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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:
What are the risks involved?The greatest risk involved is loss of money invested -you ought only invest what you can afford to lose.
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 a 3.5% service fee of the total fundraise, only if successful. For example, if a business raises $100,000, we charge $3,500 at the close of the offering.
How do you determine the range of yields cited for each business?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.
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 canceled from the Investment History cards in your Book.
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.
How much does it cost?We charge a 3.5% service fee of the total amount you raise, only if successful. For example, if you raise $100,000, we charge $3,500 at the close of the offering.
How much can I raise?You can raise between $100,000 - $1,000,000.
How do you determine my range of interest rates?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 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.
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.
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.
AuctionAn 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.
BondSmall 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 RateInterest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.
IssuanceAn “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”.
IssuerOnly 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 bidA 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.
OfferingAn “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”.
PrincipalPrincipal is the amount borrowed on a loan or put into an investment.
SecurityA security is a financial asset that can be bought and sold, and holds some cash value.
YieldYield is the amount of return an investor realizes on a bond.
Yield rangeYield 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%).