Everything you need to know about financial securities

Enerfip offers you a guide on financial securities to clarify this sometimes obscure subject. Discover what a security is, but also the different types of securities, as well as the specific features of each. In short, we tell you everything on this subject! Enjoy reading!

What is a security?

Before going any further on this topic, which can be complex, we thought it was important to define what a security interest is. What you need to remember is that a security interest is necessarily a guarantee, but the converse is false.

The definition

So, what is a security interest?It is a mechanism used in financial transactions to secure the repayment of a debt or the performance of an obligation. It may involve the use of an asset that can be seized, or a third party who can commit to paying, in the event of default or non-compliance with the terms of the contractual obligation.

What is the objective?

The purpose of a security interest is to reduce the risk for the creditor. How? By providing a tangible guarantee or a promise of payment in the event of the borrower's default.

What is the difference between a real security interest and a personal security interest?

As you now know, a security interest is a form of protection against a project owner who fails to repay investors. But did you know that there are several types?

Real Security Interests

It gives the creditor a right to real or personal property belonging to the debtor. This security interest takes the form of a preferential right or an exclusive right to payment on the property in question. What does this mean? It allows the creditor to be paid first through the sale or seizure of the property.

To help you see things more clearly, here are the main categories of real security.

• Conventional mortgage: this relates to real estate (for example: a house, land, etc.).
• Pledge: this relates to tangible personal property (for example: photovoltaic panels, etc.).
• Pledge: this relates to intangible personal property (for example: shares, intellectual property rights, etc.).

These securities offer additional security to creditors by giving them direct recourse to specific assets in the event of the borrower's default.

Personal Security Interests

Unlike a security interest based on property, a personal security interest is based on the promise of an individual or third-party entity. Rather than relying on tangible assets, it relies on that person's commitment to repay the borrower's debt if the borrower defaults.

Here are some examples of personal guarantees.

• Guarantee: By law, a guarantor pays the creditor if the borrower cannot repay the debt according to the terms of the contract.
• GAPD (Guarantee on First Demand): This is a commitment made by a guarantor in favor of the beneficiary of the guarantee, independent of the initial debt.

How to select the best security?

To minimize risks, the best guarantee is… Unfortunately, it's not that simple. Choosing the best security only exists based on a given situation. Depending on the project, the highest guarantee varies depending on the risks involved and the preferences of the parties involved.

To select the best security, we recommend following these steps:

• assess the nature of the transaction;
• assess the risks;
• assess the available assets;
• consider the preferences of the parties;
• consult legal professionals.

At Enerfip, a dedicated team is responsible for studying and analyzing projects in order to provide investors with comprehensive documentation for each project. Want to know the professionals behind these missions? Discover our Team by clicking here.

Enerfip supports you at every stage of your investment. That's why, if you're interested in our crowdfunding platform dedicated to the energy transition, make an appointment with the Investor Relations department without further delay!