The fund does not make unsecured loans to a business but instead makes secured loans against real assets. Therefore, the pertinent question would really be, “What happens if you go out of business and quit paying on your loans?… even though the fund structure means you have significant cash flow to pay those loans.”
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.
“Going out of business” has involved a bankruptcy for some companies. This has happened when their liabilities were greater than their assets. We do not see how this would be feasible with the fund structure, seeing that strict lending criteria is in place to keep loan balances within reason.
It is implausible but technically possible that Doug’s entities could take on additional unsecured debt that ultimately led the company to bankruptcy. In this case, the courts would oversee the process of selling assets, paying off the fund’s loans, which are all secured by first liens, and returning capital to investors.