Business or corporate notes is a somewhat atypical investment product in the sense that it is not listed on the financial markets. However, these operations are not covered by the Deposit Guarantee Fund (FGD), as is the case with term deposits. It is a small risk that you have to assume when assuming the investment because in the worst case scenario, you can lose the money that you have allocated to these movements within a company of these characteristics.
In any case, they generate a profitability that oscillates between 3% and 8%, depending on the level of solvency of the issuers of this financial product. In any case, it is an interest rate that is significantly higher than that offered by fixed income derivative products and of course also bank products (high-income accounts, time deposits or corporate bonds). Where it rarely exceeds levels of 1,5% and that do not meet your needs to make operations profitable as you wish.
Business notes are one of the most unknown products of private fixed income. Not because they are far from the investors' intentions. If not, why don't they contemplate a fixed period in their issuance since they can go on the market at any time and depending on the financing needs of the companies. In return, the recipients of these proposals receive a return on the money borrowed. They are assets with an implicit return issued at a discount.
Business notes: maturities
The maturity is short-term, ranging from just a few days and up to 24 months approximately, the most common hiring periods are six, twelve and up to 16 months. This particularity benefits its applicants who can adjust to the most desired terms depending on their need for liquidity. Of course, it is precisely these terms that make promissory notes of these characteristics more flexible products for your real investment needs since you can adapt them to any kind of maturity depending on the profile you present as a small and medium investor.
In any case, it is a more delicate investment model than the others due to its special characteristics. Where the solvency of the issuing companies of this financial product plays a very relevant role for its formalization. Among other reasons, because if they go bankrupt, the money invested will be lost since no amount is guaranteed.
They are covered up to 100.000 euros
As is the case with term deposits in which up to 100.000 euros per deposit and holder are covered through the Deposit Guarantee Fund. For this reason, it is very important to analyze the financial situation of the issuer of the promissory note so as not to be surprised before its maturity. On the contrary, its greatest guarantee lies in the possible solvency and equity guarantee of its issuers. Because in effect, you will have no choice but to look at the company to which you direct your money since it must provide a more than proven solvency so that you do not have more than one negative surprise from now on.
A profitability is required that is above that generated by the risk-free investments. The biggest problem lies more in small and medium-sized companies than in large ones. The reason is because there is no independent rating on their financial solvency, as is the case with those with the largest capitalization or that are regularly listed on the stock markets. To avoid any kind of incidents with this financial product, it will be necessary for its issue to be registered with the National Securities Market Commission (CNMV). If not, there will be no remedy but to distrust as the main preventive measure.
Issuers of the promissory notes
There is no defined profile on the profile presented by the companies that issue the promissory notes. Very low capitalization lines of business may not be present in banks to those listed in the selective index of Spanish equities, Ibex 35. In this last group, it is precisely the construction companies that mostly opt for the issuance of this class of securities. Some of the listed companies that have launched a product of these characteristics are ACS, Acciona, OHL or Sacyr. With different returns depending on their emissions, even if they come from the same company.
At this point you can come to the dilemma about is better invest on your shares at market price or on the contrary through an agreed and fixed amount before hiring. In other words, to reach the positions of these companies, it can not only be reached through variable income, but also through private fixed income. However, one of its greatest risks resides in the fact that its early cancellation is necessary since sales must be formalized in the secondary market. With very little liquidity, and with the danger of losing part of the invested capital.
Profitability offered by this product
With regard to the interest provided by these promissory notes, there is no uniformity in the proposals offered by the companies. But on the contrary, the increase in profitability is in line with the risk assumed by the user with their subscription. In this way, the securities with the highest risk may pay interest close to 8%. Whereas if this characteristic is not present, the usual thing is that it descends until it is in a range that goes from 3% to 5%.
These very wide differences, by almost five percentage points, are originated as a consequence of the price that must be assumed for a increased risk. Where a greater exposure will be accompanied by a more attractive annual interest and that no fixed income product offers at this time. From this general perspective, of course you can find many kinds of profitability since it is not a homogeneous product, far from it. If not, on the contrary, it moves with important differences in terms of the profitability that is generated from company promissory notes. Being one of the incentives at the precise moment of your hiring.
Other similar products
With regard to its profitability, the investment product that most closely resembles it is the dividend on the purchase and sale of shares on the stock market. Not because of their structure, but because they are the most profitable at the moment since few can offer you 8% as fixed and guaranteed interest every year. Although it is convenient to distinguish certain aspects between these two models of carrying out investments. Because in dividends the risks are practically non-existent and derive from the fact that the shares are listed on the equity markets.
Another factor to take into account between these two financial products is that which refers to the form of shape your prices. Because shares are exposed to the verdict of the financial markets while, on the contrary, company notes are governed under substantially different parameters and that are more complex for your perfect understanding. Where the risks are always much more latent and in cases it is almost a reality that can affect you in certain situations. However, it is safe to say that corporate notes is one of the great unknowns in the investment industry. Not surprisingly, it is a financial product that is not very popular among small and medium investors.
Unlisted companies
Other of the great characteristics of corporate notes is that they do not have to be issued by companies that are listed on the equity markets. Although this is the general trend, also a good number of companies that launch this product unlisted. Because what really matters is the actual status of your business accounts. This makes a company with little solvency offer you a higher return than usual and quite the opposite. That is, with great security, it provides you with a significantly lower interest rate that hardly differs from what fixed income offers you at the moment.
If you want to contract this kind of product, you will have to go to your usual bank to inform you about which companies have a promissory note of these characteristics available at that time. You will have to see what their particularities are and assess whether or not it is convenient for you to hire them. On the other hand, it has the great advantage that it does not generate commissions nor does it even have expenses for its management or maintenance. From this scenario, it is quite true that you can save money in its formalization with respect to other products intended for investment. Beyond the contributions that it can provide you from any point of view. Because it is a product that you may not be very used to in its operations.
The option of discounting a promissory note is very interesting since in this way you anticipate the money of your customers and you can invest directly in machinery, customer acquisition ...
One piece of advice that I would give to those companies that want to discount their promissory notes is to negotiate first with banks and then with factoring financial institutions, as this way they will be able to have different proposals and choose the best option.