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Equity is the capital placed in the company by its owners. Equity investments have both the highest risk as well as the potentially highest return.
With this type of investment one should note the structure of a company’s liabilities – the company will pay debts to employees and creditors first and only then the equity investors may receive their payments from the remaining assets of the company.
In case of failure, there is a real possibility that the earnings of the investor are reduced to zero, and in worst cases, the equity holders may lose all of their investment. When the project succeeds, however, employees and creditors usually receive a fixed interest rate while the equity investor takes all the remaining profit. So, in this case, one should make sure that they assess the probability of failure. Is the project understandable? Are the numbers presented in the project realistic?
Here is an equity project example: https://crowdestate.eu/en/opportunity/Instituudi-tee-132
Read more about other capital types:
- Secured loan: https://blog.crowdestate.eu/en/2020/secured-loan-definition/
- Unsecured loan: https://blog.crowdestate.eu/en/2020/unsecured-loan-definition/
- Mezzanine loan: https://blog.crowdestate.eu/en/2020/mezzanine-definition/