Why We’re Doubling Our Reserves Before 2026

Why Reserves Matter More Than Yield in 2026

In private lending, rates and speed get all the attention. But if 2026 proves anything, it’ll be this: the best returns won’t come from swinging harder — they’ll come from staying liquid and disciplined.

At 42 Solutions, we’re not building our business around aggressive loan volume. We’re building around a foundation that lasts. That starts with one underappreciated advantage: reserves.

Why Liquidity Trumps Leverage

When markets tighten, even good lenders can get caught. Projects stall. Exit timelines stretch. And lenders without strong liquidity are forced to make weak decisions — fire-selling assets, pushing borrowers prematurely, or compromising terms just to recover cash.

We’re not interested in playing that game.

At 42 Solutions, we believe the difference between having leverage and being leveraged is everything. Strong reserves are how we stay in control when others lose theirs.

How Reserves Protect Your Capital

Most lenders think of reserves as idle capital. We see them as insurance, time, and strategic flexibility.

In 2025, we held six months of operating reserves. Our goal for 2026: double that. Twelve months of cushion gives us space to:

• Work through project delays without panic

• Avoid forced foreclosures or distressed exits

• Support our borrowers without compromising investor returns

• Stay consistent regardless of short-term conditions

More importantly, it means investor payments never depend on loan timing luck — they’re backed by sound planning.

Why This Strategy Quietly Outperforms

Here’s the truth: stronger reserves create better returns over time.

They help us avoid principal loss, exit wisely, and support high-quality borrowers through friction. That means more repeat deals, fewer surprises, and fewer moments of desperation.

In short, reserves reduce downside far more than they limit upside — and that’s the compounding edge most lenders miss.

Going Into 2026

We’re absolutely focused on growing 42 Solutions. But growth without stability isn’t strength — it’s exposure.

Our priorities for the new year:

• Conservative underwriting

• Strong borrower relationships

• Thoughtful loan velocity

• A rock-solid balance sheet

Because in lending, consistency beats chaos — every time.

Closing Thought

Anyone can lend when everything goes right. But real lending businesses show their strength when things go slightly wrong.

That’s why we’re building from the balance sheet up.

In next week’s newsletter, I’ll share how borrower quality in Arizona is evolving — and why our deal flow is stronger than ever.

— Devon Kennard

 Founder, 42 Solutions LLC