Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

13. FAIR VALUE MEASUREMENTS

GAAP requires disclosure of fair value information about financial and non-financial assets and liabilities, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial and non-financial assets and liabilities could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.

Recurring Fair Value Measurements

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:

	As of September 30, 2024
	Level 1		Level 2		Level 3		Total
Financial assets:
Loan held for sale, at fair value(1)	$	-	$	6,000,000	$	-	$	6,000,000

(1) The Company's loan held for sale as of September 30, 2024 was sold on October 1, 2024 (Note 15). The sale price of $6.0 million was determined prior to the balance sheet date and accordingly this financial asset is included in Level 2.

	As of December 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Debt securities, at fair value	$	-	$	842,269	$	-	$	842,269

Financial Assets and Liabilities Not Measured at Fair Value

As of September 30, 2024 and December 31, 2023, the carrying values and fair values of the Company’s financial assets and liabilities recorded at amortized cost are as follows:

		As of September 30,				As of December 31,
		2024				2023
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Loans held for investment	3	$	354,672,510	$	353,727,754	$	353,640,610	$	351,952,876
Cash and cash equivalents	1		6,760,433		6,760,433		7,898,040		7,898,040
Interest receivable	2		484,361		484,361		1,004,140		1,004,140
Other receivables and assets, net	2		614,762		614,762		705,960		705,960
Related party receivables	2		1,471,621		1,471,621		107,225		107,225
Financial liabilities:
Revolving loan	2	$	54,000,000	$	53,738,783	$	66,000,000	$	65,633,408
Accounts payable and other liabilities	2		1,357,718		1,357,718		1,135,355		1,135,355
Interest reserve	2		2,580,887		2,580,887		1,074,889		1,074,889
Management and incentive fees payable	2		1,669,116		1,669,116		3,243,775		3,243,775
Related party payables	2		1,570,544		1,570,544		2,051,531		2,051,531
Dividend payable	2		9,267,714		9,267,714		13,866,656		13,866,656

Our loans are held for investment and are substantially secured by real estate, equipment, licenses and other assets of the borrowers to the extent permitted by the applicable laws and the regulations governing such borrowers. The aggregate fair value of the Company’s portfolio of loans held for investment was $353,727,754 and $351,952,876, with gross unrecognized holding losses of $944,756 and $1,687,734 as of September 30, 2024 and December 31, 2023, respectively. The fair values, which are classified as Level 3 in the fair value hierarchy, are estimated using discounted cash flow models based on current market inputs for similar types of arrangements. The primary sensitivity in these models is based on the selection of appropriate discount rates. Fluctuations in these assumptions could result in different estimates of fair value.