How safe is my investment? Overview of security arrangements at Invesdor 

Not every project can offer any or the same security arrangement. Depending on the industry, location, form of financing and legal framework conditions, the type and scope of the protections differ considerably. Different typical security instruments are guarantees (liabilities of a third party) and collateral (specific asset securities).  The various security instruments are intended to limit investors’ losses in the event of default. . In this way, it is usually possible to recover at least part of the deposit by realising the collateral or guarantee.

1. What forms of securities are there and how reliable are they? 

Typical forms are guarantees and collateral such as 

• mortgages on land or pledges of machinery, 
• assignments of receivables or 
• floating charges.   

The importance of security arrangements depends on the investment model: in non-subordinated projects, they play a more important role than in subordinated projects, where security arrangements are usually not possible. 

In addition, we usually cannot check the value of the collateral or the economic capacity of the guarantor and the value of the collateral or the guarantee can fluctuate. As a result, there is a risk that, in the worst case, investors will not receive any repayments despite the ordering and realisation of collateral or guarantees in the event of the failure of the project. 

We therefore recommend: Read the key investment information sheet carefully for each project. It contains information on whether security arrangements are provided in the project.

2. Examples of securities from practice 

What collateral has been used in various Invesdor campaigns in the past? The following examples from different industries and countries show how different these can look: 

Megin (medical technology): Second rank floating charge on the assets of the project owner.  
(https://www.invesdor.de/projekte/c244d249-74e3-4d89-a147-3b479f5cc49d#/)  

Bamboologic (Agriculture): A mortgage on a plot of land in Portugal serves as security.  
(https://www.invesdor.de/projekte/b57d633d-ee1c-49ba-8f44-ec75f95f25d9#/) 

The form of security arrangement strongly depends on the individual case. It is worth taking a close look at which values have been specifically deposited and how plausible their usability appears in an emergency

3. From subordinate to securable models 

In the past, Invesdor in Germany was mostly limited by law to brokering qualified subordinated loans. In the case of subordinated loans, investors are only served in the event of insolvency after all creditors have received their money – a significantly higher risk. In the case of qualified subordinated loans, investors have even less chance of enforcing their claims in the event of non-payment by the company, even before any insolvency. 

Today, we mainly finance with non-subordinated financial instruments, in which investors hold a stronger legal position. These models allow us, where appropriate and possible, to include collateral/guarantee that can potentially reduce the risk of default (the actual value of a security ultimately depends on the proceeds from the realisation of a security). 

Investors should therefore check carefully with each investment whether and which security arrangement exists and what rank the respective financing has. 

How can I judge the security arrangement of a project myself? 

Read the issue terms, the key investment information sheet and information on the campaign page carefully. Check what kind of securities are mentioned and whether it seems sufficient to you from the investor’s point of view. 

Conclusion: Security arrangements for investments

Security arrangements in crowdfunding are complex and can never be assessed across the board. What we do at Invesdor: create transparency, clearly identify risks and always try to achieve the best possible level of security for our investors. Each campaign contains information on possible security arrangements. And we are constantly working to make them it even more understandable. 

 
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