the purpose of cash management, which in turn increases our yield. The Partnership LOC is like a savings account in reverse; it is a reserve account used to fund loans, pay expenses and pay income and capital withdrawals. The Partnership cash flow is significant but unpredictable. Our monthly income from payments is predictable, but loan pay-offs and new investor capital are unpredictable. Cash is an unproductive asset. Therefore, by being slightly leveraged at all times, the Partnership profits from the old axiom “a penny saved is a penny earned”. The Partnership targets borrowing approximately 10% of its capital with zero in cash. The Lin
The Partnership does not borrow to arbitrage. Arbitrage is the practice of taking advantage of a price differential between two or more markets. In our case, that would mean borrowing for the purpose of making loans at a higher interest rate to take advantage of the rate differential. The Partnership does, however, utilize a Line of Credit (LOC) for the purpose of cash management, which in turn increases our yield. The Partnership LOC is like a savings account in reverse: it is a reserve account used to fund loans, pay expenses, and pay income and capital withdrawals. The Partnership cash flow is significant but unpredictable. Our monthly income from payments is predictable, but loan pay-offs and new investor capital are unpredictable. Cash is an unproductive asset. Therefore, by being slightly leveraged at all times, the Partnership profits from the old axiom “a penny saved is a penny earned”. The Partnership targets borrowing approximately 10% of its capital with zero in cash. The Li
