Risks and Securities: Key Considerations for Every Investor
Risk and security are two central themes that occupy a large part of our daily work. For investors, they are crucial factors in the decision-making process — whether to lend money and place their trust in an entrepreneur.
At Capital Circle, we thoroughly assess every funding request submitted by entrepreneurs. We verify their identity, assess their payment behaviour using reliable public data sources, and analyse their financial history, current position, and future forecasts.
More than two-thirds of all applications do not meet our acceptance criteria and must unfortunately be rejected. The remaining requests are assigned a risk rating:
- High (C)
- Medium (B)
- Low (A)
This quantitative assessment is supplemented by the collateral or securities that the entrepreneur can offer. While these do not speak to repayment capacity or liquidity, they do demonstrate the entrepreneur’s commitment. And if things go wrong, these securities may be enforced to limit the investor's loss.
What Is the Purpose of the KOM Group Security Trustee Foundation?
The manner in which securities are registered and enforced is of great importance. In cooperation with our notary and legal advisors, we established the Stichting Security Trustee KOM Group (KOM Group Security Trustee Foundation).
As of 1 March 2016, this entity is responsible — on behalf of all investors — for registering and enforcing rights under the Loan Agreement signed between the entrepreneur and Capital Circle, including any collateral pledged by the entrepreneur for all projects funded through Capital Circle.
The KOM Group Security Trustee becomes directly involved in any project as soon as a payment default occurs under the terms of the Loan Agreement. Notification of such arrears is issued via the Stichting Derdengelden Capital Circle.
In all situations involving delayed payments, the entrepreneur is obliged to continue informing investors. However, the Security Trustee has a clear duty — preferably in cooperation with the entrepreneur — to inform investors of the situation and share its findings.
If necessary and applicable, the Security Trustee will enforce the securities provided by the entrepreneur on behalf of the investors. If the entrepreneur is willing to continue the loan under revised terms, the Trustee may also represent the investors in negotiating and formalising those terms.
The establishment of the KOM Group Security Trustee Foundation marked a significant milestone in the further professionalisation of bank-free financing through kapitaalopmaat.nl, and has since been followed by many other platforms.
What Has Changed Compared to the ‘Old’ Loan Agreement?
The most important procedural change is that the new Loan Agreement is no longer signed by the Third-Party Funds Foundation, but instead by the KOM Group Security Trustee Foundation.
This change was legally desirable — and necessary — in order to enable direct enforcement of securities by the Security Trustee on behalf of all investors. The old Loan Agreement did not allow for collective enforcement, unless each investor individually authorised collection (i.e., each investor previously held an independent claim against the entrepreneur).
Who Is the KOM Group Security Trustee Foundation?
The board of the KOM Group Security Trustee Foundation consists of the management of KOM Group B.V. and Mr T. Knibbeler.