SMBX is an online platform dedicated to helping small businesses raise capital via bonds. Their marketplace caters to both small businesses looking to raise capital for their startup and to retail investors who want to invest in these business ventures. The minimum Investment is $10, and the maximum return currently being offered is 9%. I signed up as an investor and made my first purchase on the site. Here is a review of my experience.
Bonds versus Stocks
Before I get into the SMBX experience it may be useful to give a brief explanation of exactly what a bond is and how it compares to a stock.
What is a bond? A bond is a fixed instrument investment made by a lender to a borrower. In our case, an investor to a small business. Bonds include details such as the term of the loan and information on when payments are to be made to the investor. Bond prices are inverse to interest rates. When rates go up bond prices fall. Bonds have maturity dates at which point the principal investment must be repaid. This is a very basic overview. You can learn more by researching bonds online.
The main difference between stocks and bonds is that stock is an equity and bonds are debt. When you buy stock, you are buying a piece of the company. When you buy a bond, you are acting like a lender to the company. If you want to gain a more in-depth understanding, click here.
Full disclaimer: I am not a tech savvy person. That being said, I found signing up to be very easy. The entire process took about 10 minutes, and that included linking my bank account.
To sign up with SMBX you just need to create a username and password then answer a few basic questions. After that you link a bank account, agree to the terms of the site, and you are up and running. You do have the option to link a credit card as well, but I only chose to link my bank.
Current bond offerings are displayed under the Bonds tab on the main page of the site. As of the writing of this article there were 5 bond offerings to choose from.
I was given a $3500 investment limit based on my current income and net worth.
My First Bond Purchase
I chose to invest $50 into 24 HR Truck Services as my first bond purchase. The bonds have a 60-month duration with a $10 par value and an 8% yield.
The trucking and logistics industry is near and dear to my heart, as my primary job is in that field. I know first-hand the pain that can happen when trying to move freight, so any business that is attempting to improve it has my vote. I support what they are trying to accomplish with their dash cam and onboard apps.
Some Early Observations
SMBX has a very user-friendly website. It is packed with information, but it doesn’t feel cluttered. They have done a nice job of organizing the site and making it as easy to use as possible.
The bond offerings are right off the main page. Clicking on any of them will take you to a page that clearly spells out what the company is and their mission. Documents such as the bond prospectus can also be found there. The bond offering itself lists all critical information such as the duration, the par value, and the yield. You can also see a list of investors and the amounts that they invested. Don’t want anyone to see what you are investing in? Just don’t click on the “make investment activity public” tab in your portfolio.
If you go to the Profile tab you will see all your personal information displayed. Basic things such as username, address and email are here. This is also where you can link bank accounts and credit cards to your SMBX account.
The Portfolio tab will take you to your personal investment portfolio. Here you will see your total investment limit and your current investments. Information such as total principal and interest earned will also be displayed here. This is also the place where you can withdraw funds.
The Help tab shows common questions and answers concerning the company and the bond offerings. There is also an option to email or call SMBX should you need further assistance. I didn’t try to do either, so I don’t know how responsive or available someone from the company is. I did however receive a welcome email from a customer service rep shortly after signing up for an account. It contained a few links to commonly asked questions and contact information should I need any further assistance.
Initially I only found a few things about SMBX that I didn’t like.
First, they don’t appear to have an app for Android devices. There is an app for Apple devices, but as you might guess I don’t have an I phone. So, I have no knowledge of how well the app performs. I used my laptop to sign up on the site. The website itself is just fine, and it is mobile friendly, but not having an app that supports Android could be a drawback for some.
Second, the bond offerings were few. Only 5 as of the writing of this review. There weren’t a lot of investment options to choose from. As I stated earlier, I found a company that looked promising to make an investment, but I could see the lack of offerings as a deterrent to some people. More investments and more diverse investments would be welcome.
Lastly, the investment offerings by their very nature are risky. Investing in startups will always be on the higher side of the risk scale. SMBX does disclose this fact, but a fair amount of investors will want to avoid riskier investments in favor of safer less volatile investment vehicles. If you are comfortable with the risk going in, then you shouldn’t have a problem, but I can see certain people not wanting to invest their hard-earned money in these ventures.
I like the business model that SMBX has created. A centralized place where average investors can easily invest in small businesses and startups is a welcome addition to the alternative investing world.
Signing up was a breeze, and the website can easily be navigated. Plenty of information on the various companies looking for funding is readily available, and you can easily check your investments and their returns by looking at your personal profile page.
Drawbacks are few, but there are a couple to make note of. The most notable is that the investments are risky. Investing in startups will always be a risky endeavor, so just be aware that you could lose all your money if the company that you invest in goes under. The other drawback is that there are currently a very limited number of companies that you can invest in. There were only 5 as of the writing of this review.
I made an initial investment of $50. I plan to circle back soon and let you all know how it performs. Hopefully, I will also have some additional thoughts on SMBX. Talk to you soon!
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