The fund lends to Doug Smith’s entities, which are primarily Hawthorne Land and Hawthorne Interests.
In the “flow of funds” FAQ, you can see that the structure of the fund provides for ample liquid capital for Hawthorne Land each time it sells a ranchette. This capital, along with capital already available in Hawthorne Land and Doug’s other personal and business checking accounts, provides substantially more resources than are needed to service the loans made to Hawthorne Land.
Hawthorne Interests should not have an issue covering loan payments either, as it receives more income each month from its borrowers on each note than it must pay to the fund each month for the associated fund loan.
In an unlikely and unforeseeable worst-case scenario, the fund has mechanisms in place for fund management or fund investors to foreclose on assets that the fund has loaned against. It could either hold or sell them at that point.