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What are the differences between loans and bonds?
December 4, 2023
In June 2023, Raizers obtained approval as a provider of participatory financing services (" PSFP "). As such, RAIZERS is now authorized to finance operators in two ways: by issuing bonds or by granting loans.
The facilitation of lending, newly authorized by the Regulation (EU) 2020/1503 of the European Parliament and of the Council of October 7, 2020 on European providers of participatory finance services for entrepreneursis part of a European Union objective to "facilitate the matching of potential investors or lenders with entrepreneurs seeking financing "*.
The Regulations define a loan as "a contract by which an investor makes available to a project holder an agreed sum of money, for an agreed period, and by which the project holder undertakes an unconditional obligation to repay this sum to the investor, with accrued interest, in accordance with the amortization schedule "**.
Please note that the type of loan made on the RAIZERS platform is a "simple" loan within the meaning of the French Civil Code***. It does not involve participative financing through investment in securities such as bonds.
In accordance with the Regulations, RAIZERS informs its investors of the specific characteristics of participatory loan financing. This information is contained in the key investment information sheet (" KIS ") available for each transaction. In particular, the sheet includes a section entitled "Statements relating to the loan" specifying the terms and conditions of the loan, the applicable interest rate, risk mitigation measures, the repayment schedule, and so on.
The loan contract signed by the project owner with the investor pool is very similar to the bond issue contract usually presented on the RAIZERS platform. In particular, RAIZERS is mandated by the investor pool to represent it throughout the transaction, and investors can subscribe to loan tranches of one thousand euros, signing a subscription form containing an amortization schedule.
Interest earned on loan investments is taxed in the same way as interest earned on bond issues. Individuals and corporate entities are therefore taxed in the same way, whether they invest through a loan or a bond.
In conclusion, participatory loan financing does not introduce any major changes for investors used to subscribing to bonds. Above all, it meets the financing needs of real-estate operators, who are largely incorporated as SARLs (limited liability companies), for which the conditions for issuing bonds are highly restrictive.
* Recital (1) of the Regulation.
** Article 2 of the Regulations.
*** Article 1892 of the French Civil Code.
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