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Any fully capable natural or legal person residing in the European Union economic area can become an investor together with Capitalia. If your country of residence does not appear in the selection list, please contact support@capitalia.com so we can find a solution. During registration, the investor must provide contact information, submit identity documents, and complete the full identification procedure to prevent money laundering risks. Investors must also complete a financial competence test to verify knowledge in financial analysis.

In each loan project, investors can review the company description, available collateral, financial data, risk analysis, and other information. Investors can also request additional details about any company by contacting the Capitalia representative listed at the end of the project description. Standard loan agreement forms are available here - Loan agreement / Factoring agreement.

All companies that can be co-financed together with Capitalia are published in the Lending opportunities section of the Capitalia website. Loan projects below EUR 50,000 are published daily at 11:00 (Baltic time) without a separate email notice. Information about larger projects is sent electronically one business day before lending is enabled (the function is also enabled at 11:00 Baltic time). Notifications for projects larger than EUR 50,000 are sent automatically by email to Prime account holders one business day before lending is enabled. Standard account holders receive the email on the day the project is published (also at 11:00 Baltic time).

Please note that Capitalia does not offer virtual account balances, therefore all transfers are made to and from the investor's registered bank account. After evaluating a company, the lender can enter the desired investment amount on the right side of the project description. The minimum loan amount per company is EUR 200. In some situations, Capitalia also limits the maximum amount one lender can provide to a company. The investor then receives a transfer instruction by email, including the account number and payment reference details needed to finalize the loan transaction. Transfer instructions can also be downloaded from the My Loans section (login required). The transfer to the indicated Capitalia account must be made within two business days. Once funds are received in Capitalia's account, the investor is notified automatically by email.

A loan is issued to the company provided that the full required funding amount is collected from investors within the term stated in the project description. Funding for each project is usually open for two weeks unless stated otherwise. If the full required amount is not collected within this period, received investments are returned to investors within one business day. If the full amount is collected, Capitalia signs the loan agreement with the company and sends confirmation of the completed transaction to all investors. When funding is secured by a commercial pledge or other collateral types, investor confirmation may be sent within two weeks. Each investor owns a proportional share of the total loan issued to the company. According to the Terms of Use, lenders authorize Capitalia to conclude loan agreements, register pledges, supervise credit, distribute payments, and perform other necessary actions.

Capitalia primarily offers investors the opportunity to invest in loan instruments. However, some investment projects, such as bond trading, real estate, and equity investments, may be available only to qualified investors.

Funded companies make all payments related to signed loan agreements to Capitalia's account. Capitalia then allocates these payments and transfers funds to each investor's registered bank account within two business days. In some cases (for example, when only a small partial payment has been made), repayment can be held and transferred only once a larger amount is received from the client. Please review our Terms of Use for more details.

Information about signed loan agreements, received and scheduled payments, and related contracts is available to each investor after login in the My Loans section (login required). Investors also have access to the Account Statement section, where cash flow movements can be viewed for a selected time period.

Updates on funded projects are published weekly on Mondays by the end of the day (when there are updates). News can be viewed in the My Loans section (login required). To see the latest information, please log in on Monday evening or Tuesday.

Investors can update their details in the My Profile section. When changing country of residence, bank account, or other key information, renewed identity verification may be required.

Using co-financing opportunities is free of charge for investors. Capitalia earns revenue by charging companies a success fee of 1-5% for successfully funded transactions, as well as a regular management fee added to interest payments. All Capitalia costs, including minimum Capitalia co-financing and interest payments, are shown in each project section under Capitalia Interest.

Income earned from lending may be subject to personal or corporate income tax depending on the investor's country of residence and legal status. All transfers to investors are gross payments, meaning Capitalia does not withhold taxes. Capitalia encourages each investor to verify their own tax reporting obligations and payment procedures, involving tax consultants when necessary. In the Account Statement section, by selecting a specific reporting period, investors can download an automatically prepared Tax Report.

There are two investor account types available for co-financing with Capitalia - Standard and Prime. Each new investor is automatically assigned a Standard account during registration. Every investor can upgrade to Prime, which offers several advantages. Additional details about benefits and upgrade options are available in the Account Types section (login required).

Capitalia applies the provisioning policy below for late loans based on the number of overdue days.

Although Capitalia recommends all investors independently evaluate each project, the platform also supports automatic investing strategies. Activation is available in the Autoinvest section (login required). If this feature is enabled, the investor automatically receives a notification about investments made when a project is published for investing. After automatic reservation, the project can still be canceled if it is no longer attractive.

Capitalia offers investors an opportunity to participate in the secondary market by buying and selling* investments at nominal value to other investors (including accrued interest at the time of sale) after project funding has closed. Secondary market transactions appear in the co-financing section with a dedicated identifier. In secondary market transactions, the seller pays a 1% fee of the principal amount being sold. If the commission payment is not received within 48 hours, the reservation is canceled.
*In testing stage, only Capitalia can sell its investments on the secondary market. Investors will be informed as soon as this function becomes available to them.

With this article, we want to draw your attention to the benefits of diversification. Remember that business lending includes the risk of partially or fully losing the lent amount. The best way to reduce this risk is to invest continuously and diversify your portfolio across different maturities and multiple projects. This helps ensure that a) no single loan significantly impacts your total return and b) your portfolio is less exposed to poor timing in individual investments.

The benefits of diversification are clearly visible in our platform's historical return data. Taking into account loan losses and provisions, we can observe the following portfolio return indicators in relation to the number of investments made by each investor:

Chart: Portfolio investment return by number of investments made

From this chart, we can draw several clear conclusions:

1. Only 3 out of 293 active investors have negative returns. All investors who have invested in 27 or more projects have achieved positive returns.
2. Some investors with relatively small portfolios of up to 20 loans can achieve above-average returns, but most small portfolios will deliver below-average returns.
3. Investing in all loans offered by Capitalia would have produced a 10% return.
4. In many cases, investors with portfolios larger than 25 loans but below-average returns have invested above-average amounts in riskier loans.
5. Return volatility clearly decreases as the number of loans in the portfolio grows. Investing in a single loan is at least twice as risky as investing in a basket of 25 loans.

Based on these findings, we strongly recommend the following principles when investing with Capitalia (or anywhere else):

• Build a portfolio with at least 20-25 investments;
• Invest similar amounts in each project;
• Make smaller investments but invest in a larger number of projects;
• Use our Auto-invest tool to easily ensure automatic diversification.

For those interested in a more technical view of diversification effects, we provide the chart below showing return volatility (standard deviation) based on the number of investments.

Return volatility depending on the number of loans in the portfolio.