The SMBX: Changing the Way You Invest in Small Businesses

SMBX: A new way to invest

As an individual investor, I am always looking for new and innovative ways to diversify my portfolio and increase my earnings. I already have a healthy range of holdings in stocks, bonds, and mutual funds.

However, I’m always on the lookout for new ways to generate passive income. That’s where platforms like the SMBX come in. This new marketplace directly engages with its investors to make it simpler for you to invest in small businesses.

The platform is somewhat complicated and new, so here is some explanation of what it is.

What is the SMBX?

The SMBX is new investment platform where small business owners can directly connect to the public. Their model utilizes regulation crowdfunding to allow small businesses to go straight to the source. As their tagline states, individual investors get to “be the bank,” providing an entirely new way to raise capital. Rather than purchasing stock in a specific company, any investor can buy small business financial securities through their marketplace.

What sets the SMBX apart is that they have created a new asset class: the Small Business Bond. The idea is to help small businesses generate capital through bonds instead of relying on bank loans. Private investors purchase bonds, which are debt-based financial assets. The investor (you) loans money to an issuer (the small business) for a period of time. In exchange, the issuer has a legal obligation to repay them, plus interest.

It is a win-win scenario for everyone. Small businesses can bypass the loan process to get the funding they need at better prices than banks offer. Meanwhile, investors have more control over where their money goes since you can pick which small businesses to invest in.

What are the Advantages of Investing with SMBX?

The greatest advantage of the SMBX is that it creates new options for both small businesses and individual investors. Unlike other marketplaces that emphasize equity, the SMBX is transforming small business debt through community engagement. Additionally, investors have the opportunity to affect change by supporting these businesses. What seems like a modest investment to the individual has the potential to impact not only the business owners, but also the people they serve.

For Small Businesses

The greatest benefit to small businesses is that they have the ability to bypass traditional lenders. Small companies no longer have to be captive to bank loans. It is much easier and cheaper to raise capital through Small Business Bonds since they can appeal directly to the public. Furthermore, there are less regulations and fees associated with this type of asset. Here is what their website says:

SMBX value for businesses

For Investors

There are even more advantages for individual investors. Since you get to replace corporate banks, you have the ability to affect change within your community. You support local commerce when you invest in small businesses, allowing them to continue operating. What seems like a modest investment from the individual can have a huge impact on hundreds of people by creating more jobs locally and returning profits back to their communities.

Another benefit is that the SMBX welcomes non-accredited investors to join. The platform is easily accessible and very user-friendly. There are no investors fees and you can begin with as little as $10. The average returns on investments is approximately 6.5%, and it pays the principle plus interest each month.

What are the Disadvantages?

As with any investment, there is always risk. It is possible that your investment will not see profitable returns, and you could lose your money. SMBX is offering bonds, so you’ll want to read the bond prospectus for each offering.

Another thing to keep in mind is that the SMBX is a relatively new platform. Any financial advisor will tell you that it is risky to invest with new firms that have a short history. However, the expertise and combined experience of the founders give me confidence that I’m not throwing my money away.

One thing that I was disappointed with was the limited offerings. Since it is a relatively new marketplace, this makes sense. However, I hope to see a wider variety of small businesses on the marketplace and more frequently updated offerings in the future.

Here are some of the companies in their marketplace offering bonds.

SMBX Offerings

How Do You Start Investing with SMBX?

Getting started was the easiest part. It is simple to sign up. First, you need to create an account, which requires you to enter your personal details. They will ask for typical information including your legal name, address, estimated income, and estimated net worth. Once you verify your email and add a payment method, you are ready to get started. Just be aware that you must link to either a credit card or bank account to your profile.

After you confirm and submit everything, you can then browse the available offerings and choose which one to invest with. I carefully looked at each one, evaluating their financial goals, bond duration, expected yield, and overall mission.

Once I reviewed my options, I chose to purchase my first Small Business Bonds from ChildWise because I am very passionate about education. Furthermore, the bonds I bought have an estimated 8% yield. Not only can I feel good about where I am investing, but it also seems like I will see good returns.

Why Should You Use SMBX to Invest in Small Businesses?

My initial experience with the SMBX has been extremely positive. I feel it is important to find innovative ways to directly connect investors with the small businesses they want to invest in. Through their marketplace, investors are able to engage and interact with the company in an entirely new way. As the markets continue to evolve, it is important that small businesses find ways to thrive.

The best part is that it creates new revenue streams for your portfolio by supporting your local community.  You don’t need thousands of dollars to get started. Even a modest investment in Small Business Bonds with a high yield can significantly increase your earnings. You can get started with as little as $10 and choose from the latest offerings at the SMBX. The bonds pay between 4% and 9%, which is higher than most bank accounts, although you are taking a bit more risk.

By way of a quick wrap up here, if your looking for some additional revenue and you like the idea of investing in small businesses, you can sign up here.

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