Debt Funding

Issue a 'series' of SME Bonds to raise Debt funding

Issue a 'series' of sme bonds

SME Bonds - Funding for established businesses

An issue of SME Bonds can be a way for established businesses to obtain debt finance.

Issuing a series of SME Bonds provides a way to fund a Company without watering down its existing shareholders. Bond investors receive regular interest payments until the end of the bond term and receive their initial investment back at the maturity date.

SME Bond example 1 of 20 in a series to raise $100K. The Bond terms & conditions are set out on the back of the certificate in accord with the issuer’s instructions.

There can be various types of SME Bonds to suit different purposes

Vendor Bonds

Vendor finance through the issue of a Vendor Bond may be appropriate when, for example, a purchaser is having problems getting a bank to finance the purchase of a business. Issuing a Vendor Bond will often allow the vendor of a business to get the price they’re looking for.

Issuing a single Vendor Bond provides an easy way to quickly set up vendor finance & repayment terms, making your business, or anything else you might be selling, more affordable to potential buyers.

SME Bonds

An established small to medium sized enterprise (SME) with strong cash flow can issue a ‘series’ of SME Bonds, to raise debt funding for business development or expansion, or for any other worthwhile purpose! 

The business issuing these might call these debt instruments, ‘Development Bonds’; ‘SME Bonds’; ‘Special Project Bonds’; ‘Vendor Bonds’ or any other name that best describes or suits the purpose for which the funds raised will be used.

Convertible Bonds

Since these Bonds act as a debt instrument prior to conversion, they can include an interest rate. Instead of paying out cash, the Issuer pays the investor(s) with shares in the Company when the debt is converted.

If raising Equity Capital, offering Convertible Bonds can be a way to get your early supporters onboard and give them the discretion to choose to convert the debt to equity as the business grows. The advantage of issuing convertible bonds is that, if the bonds are converted into shares, the company’s debt vanishes.

Financing small-scale property development projects

Convertible Property Bonds

These Bonds may be converted into real estate equity at the discretion of the investor. Since the Bonds act as a debt instrument prior to conversion, they can include an interest rate. Instead of paying out cash, investors can choose to accept bricks & mortar (a tenant in common ownership share in real estate) when the debt is converted. This can help more people get a foothold on the property ladder.

The advantage of issuing convertible bonds is that, if the bonds are converted into ownership of land, bricks & mortar, the company’s debt vanishes.

Selling tenant in common shares in a development opportunity can be another way to fund the project. See: ticx.com.au

A Private Trading Exchange (PTX) for your issued Debt securities

What is a Private Trading Exchange?

A Private Trading Exchange (PTX) is a legally compliant Internet-based private securities trading exchange that is set up and owned by company that has issued, or proposes to issue, securities by undertaking an Initial Private Offer (IPO) in order to raise funds from investors.

A PTX may also be established by accountant or other business advisor that acts on behalf of multiple companies that have issued, or propose to issue, securities in order to raise funds from investors.

PTX Explainer Video

Click on the image above to see an example of a PTX for Debt securities.

When seeking investors for your business, it’s helpful if you have …

  • A convincing, compelling, credible story;
  • A balanced, passionate, capable and likeable team;
  • Lots of suitable people to share the story with and engage;
  • Lots of compliant ways and means to tell the story.

If you need help drafting a legally compliant investment offer document embodying your story you can contact us, or one of our Independent Consultants to receive a detailed timeline & quote to get your offer to issue SME Bonds underway.

Warning to Issuers!

In most jurisdictions around the world it is illegal for any person or company to ask two or more people to invest in a business venture, or other investment, without complying with legal rules set down by the Corporate Regulator in that country.

These rules will apply when an offer to invest in a series of Bonds is made by an issuer to members of the public. However, sophisticated, professional and accredited investors can have investment offers made and accepted by them.

In Australia, the limit on retail investors is set by the Corporations Act 2001 Sec. 708, which allows up to 20 retail (Mum & Dad) investors in any 12-month period not exceeding $2million in total investment. Any sophisticated, professional or accredited investors (as defined), and anyone who invests $500,000 or more (this is called the Gold Card exemption). These investors are outside of the count (of 20) and is unlimited as to numbers of investors and total amount raised

The Corporate Regulator in the United States is the Securities and Exchange Commission (SEC). Wherever the jurisdiction you are in, the Bond issuer should always check with their local Corporate Regulator and/or seek legal or other professional advice before making any offer to invest. There are fines and jail terms for those who breach the law in this regard and ignorance of the Law in no excuse.

Warning to Investors!

Investing in SME Bonds is not without risk to your capital. Interest payments and forward-looking financial projections are not guaranteed. If you are thinking about lending money to a business, it is essential to put the terms in writing to minimise the chances you could have a future disagreement that ends up in court. A Bond avoids such disagreements or misunderstandings over terms of a loan agreement by clearly defining important details, like interest rate, late payment penalties, and payment timeframes. A Bond provides concrete evidence of the loan terms if a question ever arises.

Above all, do your due diligence and risk assessment on the issuing company and its directors before handing over your money!!

 

Which type of SME Bond are you wanting to issue?

Issue a 'series' of SME Bonds

Our Independent Consultants are here to help their SME clients use some of the tactics the big companies use to raise capital when the banks are playing hardball.

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