Investor capital goes into the fund. The fund is an entity known as Hawthorne Income Fund. It could not go out of business or file for bankruptcy because it is not operating as a business in the traditional sense. Instead, it is an entity that owns assets and has no debt.
The borrowers are entities that Doug Smith owns. Those are Hawthorne Land and Hawthorne Interests. Those entities are unlikely to go out of business for multiple reasons. But if they did, the fund’s secured liens against their land and land notes would remain firmly in place.
As was mentioned in the prior FAQ, in a far-fetched 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.