Know Your Investor – Drawing a Line Between the Two Types of Investors

Know Your Investor

Businesses worldwide are always in need of potential uplift which can either be provided by financial firms or individual investors. However, without an investor verification service, startups and other businesses are more likely to experience risk-based exposure. Moreover, not all the investors are sure to bring positive outcomes and generate high revenue, some can simply compromise the whole industry. 

Therefore, industries are obliged to comply with Know Your Investor (KYI) standards by cross-checking their background and verifying their real identities. Businesses require digital Know Your Investor services to identify risk-possessed entities and their relevance to the business type. Moreover, there are two types of investors – accredited and non-accredited. The blog differentiates between these two types while nailing down benefits that bring industries uplift.

Investor Verification Solution – Differentiation Between Accredited and Non-accredited Entities

As per the major definitions regarding accredited investors, it has been pointed out that they should satisfy the following requirements:

  • Investors should have a net worth of over $1 million excluding their residence and personal assets 
  • Investors should have an annual income of over $200,000 and in the case of a mutual one with a spouse, it should be over $300,000. These figures should be attained in the past two years. 
  • If the investor is putting in funds on behalf of a corporate firm or a business, the company should be earning more than $5 million

Previously mentioned requirements and investor verification online make it evident that the entity is beneficial both in terms of uplift and high revenue generation. The plus point of accredited investors is that they always have enough funds in reserve to address the loss. 

Whereas, non-accredited are referred to as investors who do not need to satisfy the above requirements. These are mostly the capitalists, angels, and private investors who put in their money for self-profits. Furthermore, the non-accredited investors are less experienced and their relevance should be highlighted before pitching to them. The non-accredited investors are monitored by the Securities and Exchange Commission (SEC) to prevent chances of fraud, financial crimes, and misrepresentations. Both types can be differentiated by using investor verification services. 

Investor Onboarding – Diversification in Investment Opportunities for Both the Types

Businesses, especially startups, term accredited investors as their ticket to rapid economic uplift and prevention of losses. This is mainly because these investors are savvier when it comes to expertise regarding business strategies and investments. Accredited investors are well aware of the ins and outs of funds transfers and easily identify the point which involves less risk of loss. Moreover, the accredited investors can avail the following types of investment opportunities:

  1. Massive investments in real-estate 
  2. Hedge funds
  3. Accredited investors also serve as venture capital and professional entities 

On the contrary, as Shufti Pro News highlights, non-accredited investors have to undergo various investor authentication laws and regulatory compliances. Businesses opting to partner with non-accredited investors are asked to disclose a major portion of financial information, therefore, they should verify investors before pitching to them. This includes the level of security the company will provide, what it is offering, and how much revenue it will generate. Also, this information is communicated periodically so that the non-accredited investors can make informed and wise financial decisions. 

However, the recent amendments in regulations and laws have made things and investments easier and more cost-effective. This is why investors are open to more investment opportunities for instance:

  1. Industry-based crowdfunding
  2. Peer-to-peer loans (P2P)
  3. Real Estate Investment Trusts (REITs) 

Online Investor Verification – Benefits of Pitching to the Right Entities 

Most of the time, businesses are more attracted to accredited investors because they are highly qualified, have the expertise, and hold a high net worth. Moreover, these types of investors are fueling agents for startups because they provide high chances of uplift and simultaneous progress. This is why industries should adopt investor verification solutions for beneficial outcomes. More of the potential benefits include:

Increased Investment Opportunities and Fewer Chances of Loss

Businesses that are generating capital outside of the public markets are more likely to partner with accredited investors as they will help in producing more of the revenue. Also, the investors support small businesses and startups and take their status to unexpected levels. These companies include food manufacturers, small grocery stores, and others. Therefore, businesses require investor verification online to ensure they are pitching to the correct entity and secure the chances of rapid growth.

Diversification in Portfolio and Less Exposure to Risks

As Shufti Pro Funding highlights, businesses are turning to investor verification services to identify the relevant and beneficial investors. Through this, they can sign contracts with the right investors without having to disclose information. Moreover, accredited investors always have reserve funds which will prevent the downfall of both the company and themselves. Therefore, investor verification services are the business go-to solutions for addressing all kinds of investor-related problems. 

In Summation

It is the responsibility of the businesses to identify their relevant investors by mapping their requirements and goals. Here, Know Your Investor services provide the necessary insights. Hence, businesses can only ensure their uplift but also comply with Know Your Investor standards.

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