Promissory note investment is an investment strategy used by companies that are trying to raise money. Investors will loan the company money, and in return, they are promised a fixed amount of income on a periodic basis.
Generally speaking, the level of risk is low, and the rate of return is high. Because of this, many investors see promissory note investment as a smart money move.
However, as with all investments, there are a few things you want to look out for. Here’s how you can avoid getting scammed with this type of investment.
Verify The Promissory Note
A promissory note is a security. That means it must be registered with the SEC. Most legitimate notes can be easily verified by calling the state securities regulator, or by checking the EDGAR database via the SEC website.
Make Sure The Seller is Properly Licensed
In order to sell securities, the seller must be properly licensed. You can check the registration status by calling the state securities regulator.
Always Compare The Rate of Return On The Promissory Note
Take the time to compare the rate of return on your promissory note with the current market rates of similar investments. Similar investments would include things such as FDIC insured certificates of deposit or fixed-rate investments.
If your seller is promising a higher rate, that’s a sign of possible fraud.
Stay Away From Sellers That Promise Guaranteed Return
In the world of investing there are no guarantees. Be cautious of any seller that makes such claims.
To learn more about promissory notes visit the website.
