For those of you longtime readers of the DINKs, you’ll know I’m usually pretty excited about up-and-coming fintech companies.
The latest company I got excited about was the Small Business Exchange (SMBX). The SMBX is basically attempting to reform small business finance by replacing bank lending with crowdfunded bond marketplace options.
SMBX Works – It Makes Money
SMBX works. From the standpoint of observing their business eight or so months down the line – it’s totally been working from an investor standpoint. I’ve bought maybe $10 or $20 worth of bonds per month since I started last December. Most of the bonds pay between 6.5% and 8%. Most have amortization schedules that return principle and interest over the life of the bonds, so there isn’t any large repayment at the end – similar to how most conventional bonds are structured. This means your payments are higher – which is good for investors. And, every few days I get an email telling me I have a principle and interest payment that hit the balance in my SMBX account. There also haven’t been any defaults or other nonsense. So…SMBX works.
I have to admit, it’s nice to check email after my morning routine and see a payment notification. Nothing wrong with that at all.
One of the companies I invested in even sent me a nice thank you card.
SMBX Works, But Might Not Meet Its Organizational Mission
From an investing standpoint, SMBX works. However, in terms of SMBX’s mission to transform lending markets, it’s not clear if they’re moving enough volume to make this happen. The platform only has about three companies which have active bond offerings, and only about 21 closed offerings. Twenty four total offerings isn’t enough to move markets.
That said – if SMBX can meet it’s organizational promise it could be a very interesting in the long term. Small businesses often have trouble getting affordable capital. And, not only that small busineses run by minorities typically have even more trouble. This is often due to the types of businesses they run and to lack of things like extensive bank account history, formalized accouting receipts, etc. In theory the crowdfunded bonds model should fix these issues. Only time will tell.
Incidentally, if you have all your financial bases coved (emergency fund, debt paid off, etc.), I recommend you give these guys a spin. Their website is => here.
For more on this, consider reading: