The investment in equity financing implies specific risks, in return for higher returns than those of traditional investments. It is essential that you make your own opinion on this risk taking, with the advice of EuroRaiser.
Capital loss risk
There is a real risk of losing a large part or all of the funds you have agreed to lend or invest. This is called the loss of capital . To reduce the collateral effects of such a loss, we give you two tips:
- the first one: invest only the money you can lose.
- the second : invest small amounts of money in several projects.
Your capital may be frozen in the case of loans of “in fine” type. This problem is called the lack of liquidity. In the case of real estate, the maturities range from 18 to 36 months. Although shorter than investments in young technological start-ups, for example, your capital is tied up for an incompressible period of time. So we give:
- The third advice: Do not lend or invest on projects funded by “In Fine” loans if you need some of your funds quickly.
Dividend and dilution risk
Finally, “Equity” securities in unlisted companies rarely provide dividends. This is the scarcity of dividends. Indeed, the decision to reinvest profits is very often taken and dividends are not redistributed to shareholders. It is therefore necessary to rely on the resale of the securities after a certain time to recover your investment and perhaps even more.
However, there may also be an additional risk: dilution of your shares. The company can issue new shares by raising additional capital and thus dilute your shares by reducing your percentage share in the capital.
- The fourth tip: Avoid investing in “Action” if you are looking for recurring results, as income can change randomly or be zero at worst.
Default risk of the project owner
The projects presented by EuroRaiser present risks of all kinds (legal, technical, financial, operational, climatic, etc.).
As a future Investor, you must ensure that you fully understand the Project, its benefits and risks, and that your decision making is independent of any other consideration than the risk associated with this investment and the long-term freeze of the funds you will invest in it .
Some projects may be in “in fine” including capital and interest. You must measure whether this transaction is in accordance with your situation with regard to the objectives you have set for yourself, your financial resources, and other parameters relevant to the measure (illiquidity, other priority investment, tax deadlines, structure of your portfolio, etc.)
Because of the nature of loans and investments, you cannot be given any guarantee of recovery not only of interest but also of your initial investment. Even if, rightly, you dilute the total risk in multiple loans or investments, it is imperative not to rush into decision-making and never sign a contractual document binding you without having read and fully understood the terms explicit in this contract.
EuroRaiser advises you to respect the following criteria when making your investments:
- invest only the money you can lose.
- invest small sums on several projects.
- do not invest in “in fine” loans, bond loans or capital if you need part of your funds quickly.