This is a SMBX review and all opinions are my own.
It was only a matter of time before finance became participatory as the participatory economy grew at full speed and Uber, Airbnb and others replaced traditional taxis and hotels. So can you be a bank? It’s very easy.
There are a variety of projects, from P2P loans to real estate projects to social investment abroad on sites like Kiva. Today, let’s take a look at SMBX, which offers a way to invest in your local business. This results in higher expected returns than traditional banks.
SMBX is a market where you can buy $ 10 SME bonds at a time. Bonds are like the loans a company needs to keep growing. Some bonds are backed by business assets and others are unsecured.
As always, higher returns mean higher risk, so if you decide to move forward, do your own research and the money you can afford to lose or at least long-term trapped. Just invest. This is not the place to park your emergency funds!
How does SMBX work?
SMBX offers a way to invest in local small businesses through apps and websites.
Investing starts at $ 10, just like crowdfunding, just browse through the projects and find the one you want to join.
You can create a personal account or invest as a company, foundation or institution. Must be 13 years or older.
Signing up is very easy. You need to disclose your salary and net worth and make sure you understand that your funds may not be recovered. Also, the investment cannot be resold. This will return you to the initial warning that you will not exceed your investment. I can afford to lose.
After checking one email, you are ready to link your bank account. Credit card options charge an additional 4%, and I would like my money to be spent on my investment rather than a processing fee.
Linking bank accounts was very easy as SMBX uses Plaid to interact with online banking. So there was no scrambling of accounts and bank codes and I was able to confirm with a small deposit … Welcome to 2021!
I chose to keep my investment activities private, but like social media platforms, I can share what I’m doing and see what others are doing. I like privacy, but let me know my first move 🙂
Currently, the fixed income section presents 15 different investment options. My first thought is that it’s not that many, especially after making sure that only five are currently open. The other 10 are marked as complete.
There isn’t much to choose from, but as the platform grows, you need a way to sort by the amount requested, the interest rate offered, the rate of completion, the sector, and so on. Maps, helping local businesses are so attractive that we could even visit local due diligence instead of investing in companies on the other side of the country.
But before looking at open projects, I would like to look at the performance of ongoing projects. This is a beer company based in Oakland, California.
According to the site, it raised $ 35,000 as a 36-month loan that would bring investors a 10% return. They have made nine payments so far. With that money, they bought a car and some equipment and invested in marketing. With over 10% of the loan invested and the top participants investing 6,560, we know that four people really need to believe in the project. Hope they have diversified into more loans!
The bond documentation shows that the $ 35,000 loan collateral is only for a new $ 22,000 car and that if the company defaults, it is contractually obliged to sell. Will SMBX retain the title until the loan is repaid?
However, the default indicates that it is unlikely that you will be able to get all your money back. The proceedings are probably worthless in such a small amount. This explains the high 10% interest rate offered by the platform to compensate for the risks taken by investors.
How many investors who have invested less than $ 100 are willing to read the 14-page bond document now? The fact that I was kicked out of the site because I wasn’t active before I finished reading, I think the majority will only invest because the project looks interesting. It’s cool, but I know there are risks. SMBX is regulated by FINRA, which gives me confidence, but it’s still a risky tool.
So instead of putting all the eggs in the same basket, I decided to invest $ 10 in five open projects.
The first is the Cajun restaurant, which has been in business for five years and is already sold in over 5,000 supermarkets.
Instead of paying interest, they are refinancing higher interest debt to free up some cash flow. The interest they pay to investors is 8%, the SMBX spread is on top, and they are probably borrowing at 10-12%, so I wonder how much interest they are paying now. The prospectus again reveals on page 16 that it will pay up to 29%, including 19.99% credit cards, but it looks like a good business with solid social media follow-up and distribution networks, so I Suspected that they are benefiting them. Many business owners are good businessmen, but they are not very financially familiar.
When my order is confirmed, I remember that the order will only be completed if the company raises the necessary funds by the deadline within a few weeks.
Next is a project that wants to expand the production of vegan cheese. It’s not my alley, but I know there is a strong market for it. Loans are 50% secured for equipment purchased with funds.
Interest rates will be a little lower, but by default it should be easier to recover the funds. Or maybe we will get a pound of vegan cheese.
We also invested in a 24-hour truck service company on the East Coast, a bilingual early childhood education program in English and Mandarin, and an Instagrammable ice cream shop in San Francisco.
Now you can see if my variance was wise, or if I should have gone deeper into due diligence to assess the risk of each project and applied weighted allocations instead.
Summary about SMBX
It’s a fun investment platform, easy to navigate, and I’m sure they have great photos and graphics for the business they introduce.
The interface was very intuitive and I was able to invest in minutes.
As always with peer-to-peer lending, is the project solid, and is the company behind it just pushing the project to fill the platform, or is it really scrutinizing the business and its growth and repayment plans? It takes more than a few months to evaluate their loan.
I wish I had more options for loans and projects to invest in, but I would like to see a small number of thoroughly scrutinized projects rather than a market where any company can profile and demand money. think.
Again, it would be nice to have a way to sort your projects geographically or by metric to make it easier to navigate the interface.
I enjoyed the inside story of the project, and I think it often creates a great business. Passion and love efforts from the founder. I like being able to guarantee these projects with my own capital, rather than buying yet another slice of the S & P500.
Click here if you want to start buying SME bonds with SMBX