Filed pursuant to Rule 424(b)(3)

File No. 333-224557

SHEPHERD’S FINANCE, LLC

SUPPLEMENT NO. 4 DATED November 18, 2021

TO THE PROSPECTUS DATED April 28, 2021

This document supplements, and should be read in conjunction with, the prospectus of Shepherd’s Finance, LLC (the “Company,” “we,” or “our”) dated April 28, 2021, Supplement No. 2 dated July 8, 2021 (which amended and superseded all prior supplements to the prospectus), and Supplement No. 3 dated August 11, 2021. Unless otherwise defined in this supplement, capitalized terms used in this supplement shall have the same meanings as set forth in the prospectus.

The purpose of this supplement is to disclose:

Status of Our Offering

We commenced this offering of Fixed Rate Subordinated Notes (“Notes”), which is our second follow-on offering of Notes (our “Current Offering”), on March 22, 2019. As of November 16, 2021, we have issued approximately $26.6 million of Notes in our Current Offering. As of November 16, 2021, approximately $44.4 million of Notes remain available for sale to the public under our Current Offering. On November 5, 2020, our board of managers approved an extension of the Current Offering to March 22, 2022. Therefore, the Current Offering will not last beyond March 22, 2022, unless further extended as permitted under applicable law. We also reserve the right to terminate the Current Offering at any time.

We commenced our initial public offering of Notes on October 4, 2012. On September 29, 2015, we terminated our initial public offering, having issued approximately $8.25 million in Notes. We commenced our first follow-on offering of Notes (our “First Follow-on Offering”) on September 29, 2015. On March 22, 2019, we terminated our First Follow-on Offering, having issued approximately $29.99 million in Notes.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(All dollar [$] amounts shown in thousands.)

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our interim condensed consolidated financial statements and the notes thereto contained elsewhere in this supplement. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should also be read in conjunction with our audited annual consolidated financial statements and related notes and other consolidated financial data (the “2020 Financial Statements”) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

Overview

During the nine months ended September 30, 2021, the Company continued to focus on specific issues that arose in 2020 primarily due to the pandemic and, more specifically, focused on the reduction of non-interest earning assets. As of September 30, 2021, loans classified as non-accrual were 23 or $9,528 compared to 27 or $11,854 for the same period in the prior year.

While the Company continues to face COVID-19 risks as it relates to the economy and the homebuilding industry, management made the decision during the nine months ended September 30, 2021 to focus on the following three areas:

We anticipate that for the remainder of 2021, the housing market in most of the areas in which we do business will be strong despite the impact of COVID-19. We also anticipate that the losses we incurred in principal related to COVID-19 will not continue, and that the lack of interest due to non-performing assets from COVID-19 will decrease significantly in the fourth quarter of 2021.

We had $47,457 and $46,405 in loan assets as of September 30, 2021 and December 31, 2020, respectively. In addition, as of September 30, 2021, we had 228 construction loans in 22 states with 67 borrowers and 15 development loans in 7 states with 12 borrowers.

Net cash used in operating activities decreased $154 for the nine months ended September 30, 2021 as compared to the same period of 2020. Our increase in operating cash flow was due primarily to the change in net income.

Critical Accounting Estimates

To assist in evaluating our interim condensed consolidated financial statements, we describe below information regarding the critical accounting estimates that we use. We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used, have had or would have a material impact on our consolidated financial condition or results of operations. See our 2020 Form 10-K, as filed with the SEC, for more information on our critical accounting estimates. No material changes to our critical accounting estimates have occurred since December 31, 2020 unless listed below.

Loan Losses

Fair value of collateral has the potential to impact the calculation of the loan loss provision (the amount we have expensed over time in anticipation of loan losses we have not yet realized). Specifically, relevant to the allowance for loan loss reserve is the fair value of the underlying collateral supporting the outstanding loan balances. Fair value measurements are an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Due to a rapidly changing economic market, an erratic housing market, the various methods that could be used to develop fair value estimates, and the various assumptions that could be used, determining the collateral’s fair value requires significant judgment.

* Increases in the fair value of the real estate collateral do not impact the loan loss provision, as the value generally is not “written up.”

** Assumes the loans were nonperforming and a book amount of the loans outstanding of $47,457.

Foreclosed Assets

The fair value of real estate will impact our foreclosed asset value, which is recorded at 100% of fair value (after selling costs are deducted).

* Increases in the fair value of the foreclosed assets do not impact the carrying value, as the value generally is not “written up.” Those gains would be recognized at the sale of the asset.

** Assumes a book amount of the foreclosed assets of $2,747.

Interest Spread

The following table displays a comparison of our interest income, expense, fees, and spread:

* Annualized amount as percentage of the weighted average outstanding gross loan balance.

There are three main components that can impact our interest spread:

● Difference between the interest rate received (on our loan assets) and the interest rate paid (on our borrowings). The loans originated have interest rates which are based on our cost of funds, with a minimum cost of funds of 7%. For most loans, the margin is fixed at 3%; however, for our development loans the margin is generally fixed at 7%. This component is also impacted by the lending of money with no interest cost (our equity).

Interest income on loans was 10% for both the quarter and nine months ended September 30, 2021 compared to 11% for the same periods of 2020. This decrease was due primarily to fewer loans paying higher interest due to lower cost of funds.

Interest expense decreased to 10% for both the quarter and nine months ended September 30, 2021 compared to the same periods of 2020 which was due primarily to management’s decision to paydown certain notes payables with higher interest rates. In addition, during the third quarter of 2021, the interest rate on one secured line of credit decreased.

Notes payable with higher interest rates is expected to decrease over the next quarter as we continue to pay down outstanding debt.

We anticipate our standard margin to be generally 3% and 7% on all future construction loans and all development loans, respectively, which yields a blended margin of approximately 3.9%.

● Fee income. Our construction loan fee is 5% on the amount we commit to lend, which is amortized over the expected life of each loan. In addition, our development loans do not recognize a loan fee. When loans terminate before their expected maturity, the remaining fee is recognized at the termination of the loan. Faster turning loans typically yield a higher fee income percentage.

For the quarter and nine months ended September 30, 2021, fee income increased to 8% and 7%, respectively, compared to 4% for both of the same periods of 2020. The increases were primarily due to fewer old loans (which are fully amortized) and more faster turning loans.

● Amount of nonperforming assets. Generally, we can have two types of nonperforming assets that negatively affect interest spread: loans not paying interest and foreclosed assets.

As of September 30, 2021 and 2020, we had 23 and 27 impaired loans not paying interest in the aggregate gross loan amount of $9,528 and $11,854, respectively.

Foreclosed assets do not provide a monthly interest return. Foreclosed assets decreased $1,702 to $2,747 as of September 30, 2021 compared to $4,449 as of December 31, 2020. The decrease in foreclosed assets resulted in a positive impact to our interest spread in both years.

The amount of nonperforming assets is expected to decrease over the next quarter as we continue to sell our foreclosed assets following completion of construction.

Cash also does not yield a return. During the third quarter of 2021 we used cash to reduce the amount of debt while maintaining a responsible level of liquidity to cover unfunded commitments on loans and cash needs for operations. As of September 30, 2021 and June 30, 2021 cash was $1,452 and $6,118, respectively. Repayments of secured notes payable increased $3,513 to $10,696 as of September 30, 2021 compared to $7,183 as of June 30, 2021.

Non-Interest Income

Gain on the Extinguishment of Debt

During February 2021, we borrowed approximately $361 pursuant to the Paycheck Protection Program (“PPP”), created under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. The PPP is intended to provide loans to qualified businesses to cover payroll and certain other identified costs. Funds from the loan may only be used for certain purposes, including payroll, benefits, rent, and utilities. All or a portion of the loan may be forgivable, as provided by the terms of the PPP.

In August 2021, the full principal amount of the PPP loan or $361 and the accrued interest were forgiven by the U.S. Small Business Administration.

During April 2020, the Company received a grant under the Economic Injury Disaster Loan Emergency Advance (the “EIDL Advance”) of $10 which was used for payroll and other certain operating expenses.

In February 2021, the full EIDL Advance of $10 and accrued interest were forgiven by the U.S. Small Business Administration.

Gain on Sale of Foreclosed Assets

During the quarter and nine months ended September 30, 2021, we recognized $64 and $165, respectively, as a gain on the sale of foreclosed assets, compared to $135 and $138, respectively, for the same periods of 2020.

Non-Interest Expense

Selling, General and Administrative (“SG&A”) Expenses

The following table displays our SG&A expenses:

Our SG&A increased $116 and decreased $78 for the quarter and nine months ended September 30, 2021, respectively, compared to the same periods of 2020 due significantly to the following:

Loss on the Sale of Foreclosed Assets

During the quarter ended September 30, 2021 and 2020, we recognized $0 and $51, respectively, as a loss on the sale of foreclosed assets.

During the nine months ended September 30, 2021 and 2020, we recognized $69 and $86, respectively, as a loss on the sale of foreclosed assets.

Impairment Loss on Foreclosed Assets

During the quarter ended September 30, 2021 and 2020, impairment loss on foreclosed assets was $0 and $4, respectively.

During the nine months ended September 30, 2021 and 2020, impairment loss on foreclosed assets was $10 and $205, respectively.

Consolidated Financial Position

Loans Receivable

Commercial Loans – Construction Loan Portfolio Summary

We anticipate that the aggregate balance of our construction loan portfolio will increase as loans near maturity and as we have new loan originations.

The following is a summary of our loan portfolio to builders for home construction loans as of September 30, 2021:

The following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2020:

Commercial Loans – Real Estate Development Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for land development as of September 30, 2021:

The following is a summary of our loan portfolio to builders for land development as of December 31, 2020:

Combined Loan Portfolio Summary

Financing receivables are comprised of the following as of September 30, 2021 and December 31, 2020:

The allowance for loan losses as of September 30, 2021 was $1,802, of which $165 is related to loans without specific reserves. The Company recorded specific reserves for loans impaired due to impacts from COVID-19 of $1,483, special mention loans of $60, and impaired loans not due to impacts from COVID-19 of $94. As of December 31, 2020, the allowance was $1,968, of which $151 is related to loans without specific reserves.

During the quarter and nine months ended September 30, 2021, we incurred $0 and $509 in direct charge-offs, respectively, compared to $72 for the year ended December 31, 2020.

The following is a roll forward of combined loans:

Finance Receivables – By risk rating:

Finance Receivables – Method of impairment calculation:

As of September 30, 2021, and December 31, 2020, there were no loans acquired with deteriorated credit quality.

Impaired Loans

The following is a summary of our impaired nonaccrual commercial construction loans as of September 30, 2021 and December 31, 2020.

Below is an aging schedule of loans receivable as of September 30, 2021, on a recency basis:

Below is an aging schedule of loans receivable as of September 30, 2021, on a contractual basis:

Below is an aging schedule of loans receivable as of December 31, 2020, on a recency basis:

Below is an aging schedule of loans receivable as of December 31, 2020, on a contractual basis:

Below is a roll forward of foreclosed assets:

For both the nine months ended September 30, 2021 and 2020, we reclassed one construction loan from loans receivable to foreclosed assets.

In addition, during the nine months ended September 30, 2021, we sold 13 foreclosed assets compared to 15 during the same period of 2020.

Customer Interest Escrow

Below is a roll forward of interest escrow:

Related Party Borrowings

As of September 30, 2021, the Company had $1,250, $250, and $1,000 available to borrow against the line of credit from Daniel M. Wallach (our Chief Executive Officer and chairman of the board of managers) and his wife, the line of credit from the 2007 Daniel M. Wallach Legacy Trust, and the line of credit from William Myrick (our Executive Vice President of Sales), respectively. A more detailed description is included in Note 7 to the 2020 Financial Statements. These borrowings are in notes payable secured, net of deferred financing costs on the interim condensed consolidated balance sheet.

Secured Borrowings

Lines of Credit

As of September 30, 2021, the Company had borrowed $0 on its lines of credit from affiliates, which have a total limit of $2,500.

None of our lines of credit (including with related parties and non-related parties) have given us notice of nonrenewal, and the lines will continue to automatically renew unless notice is given by a lender.

Summary

The borrowings secured by loan assets are summarized below:

Unsecured Borrowings

Unsecured Notes through the Public Offering (“Notes Program”)

On March 22, 2019, the Company terminated its second public offering and commenced its third public offering of fixed rate subordinated notes (the “Notes”). The effective interest rate on borrowings through our Notes Program at September 30, 2021 and December 31, 2020 was 9.53% and 10.38%, respectively, not including the amortization of deferred financing costs. We generally offer four durations at any given time, ranging from 12 to 48 months from the date of issuance. There are limited rights of early redemption. Our 36-month Note has mandatory early redemption options, subject to certain conditions, and all of our Notes have a mandatory early redemption option, subject to certain conditions. The following table shows the roll forward of our Notes Program:

The following is a roll forward of deferred financing costs:

The following is a roll forward of the accumulated amortization of deferred financing costs:

Other Unsecured Debts

Our other unsecured debts are detailed below:

Redeemable Preferred Equity and Members’ Capital

We strive to maintain a reasonable (about 15%) balance between (1) redeemable preferred equity plus members’ capital and (2) loan assets, net. The ratio of redeemable preferred equity plus members’ capital to loan assets, net was 13.5% and 12.9% as of September 30, 2021 and December 31, 2020, respectively. The ratio increased primarily due to fewer losses related to COVID-19. We anticipate this ratio to increase as we retain earnings for the remainder of 2021.

Priority of Borrowings

The following table displays our borrowings and a ranking of priority. The lower the number, the higher the priority.

Liquidity and Capital Resources

Our primary liquidity management objective is to meet expected cash flow needs while continuing to service our business and customers. We had 243 and 222 combined loans outstanding as of September 30, 2021 and December 31, 2020, respectively. Gross loans receivable was $51,276 and $50,449 as of September 30, 2021 and December 31, 2020, respectively. Our unfunded commitments to extend credit, which have similar collateral, credit and market risk to our outstanding loans, were $23,906 and $19,495 as September 30, 2021 and December 31, 2020, respectively.

We anticipate an increase in our gross loan receivables over the 12 months subsequent to September 30, 2021 by directly increasing originations to new and existing customers. In addition, business competition has declined; therefore, we believe the ability to return to historical levels may be achieved through the remainder of the year.

To fund our combined loans, we rely on secured debt, unsecured debt, equity and cash, which are described in the following table:

As of September 30, 2021 and December 31, 2020, cash was $1,452 and $4,749, respectively. During the nine months ended September 30, 2021, the Company made the decision to pay down secured debt with high interest rates. The New Line of Credit Agreements decreased $2,550 to $1,609 as of September 30, 2021, compared to $4,159 as of December 31, 2020. In addition, the Shuman Line of Credit Agreement decreased $1,200 to $125 as of September 30, 2021 compared to $1,325 as of December 30, 2020. Secured debt, net of deferred financing costs decreased $4,293 as of September 30, 2021 compared to December 31, 2020 primarily due to the New Secured Line of Credit Agreement and Shuman Line of Credit payments. We anticipate secured debt to increase as our loan receivable balances increase.

Unsecured debt, net of deferred financing costs decreased $65 to $26,913 as of September 30, 2021 compared to $26,978 as of December 31, 2020.

In addition, in February 2021, we borrowed approximately $361 pursuant to the Paycheck Protection Program (“PPP”), created under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. The PPP is intended to provide loans to qualified businesses to cover payroll and certain other identified costs. Funds from the loan may only be used for certain purposes, including payroll, benefits, rent, and utilities. All or a portion of the loan may be forgivable, as provided by the terms of the PPP.

In August 2021, the full principal amount of the PPP loan or $361 and the accrued interest were forgiven by the U.S. Small Business Administration.

Contractual Obligations

The following table shows the maturity of outstanding debt as of September 30, 2021:

The total amount maturing through the year ending December 31, 2021 is $20,057, which consists of secured borrowings of $17,854 and unsecured borrowings of $2,203.

Secured borrowings maturing through year ending December 31, 2021 consist of loan purchase and sale agreements with two loan purchasers (Builder Finance, Inc. and S. K. Funding, LLC) and six lenders. Our secured borrowings are classified as maturing during 2021 primarily because the related collateral is demand loans. The following lists our secured facilities with maturity and renewal dates:

Unsecured borrowings due by December 31, 2021 consist of Notes issued pursuant to the Notes Program and other unsecured debt of $1,557 and $646, respectively. To the extent that Notes issued pursuant to the Notes Program are not reinvested upon maturity, we will be required to fund the maturities, which we anticipate funding through the issuance of new Notes in our Notes Program. Historically, approximately 77% of our Note holders reinvest upon maturity. Our other unsecured debt has historically renewed. For more information on other unsecured borrowings, see Note 6 – Borrowings. If other unsecured borrowings are not renewed in the future, we anticipate funding such maturities through investments in our Notes Program.

Series C cumulative preferred units (“Series C Preferred Units”) are redeemable by the Company at any time, upon a change of control or liquidation, or by the investor any time after six years from the initial date of purchase. The following table shows the earliest redemption options for investors in our Series C Preferred Units as of September 30, 2021:

Summary

We have the funding available to address the loans we have today, including our unfunded commitments. We anticipate growing our assets through the net sources and uses (12-month liquidity) listed above as well as future capital increases from debt, redeemable preferred equity, and regular equity. Our expectation to grow loan asset balances is subject to changes due to changes in demand, competition, and COVID-19. Although our secured debt is almost entirely listed as currently due because of the underlying collateral being demand notes, the vast majority of our secured debt is either contractually set to automatically renew unless notice is given or, in the case of purchase and sale agreements, has no end date as to when the purchasers will not purchase new loans (although they are never required to purchase additional loans).

Inflation, Interest Rates, and Housing Starts

Since we are in the housing industry, we are affected by factors that impact that industry. Housing starts impact our customers’ ability to sell their homes. Faster sales generally mean higher effective interest rates for us, as the recognition of fees we charge is spread over a shorter period. Slower sales generally mean lower effective interest rates for us. Slower sales also are likely to increase the default rate we experience.

Housing inflation generally has a positive impact on our operations. When we lend initially, we are lending a percentage of a home’s expected value, based on historical sales. If those estimates prove to be low (in an inflationary market), the percentage we loaned of the value actually decreases, reducing potential losses on defaulted loans. The opposite is true in a deflationary housing price market. It is our opinion that values are average in many of the housing markets in the U.S. today, and our lending against these values is safer than loans made by financial institutions in 2006 to 2008. Our analysis of the COVID-19 impacts on housing in the markets in which we do business is mixed. In many markets, our customers see demand as outpacing new housing starts. In Orlando, Florida (which is our second highest geographic concentration risk by borrower), there has been a significant lack of demand for housing sold by customers who sell more affordable homes, which has resulted in losses that we recognized in the second quarter of 2020. We note that nationwide, fewer first-time home buyers will qualify for government backed loans due to FICO score and other criteria changes.

Interest rates have several impacts on our business. First, rates affect housing (starts, home size, etc.). High long-term interest rates may decrease housing starts, having the effects listed above. Higher interest rates will also affect our investors. We believe that there will be a spread between the rate our Notes yield to our investors and the rates the same investors could get on deposits at FDIC insured institutions. We also believe that the spread may need to widen if these rates rise. This may cause our lending rates, which are based on our cost of funds, to be uncompetitive. High interest rates may also increase builder defaults, as interest payments may become a higher portion of operating costs for the builder. Higher short-term rates may increase the rates builders are charged by banks faster than our rates to the builder will grow, which might be a benefit for us. Below is a chart showing three-year U.S. treasury rates, which are being used by us here to approximate CD rates. The rates we are paying our investors are going down due to COVID-19, including the rate on our 36-month Note which has additional redemption options but lower returns, because other alternative investments are paying lower rates. This in turn will lower the rates to our borrowers over time.

Housing prices are also generally correlated with housing starts, so that increases in housing starts usually coincide with increases in housing values, and the reverse is generally true. Below is a graph showing single family housing starts from 2000 through today.

Source: U.S. Census Bureau

To date, changes in housing starts, CD rates, and inflation have not had a material impact on our business.

Financial Statements

The financial statements listed below are contained in this supplement:

Shepherd’s Finance, LLC

Interim Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Shepherd’s Finance, LLC

Interim Condensed Consolidated Statements of Operations - Unaudited

For the Three and Nine Months ended September 30, 2021 and 2020