SMBX: Small Business Bonds

Disclosure: This post is sponsored by SMBX. As always, all opinions and ideas are entirely my own.

Update: 3/17/21

I received an email response within 24 hours solving my issue. I’m not sure exactly what they did to fix, but there was some kind of technical error. Thumbs up for the SMBX customer service. Now that my bank account is linked to my account I’m able to purchase bonds. I planned to buy 5 different bonds for $10 each, but each of these purchases would require 5 transactions from my bank account. My bank account charges me for each transaction past 6 per month. I would prefer an option to fund my SMBX account rather than needing to purchase bonds directly from my bank account. Instead of 5 bonds at $10 each, I purchased 5 bonds of Humphry Slocombe for $50. There are 15 days until the offering closes so I will need to wait until then and assuming funding is met, wait about another month until I receive any interest. No transaction fees is always a plus.

Update: 3/16/21

I received the two micro deposits into my bank account. Unfortunately, there is no area to confirm these deposits on the site. I sent SMBX an email to see if I’m missing something or if there is an error.

I have recently been made aware of a pretty cool new investment opportunity. Very recently, actually. I haven’t even been able to start investing yet. I’m waiting for micro deposits to hit my back account so I can start purchasing. If this platform grows to what I believe it can, it could be huge and I figured I needed to share this with all of you sooner rather than later. My plan is to update this post as I make purchases, receive payments and get solid, boots on the ground, first hand experience with this platform that I’ll be able to share in real-time.

So, What Is It?

It all started back in 2016 when Title III of the JOBS Act was enacted by the Securities and Exchange Commission. Long story short, this allowed investing in small businesses and startups to become much easier. Thus, SMBX was born.

The mission of SMBX is simple: connect investors with successful small business owners by utilizing their bond marketplace. Yes, small business bonds. The ability to issue bonds used to be restricted to governments and large corporations, until now. 

As a small business owner this provides many unique benefits. First, SMBX makes it easy by filing the necessary paperwork for you after you review it. Second, SMBX is able to provide a low fee structure by avoiding fees that are typically associated with banks and other lending platforms. Lastly, the SMBX bond marketplace is a unique place that allows a business to build their brand, engage existing customers and acquire new customers. 

Now, the side that I’m most interested in and will be testing. The investor side. As an investor, you have the ability to browse a variety of small businesses looking for investors. Information like the businesses story, the owners story and the use of funds are highlighted on the offering page. Relevant investment information like minimum raise, maximum raise, bond duration, yield and if the bonds are secured against collateral is also front and center on the offering page. The ability to view and download the bond prospectus or a summary and the issuers financial statement is available on the offering page as well.

What I’m Excited About

First, I’m excited to get started with this platform. I have experience with some peer to peer lending platforms. I had some success with them and my only real complaint was the amount of risk it took to achieve a worthwhile yield. This led to more defaults than I liked and is what ultimately drove me away from these platforms. A healthy return is my primary focus as an investor but, I want to achieve this with as little risk as possible. The best investment to me is the one with the highest return and lowest risk.

SMBX offers yields as high as 9%, with as little as $10 invested, once the offering has closed interest and principal is paid in equal monthly payments.  For comparison, my favorite bond ETF, Vanguard Total Bond Market Index Fund (BND), is yielding 2.58% at the time of this writing. A yield of 9% in the stock market is often indicative of a high payout ratio and is generally seen as unsustainable. Naturally, this opportunity piqued my interest.

Second, I like that it’s quick and easy to learn about the small business and potential returns. If I imagine a scenario where a local small business approached me looking for an investment, I would almost feel bad asking as many questions as I would need to before committing to investing. On the SMBX platform, all the information that I need is plainly laid out on the businesses offering page. If I do have additional questions, I can leave a comment directly on the offering page that can be answered by the owner of the small business. 

I believe in shopping local and supporting small businesses. As a small business owner, I know how difficult it can be at times, especially given the current state of the country due to the Covid-19 pandemic. I like that the SMBX platform allows me to “shop locally” from small businesses that are not geographically local to me. This allows the ability to support businesses and causes that I believe in, while also earning money. There is something satisfying about knowing that my investment will make a difference.

What I’d Like To See Going Forward

First and foremost, being brand new to the platform, I would like to see interest and principal payments hitting my account. I should get my first payments in about a month. When I do, I’ll update this post with that process and anything else I’ve learned about the platform in that time.

The current funding options are credit card and bank account. I really like the idea of being able to fund my account with my credit card. I’m a big fan of credit card cash back and rewards. Unfortunately, you will incur a 4% fee when funding with a credit card. I’m not willing to pay a 4% fee to use my credit card. That just leaves using a bank account, which is fine, but I’d like to see a more modern solution. Paypal, Venmo, Cash App or just the ability to use a credit card without a fee.

I would also like to see more investment options going forward. I imagine this will become reality as the platform gains more traction. I also don’t really care to see completed offerings. I’m not able to invest in these offerings so it’s just a distraction from offerings that I am able to invest in.

I’m a Samsung (Android) smartphone user. Currently, SMBX only has an iOS app, I’d like to see an Android app. I do most things on my phone, that included signing up for SMBX. The process on my smartphone internet browser was a bit clumsy. I have an apostrophe in my last name and I wasn’t able to sign up using one. While entering my birthday I had to click a little arrow on a calendar to move one month at a time about 330 times to get from present day to my birth year. Fortunately for me, I’ll never need to do that again now that my account is setup, but it would be nice to see that corrected for new users. I imagine that’s not an issue using the iOS app or a computer, please feel free to leave a comment below if you sign up with one of those methods and can confirm one way or the other.

Disclosure: We may receive a referral fee if you sign up with a service through a link on this page.

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