Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
You could lose all the money you invest
Investments on this platform are shares in start-up businesses. Investors in these shares often lose 100% of the money they invested, as most start-up businesses fail.
Advertised rates of return aren’t guaranteed. This is not a savings account. If the underlying SME company does not pay back as agreed, you could receive less money than expected. A higher advertised rate of return means a higher risk of losing your money. If it looks too good to be true, it probably is.
Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.
You won’t get your money back quickly
If the underlying SME business related to the offer you invest in does not meet its targets, it may not be able to pay on the scheduled dates. You may find that you do not have access to your funds until later than expected or you may be paid less than expected.
The platform does not offer a secondary market. While another investor may be interested in buying your investment, there is no guarantee you will find a buyer at the price you are willing to sell.
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.
The value of your investment can be reduced
If your investment is shares, 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.
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.
Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protectionhere
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.
For further information about investment-based crowdfunding, visit the FCA’s website here.
How does Qardus assign a business to a risk band?
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As part of our credit risk assessment, if the SME passes our eligibility criteria, we conduct further credit checks on the business and the Directors using Credit Bureaus (such as Experian, Equifax, and CreditSafe). Upon satisfactory credit reports and analysis of the business’s financial statements, each business is then priced using our proprietary risk scoring model. Their risk band determines the profit rate which will be charged for the duration of the financing facility.
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