It can’t be denied that, in today’s world, investment is becoming an everyday topic. Whether you’re investing in traditional savings, bonds, stocks, or cryptocurrencies, it is crucial to fully understand each type of venture before making any financial decision. This also applies with Investment-based Crowdfunding, or investments in SME debentures.
Siam Validus Capital, a leading Fintech company, introduces an innovative crowdfunding platform that allows promising SMEs to further raise funding. The company uses advanced technology throughout its verification processes. This includes Surrogate Data Analytics, which assists in analyzing and evaluating the financial credibility of each SME company before they could start raising funds from investors.
Investments Comes with Risks
While embarking on Investment-based Crowdfunding with Siam Validus means that you will receive initial screening of each SME, it is also important for investors to self-study as well as assess the risks and evaluate the return of investments on their own.
Are you wondering what criteria you should use to gauge the quality of SMEs? Here are five suggestions on what investors should look into when selecting firms to invest in.
1. Evaluate the risks using shared information on the crowdfunding platform
Before deciding on any investment, examine the potential risks that may come with the company. If you invest in the business, what are the chances that the company will repay the loan? Is the reason for the fundraising consistent with the company’s business direction?
Regarding this, Siam Validus — in addition to evaluating the qualifications of each SME — has developed a Credit Score to help determine risk levels. The company also enables investors to introduce quality SMEs onto the platform.
2. Assess the capability of the SME
During the spread of Covid-19, many businesses have been seriously affected. However, there are also those that could sustain its operations within the supply chain, such as manufacturers, supply chain management, as well as customers who buy raw materials for further production or to use themselves.
While business growth may not be as promising as expected, Siam Validus believes that companies led by good management that effectively handles its finances as well as makes its operations transparent will unlock more potential and better utilize its funds.
3. The fruit of one’s labor — business outcomes
Most definitely, if you want to be more assured about the choice of company you’d like to invest in, you should look into the business performance. We recommend evaluating everything — from budgets to source of income and expenses. This way, you will be able to rationally assess the possibility of the company’s future outcomes.
4. Loan term and returns of investment
Many people may think that this type of investment only entails looking at figures. However, it is necessary to also study the loan term alongside the rate of return. This needs to be calculated before investing to ensure that everything goes according to the investor’s expectations.
5. The type of business you wish to invest in should have sufficient information to base your decisions on
Apart from assessing the potentials of a business, investors should also delve into the company’s capabilities when it comes to competing in the market, monetizing, and developing. You may want to select companies that offer products or services that you are already familiar with or are interested in so that you have a better understanding of the business as well as its expenses and profitability. SMEs often need constant funds, which is not a complex concept and could indicate their ability to analyze opportunities and risks for investors.
We believe that you are now ready to select the company to invest in. Nonetheless, the above details are merely recommendations and should not be deemed as shortcuts. It is important that investors do thorough research before deciding upon any investment.
*Important remark: Investing in crowdfunding debentures is ideal for investors with knowledge and understanding of the risks involved. Investors should be able to make his or her own financial decisions, wherein the investment type is suitable for those who want to diversify their portfolio. With investment-based crowdfunding, investors should consider illiquid investments and investing until the maturity of the debenture. Note that investment-based crowdfunding is not guaranteed by third parties and is not protected by any government agency. Thus, prior to any decision it is necessary that investors understand the nature of crowdfunding, thoroughly study its terms and conditions, and be prepared for any risk that may arise.