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Got Questions?

Can anyone invest? Or do you have to be accredited?

Anyone with a bank account, $10, and the desire to, can invest. You do NOT have to be accredited. There are investment limits worth noting which are based on an individual’s annual income or net worth; specifically:

If an investor’s annual income or net worth is less than $107,00: the investor’s total investment limit is the greater of $2,200 or 5% of the lesser of their annual income or net worth.

If an investor’s annual income or net worth is $107,000 or more: then that investor’s total investment limit is 10% of the lesser of their annual income or net worth.

Either way, the total amount that an investor may invest per year cannot exceed $107,000.

What are the risks involved?

The greatest risk involved is loss of money invested -you ought only invest what you can afford to lose. While SMBX thoroughly vets each business listed on our platform, requiring a baseline of 2 years operational history and demonstration of effective and tenured management, there are too many variables to determine the viability of a business to be a going concern with certainty. Be wise, be prudent, and learn as you venture.

How much does it cost to invest?

$0. Investing is free on SMBX.

If investing is free on the SMBX, how does the SMBX make money?

Great question. We charge businesses 2.5%-3.5% on the amount raised at the close of a successful offering. For example, when a business raises $100,000 successfully, we charge either $2,500 or $3,500 dependent if the business is refinancing an existing loan or raising new capital, as the latter requires more administrative work.

We do not charge fees to investors. Robinhood set a precedent. We admire them. We followed suit.

How do you determine the range of yields cited for each business?

In banker speak, we plug numbers into a proprietary risk score card and arrive at a range of yields. In trying to relate to a human speak, we analyze financial and qualitative information to understand a business’s capacity to repay its debts. The information we take into account, includes, but is not limited to: the measure of cash flow to service current debt (aka Debt Service Coverage Ratio); how aggressive, or risky, a company is with financing growth (aka Debt/Equity Ratio); ability of its short-term assets to cover short-term debt (aka Working Capital Ratio); financial trends; customer and vendor reviews; management tenure; competitive landscape; etc. We ask a lot of questions to understand the business model, its evolution, and its future intentions.

How does the auction work?

The auction is the method by which a small business bond offering is issued to investors. During an auction, investors can either buy now at the lowest yield or bid within a pre-set range of yields.

Think of it like an eBay auction versus ‘Buy It Now’. If you want to be certain to get bonds, you buy now, if you want to game, you bid.

A successful auction arrives at a single offering yield. This is the yield that the last available unit of bonds in the offering is sold at, and it is the rate that the investors will receive. An Example:

Suppose ACME Co. wants to raise $1,000 by issuing bonds of its company. It will auction 100 $10 bonds within a range of 6%-8%.

Investor A bids for 40 bonds at 6.0%
Investor B bids for 40 bonds at 6.5%
Investor C bids for 40 bonds at 7.0%
Investor D bids for 40 bonds at 7.5%

By logic of the auction: 40 bonds will be awarded to Investor A, 40 bonds will be awarded to Investor B; 20 bonds will be awarded to Investor C to close out the offering; Investor D is the highest losing bid yield; therefore the market clearing yield (offering yield) is set at 7.0%, and Investor A, B, and C’s bonds will yield at the uniform price of 7.0%.

How and when do I pay for bonds in an offering?

Payment for bonds happens at the immediate close of the offering. However, your account will be debited as soon as you bid to buy the bonds, your funds will be held in an escrow account. If you cancel your bid or if the offering is unsuccessful, funds will be credited to your SMBX Book and available for withdrawal.

How and when do I receive the bonds that I’ve purchased?

Bonds successfully purchased will be delivered to investors at the immediate close of the offering. At the same time that investor funds are released to the issuer, the issuer will deliver bonds to investors.

How do I get paid?

For the duration of the bond repayment period, each month after the settlement date, the date the funds were released to the issuer and bonds were delivered to investors, you will be credited principal + interest for that month to your SMBX Book. You can either keep the funds in your Book, reinvest in new offerings, or withdraw to your bank account.

Can and how do I cancel a bid?

Yes. Bids can be cancelled from the Investment History cards in your Book, or by cancelling your prior bids from the Offering page where you placed your bids. You can also cancel all bids, by entering into Book Settings > Investing > Cancel all bids.

You can cancel a bid any time after you have placed it, but you cannot cancel a bid any time after 48 hours prior to the close of the offering.

What regulators and regulations govern the SMBX?

The SEC and FINRA are the regulators who govern the SMBX. In 2012, US Congress passed Title III of the JOBS Act. Title III authorizes small & medium sized businesses, investors, and funding portals to participate in Title III securities offerings. In 2015, the Securities & Exchange Commission (SEC) published Regulation CF, which are the rules that regulate Title III funding portals. The SMBX is a FINRA-registered ‘funding portal’, which works with qualified small & medium sized businesses to issue Title III securities to investors.

The complete Regulation CF (aka Reg CF) rules can be found here.

How much does it cost?

We charge 2.5% of the total amount you raise to refinance an existing loan.

We charge 3.5% of the total amount you raise for new capital.

We charge at the close of your auction and only charge if your offering is successful. Success is defined as meeting your intended goal.

If you intend to raise more than $100,000, you are required to have your financials reviewed by an independent public accountant. We will facilitate the process.

How much can I raise?

You can raise between $100,000 - $1,000,000.

We can do offerings greater than $1,000,000 though it will require additional due diligence.

How do you determine my range of interest rates?

In banker speak, we plug numbers into a proprietary risk score card and arrive at a range of yields. In trying to relate to a human speak, we analyze financial and qualitative information to understand your capacity to repay debt. The information we take into account, includes, but is not limited to: the measure of cash flow to service current debt (aka Debt Service Coverage Ratio); how aggressive, or risky, your company is with financing growth (aka Debt/Equity Ratio); ability of your short-term assets to cover short-term debt (aka Working Capital Ratio); financial trends; customer and vendor reviews; management tenure; competitive landscape; etc. We ask a lot of questions to understand your business model, its evolution, and its future intentions.

How long does this process take?

If your required financial documentation is clear and complete, it should take 60 days from start to finish: initial discussion + financial review + paperwork + marketing = money in your account.

How do small business bonds work?

Like a term loan with a fixed interest rate.

Let’s say you want to raise $100,000, you issue 1,000 bonds at a $10 par value, your interest rate is determined by financial assessment and auction. We handle the issuance and recordkeeping of the bonds. You receive your money at the close of the offering, investors receive their bonds. Each month you pay the principal + interest due but instead of paying your bank, you pay your investors. We administer all of this.

What happens if I do not raise my desired amount?

We fire our business team. No, we don’t actually do that but we do take fully subscribing your offering, getting you the money you want to grow, that seriously. We cannot guarantee you other people’s money, as that is what raising from the crowd is, but we can work with you to market your offering to the right people, gaining you interest and the dollars that follow.

If you read the ‘About SMBX’ page you saw that ‘We Believe in Win-Win’. That is not an empty marketing statement, it is our core value. What it means is we vet the best businesses for investors to ensure they earn their expected returns; the better the investor experience, the more we can drive capital to businesses and the better the business experience.

We realize we did not answer your question. Worst case, you do not raise your desired amount and the amount you do raise is not of use to you, so you walk away having lost time.

You’re not a bank, you’re not a lending platform. What are you?

SMBX is an SEC registered FINRA licensed Title III crowdfunding portal.

If you are a crowdfunding portal, am I giving up ownership of my business?

No. Bonds are a debt instrument. You pay principal + interest monthly. You retain 100% ownership of your business.

The small business bond offering uses the reverse dutch auction as it’s price discovery method. If you understood that sentence, no need to read further. If, like most people, you’re not familiar with financial jargon, these definitions are here to help.



Auction

An auction is the method by which an offering is issued to investors. During an auction, potential investors place competitive bids within a pre-set range of yields or prices. The auction is a price discovery mechanism. A successful auction arrives at a single offering yield/price, which is the yield/price at which the last available unit of securities in the offering is sold.

Bond

Small and medium sized businesses issue bonds on SMBX. A bond is a debt-based financial asset, in which an investor loans money to an issuer for a period of time in exchange for a legal right to the issuer’s promise to repay the borrowed money, plus interest. On SMBX, small and medium businesses sell bonds to investors, who earn anywhere from 4% to 14% interest.

Interest Rate

Interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Issuance

An “issuance” is a security that is being “offered” for sale by a small or medium sized business. An “issuance” is also sometimes called an “offering”.

Issuer

Only a qualified small or medium sized business is able to be an issuer on SMBX. Only an issuer may offer a security for sale.

Non-competitive bid

A non-competitive bid is a bid that is made on an offering during the road show and/or auction period. It is the same thing as placing a “Buy Now”. Non-competitive bids involve entering a quantity of securities that one is prepared to buy at the lowest yield/price, as determined by the predetermined yield range of the auction.

Offering

An “offering” is a security that is being “offered” for sale by a small or medium sized business. An offering is also sometimes called an “issuance”.

Principal

Principal is the amount borrowed on a loan or put into an investment.

Security

A security is a financial asset that can be bought and sold, and holds some cash value.

Yield

Yield is the amount of return an investor realizes on a bond.

Yield range

Yield range is the spread of return an investor realizes on a bond. The range of return on a small business bond on SMBX is expressed as a 2% point spread (ie. 6-8%).