The offering is structured so that the community can put as little as $10 directly into the business. This, in turn, gives the business a quicker avenue to get capital.
The new finance model offered by SMBX enables small businesses the ability to offer bonds to the public without having to use banks and pay regulatory fees. The company expedites the transaction, lowers fees and empowers the public to invest in local businesses.
“We believe that people want power over their money, that people would rather directly invest in businesses in their communities and share in the profits than keep their money in a zero-interest bank account,” said SMBX CEO Benjamin James. “The Small Business Bond gives them this opportunity.”
People can bid on businesses to invest in for no fees using the SMBX mobile app or website. There is also an option for users to become lenders with as little as $10, and receive monthly payouts.
Paperwork is handled by SMBX, as well as the marketing of fixed-interest bonds and the hosting of bond auctions. Following an auction closing, companies get their capital and pay investors principal plus interest. Once a company reaches its collection goals, SMBX collects a 3.5 percent service fee.
“Community is part and parcel to everything we do,” said Rich Allen, Degrees Plato co-founder. “We employ people from the neighborhood, and most of the brewers we work with are people we know. Partnering with SMBX allows an incredible opportunity for this community to invest in their own space and funnel capital back into their neighborhood.”
When small business are looking for capital, community banks are often a good place to start. But the community banking market is drastically shrinking in the U.S., which is negatively impacting access to capital for small businesses. By taking the crowdfunding model and applying it to particular communities, small businesses can access affordable financing with the added benefit of familiar providers of capital.