Don’t invest unless you’re prepared to lose all your money invested. This is a high risk investment. You could lose all the money you invest and are unlikely to be protected if something goes wrong. Take 2 mins to learn more.

Risk summary for non-readily realisable securities which are shares

Estimated reading time: 2 mins

Due to the potential for losses, the Financial Conduct Authority (“FCA”) considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest

If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.

2. You are unlikely to be protected if something goes wrong

Protection from the Financial Services Compensation Scheme (“FSCS”), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here. https://www.fscs.org.uk/check/investment-protection-checker/

Protection from the Financial Ombudsman Service (“FOS”) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here: https://www.financial-ombudsman.org.uk/consumers

3. You won’t get your money back quickly

Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.

The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.

If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.

4. Don’t put all your eggs in one basket

Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.

A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Read more about it here. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest

5. The value of your investment can be reduced

The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.

These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

6. Additional risks associated with the underlying lending strategy

The company invests in secured property loans. As a result, the value of your investment may be affected by risks associated with those loans and the underlying property assets.

These risks include borrower default or insolvency, delays to construction or development projects, falls in property values, delays in the sale or refinancing of secured assets, and the possibility that the value of the security held may be insufficient to recover the full amount of a loan in the event of default.

Although loans are secured against property assets, there is no guarantee that the company will recover all amounts due or that investors will receive back the full amount invested.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here. https://www.fca.org.uk/investsmart