How we plan to handle the impact of COVID-19 on NextSeed investments

As we cautiously prepare to navigate the coming weeks and months of uncertainty, we hope that you and your families are staying safe.

We have received countless messages from our investor members offering to help the businesses they have invested in, including offers to waive their own payment rights. For that, we are incredibly grateful and inspired. The support and care for our fellow citizens has been amazing to see, and we are truly fortunate to have you as part of our community. The NextSeed team has been actively reaching out and communicating with all of the businesses on our platform to discuss their current circumstances, as well as their reasonable expectations of the future based on what has transpired over the past couple of weeks. We have also been closely tracking the status of various government initiatives that are starting to be announced and trying to assess their impact on small businesses. After taking everything into account, we wanted to share with you how we expect to handle the businesses' payment servicing process during this crisis, and what investors should expect as a result.

First, to state the obvious -- there is absolutely no doubt that virtually all small businesses across the US that rely on a retail customer base to physically visit their locations to purchase goods or services have suffered dramatically, and it is uncertain how long this period will last. The financial pain is especially severe for businesses in cities and states that have ordered the mandatory closing of such businesses, and we anticipate that the permanent closing and bankruptcy of small businesses across the US will spike unless massive government intervention is announced in the very near term to provide support.

While we believe that the businesses on the NextSeed platform are among the very best in their industries, they are unfortunately not immune to the current environment. Each business has unique circumstances and each business owner is trying their absolute best to adjust to this new environment. Some have had no choice but to completely shut down operations until this period passes. Ultimately, there will be an overwhelmingly negative impact on most businesses' bottom line in the near term, and many businesses are already forced to make very difficult decisions around whether to pay bills, rent, taxes, debt obligations, or their employees. As a result, we expect that some investments will likely fall into a defaulted status during the course of this outbreak.

Regardless of our preference, NextSeed does not have the right to unilaterally amend the note agreements to allow for a deferral or forbearance of debt payments. However, as the Collateral Agent in the event of default by an issuer, NextSeed Services has broad authority to protect and exercise investor's rights as best as we can. As always, we will pursue all actions that are likely to result in the best outcome for investors. In the event any notes fall into default during this period, our intention is to work closely with the issuers to ensure they stay in the best position possible to get back to full strength.

To that end, during this unprecedented period of uncertainty, we do not believe it will be in investors’ best interests (barring special circumstances) to aggressively pursue formal legal remedies, such as foreclosure lawsuits or attempted seizure of a business' assets, for any businesses that are indeed doing everything they can to survive this period and get back to normal operations as soon as possible. Taking such actions at this point will likely cause immediate and permanent failure of a business whereby there will be little or no recovery for noteholders. If circumstances change for any particular business such that we no longer believe that is the best course of action, we will then move forward to take the necessary actions to protect investor's interests. We will expect businesses that default during this time to take active steps to protect and strengthen their financial position, including but not limited to exhausting all available avenues for alternative sources of financing or credit (such as SBA disaster loans if they qualify). Finally, we will assist our business community as much as we can through all of these steps, and facilitate regular communication and updates to their investors.

How can you help your favorite businesses? The most practical and immediate way is simply to continue being a patron and customer as you always have, but under whatever new arrangements they offer (e.g., takeout / delivery / taking online classes, etc). You can purchase gift cards or store credit, and hold onto it until the business is fully back to normal operations before claiming it. You likely have already seen certain business updates being sent about new services offered and how you can support them -- more will follow. Regardless of how strong these business owners and their teams may seem (and they absolutely are), please know that they are all suffering tremendously, and any support you can provide them in any way will be greatly appreciated during this time.

No matter what, we know these coming weeks and months will be extremely difficult for all of us. Our commitment to you, as always, is that we will do everything within our power to help our community navigate this crisis so that we can come out of it stronger. We sincerely appreciate each of you in the NextSeed community, and most importantly, we hope you and your family remain safe and protected.


Sincerely,
Youngro Lee
Co-founder and CEO