Everyday investors and SMEs get in on the mini-bond action

Bernard first covered Neighborly on Daily Fintech way back in 2014, when he explored, what was then, an emerging crowd funding scene for small businesses.

Fast forward to 2018, and Neighborly has since emerged as a real contender in the democratisation of municipal bonds. The platform allows everyday investors to gain access to the multi-trillion-dollar municipal bond market, one that funds vital public projects like schools, libraries and parks.

These sorts of platforms cater to an increasing trend amongst investors for social impact assets that deliver strong returns. But with 12,000 investors, and up to $14.7B in issuances participated, they also signal to the industry that the appetite for other types of bonds, may be growing too.

Small business is one such area getting attention. UK fintech Code Investing offers bond purchases to investors keen on adding some SME debt into their portfolio.

One of the successfully funded bond issuances was Kevin McCloud’s housing project HAB, which raised £2,407,000 a year ago. According to McCloud, “HAB’s mission is to make homes that lift the spirits: that are a pleasure to live in and a joy to behold,” something he would know plenty about after his time following the trials and tribulations of couples and families across the UK, via his critically acclaimed and loved TV series, Grand Designs.

Other bigger businesses have also gotten in on the mini-bond action, as these investment vehicles are commonly termed. In what has curious parallels to an ICO, Hotel Chocolat was one of the first to jump on the bandwagon back in 2014, offering a bond with a yearly return of up to 7.33%, paid in chocolate. Since then, the company has successfully IPO’d, transforming a home-grown UK small business venture into a booming enterprise success story.

Matt Levine noted in his recent Bloomberg article, The Economy Is Full of Crypto (And Collective Delusion), that there is a sense in the middle of this ICO frenzy that ‘finance has become untethered from productive work.’

In many ways, he is right, which is why perhaps we need to see more fintech development and activity in the mini-bond market, to create more Hotel Chocolat success stories, with financial models that make sense, and don’t require obtuse white papers. I mean, even your mum and dad could understand that bond issuance.

The reality is, there are a plethora of good businesses out there that actually need money to do good, productive things. And while I’m all for investing in the future, it shouldn’t come at the expense of the present. After all, that’s all we really ever have.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy.

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