“Be the bank,” is what SMBX tells its users, encouraging investors to provide access to debt capital for small businesses that typically struggle to get a loan from old finance.
SMBX, a blockchain-powered platform that recently received FINRA approval to operate as a Reg CF funding portal, has just closed on its first “small business bond.” Bernal Cutlery, a “globally renowned cutlery shop” located in San Francisco closed on a $130,000 funding round in less than 2 weeks, according to an email from SMBX.
The offering was seeking up to $200,000 for a debt-based security with an 8% coupon rate. The small business bond holds a term of 120 months.
Under Reg CF, an issuer may raise money, currently up to $1.07 million, from anyone – both accredited and non-accredited investors. SMBX says it will accept more money if the demand is there but, most likely, the platform will need to do a Reg D 506c side-by-side offering if a company aims to raise more than a million dollars.
Cutting Out the Bank
The concept of being a bank replacement platform is interesting. While most, investment crowdfunding platforms focus on issuing equity, SAFEs or other vehicles, a couple of sites are looking to fund more established businesses by issuing debt. The company gets the money it needs. The investor gains access to a higher rate of return that shoulders less risk than equity or SAFE. While these debt assets still entail a fair amount of risk, they may appeal to an investor that is looking for income and not capital gain. The equation is even better when the business is known by the investor as they are a customer or part of the entities community.
SMBX hopes to provide liquidity at some point in the future via a secondary exchange. This will take some time to establish but certainly something to watch if they can pull it off.
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