The Private Investment What Is It And Why Should You Use It

 Private investment is often offered in a financial company. In financial organizations usually, several persons invest money in it. With these funds, the organization offers funding to the businesses so that they can use it for project completion or business growth. 

A financial organization usually offers many services to its clients. They especially reduce the risks when it comes to investment and funding. Also, they offer other services such as project consultancy to foresee any risks and the success rate of the project.

Investment funds must have the approval of the FSMA (Financial Services and Markets Authority) in order to carry out their activity. The funds intervene in different scenarios and in different forms. They can bring liquidity to the company for its development,  but also bring cash flow, i.e., help a company to survive. Some even intervene before that in the research and development phase. 

They can also intervene in an LBO operation, i.e., to finance the takeover of a company.  There the funds very regularly proceed with a subordinated bank loan. They can even intervene in a company in difficulty, including during a period of PRJ (Procedure for Judicial Reorganization).

The repayment formulas also vary according to the type of loan, but they rarely exceed 7 years. The loan formulas are varied and can be in the form of equity participation, convertible loans, and simple loans whose rates are very variable.

Some funds only intervene if the financial company, which lends the funds, joins the board of directors of the requesting company via its directors. This is, for my part, to be considered as an added value of the loan, even if very often the administrators are paid for their services.

Pros and cons of getting private investment:

In most cases, when an entrepreneur launches his business plan, he encounters economic difficulties and limited access to capital that force him to resort to alternative sources of income.

Private investment via project consultancy is that which comes from investors, who invest with a long-term vision in companies that have great growth potential, thus acquiring the right to participate directly in corporate governance bodies and in the management of companies that finance.

Among the benefits that your company acquires when acquiring capital in this way, we can mention:

 Access to smart money - As investors are not only interested in monetary assets when they make this type of loan, the company acquires a new team of professionals, who can contribute best practices, professional administration, institutionality, and transparency.

 Your company opens up to new opportunities and takes more value. If the company acquires support from third parties, it is because it really has potential and will generate social value.

 Increases transparency and institutionality.

However, in this type of capital, not everything is positive, it also has its disadvantages.

 In some places, the private investment interest rate is usually higher than other types of loans. Hence make sure that you choose the right place to get it.

 If operations and administration are not controlled between the team and the funds, ungovernability arises.