SMBX: Crowdsourced bond offerings

Now you can invest in small business with bonds! Start with as little as $10, and no fees …

(This is a sponsored post.)

It's no secret that small business everywhere have had a really rough time the past year. Even if the COVID-19 tunnel has a glimmer of light, it still will be a long road for many businesses to get back to “business as usual” or close to it.

Some of those businesses aren't letting the pandemic knock them off the map. They're getting injections of capital from people just like you and me who believe in their message and their future.

Crowdsourced funding isn't new. You can probably name a couple of such websites now.

The current funding options for these sites is cash. And not a thing wrong with that!

But there's a newcomer that just dialed up the coolness factor with:

Crowdsourced bonds.

Enter SMBX.

TheSMBX.com is a new fintech (financial technology) app and website that provides a crowdsourced market for small business bond offerings.

I signed up in less than five minutes, and it was easy. I was asked a few questions about my income, whether I had done any crowdsourced investing recently, my net worth, and whether or not I was an accredited investor. These questions determined my investment limit and my eligibility to use the platform. (It's not necessary to be an accredited investor to use the platform.)

Once I confirmed my email, I peeked inside to see the current bond offerings.

As of the time I'm writing this, I see 15 offerings (10 completed), with interest rates between 6% and 10%. The current five offerings are either 7.5% or 8% offers. The earliest (completed) offer was from August 2019, and the next one was the first part of 2020. With five active offers now, the diversification potential is increasing. I've been told that there are another 14 offers in the pipeline now, so that's an indication that things are taking off.

Full filing information for the bond offerings

Let's look at one of the current offerings:

This is an informative hub for the ongoing bond offering. The upper right of the screen has the bottom-line information on the offering: minimum and maximum offering range, duration of the bond, the yield, and the total unit value (per bond unit).

In addition to a formatted crowdfunding information page, there are the legally-binding documents of the offering (shown below the vegan cheese picture above).

• The Bond Prospectus gets into all of the legal details and terms of the bond offering.
• The Bond Prospectus Summary is similar in structure and content to the web page.
• The Issuer Financial Information link took me straight to the EDGAR filing page at the SEC. This has several years of detailed financial statements as well as the regulatory filing information.

The takeaway is that these are full, proper, legitimate, and legal bond offerings.

Questions answered from the business owners

After signing up, I got an email about the new offering shown above, along with an opportunity to register for Zoom meetings to chat with the owners from the other offerings.

In the earlier days of peer-to-peer lending on some other websites, there used to be similar ability to ask questions of the people requesting the loans. Following a “reboot” of these platforms, that changed, and there was only very general information available. The ability to “grill” the owners prior to investing went away.

For investors that are willing to put down five figures towards bonds for a company — some do! — this extra ability to do due diligence is welcome.

What it takes to get started

I mentioned that some investors will invest five figures in a single business. (The highest I saw as I was perusing the listings was $25,000.)

But it doesn't take nearly that much to invest. You can invest in a business bond offering for as little as $10.

And if you invest through your bank account as opposed to investing with a credit card, there are no fees at all.

All of the costs of the bond offering to TheSMBX.com are paid by the business. (There's a 3.5% fee assessed if the bond offering is successful, and an annual maintenance fee while the bonds are active.)

But from the investor's standpoint, what you earn is what you get!

(Regarding the app, it appears that there's only an Apple app now, but the website will work for Android peeps like myself and perhaps you!)

Higher risk for higher reward

Because these are bond investments in small businesses, there is the potential to lose some or all of the principal. Small businesses can fail, and no amount of screening on the part of TheSMBX.com can completely remove that risk. This is why they make sure that you understand this at several points along the way prior to you investing any money!

But this is why the bonds pay in the 8% range rather than the sub-1% range of a savings account!

Some of the bond offerings will be collateralized to some degree. One that I looked at was 50% collateralized with business equipment. This fact is part of the bond offering prospectus and removes part of the risk of default.

Check out SMBX and support small business

Visit the SMBX website to learn more about participating in crowdsourced bond offerings for small businesses!