CrowdFundInsider spotlighted the rising popularity of SME Bonds in a July 10th article authored by JD Alois. The article included commentary from Anthony Puls, Founding Director & Chairman of ASSOB and one of the trailblazers in the investment crowdfunding space. SME Bond are already available in Australia and New Zealand and target startups and early stage companies seeking to raise capital through crowdfunding. Puls expects SME Bonds to be available in the United States and Canada soon.
According to Puls, ““Entrepreneurs often require some initial seed funding to cover consultant’s fees; investment offer documentation; promotional videos; crowdfunding platform listing fees, etc. This is where the SME bond fits in.”
As outlined in the article, SME bonds have several advantages:
- As a debt/equity hybrid, SME bonds are a cost-effective method to raise capital of up to $150,000. The bond is a debt interest that may include an interest rate but instead of paying cash – it delivers equity to the investor once it is “converted”.
- An SME bond is a private treaty between an entrepreneur with an early-stage business and an early supporter who wants to back that entrepreneur. It can also be suitable for an investor that finds an entrepreneur with a great idea or business opportunity. It’s a one-on-one transaction.
- An SME bond starts off as a loan/debt and is only converted when the issuing company undertakes a share (stock) issue.
“SMEs have witnessed traditional sources of funding dry up since the 2007–2013 financial crisis and are seeking financing through alternative methods such as peer-to-peer loans, securities based crowdfunding, Enterprise Investment Schemes and mini-bonds. The capital market needs initiatives such as SME Bonds to provide leverage to the stifled economy,” said Ms. Wales.
Click here to read the full article.