Different applications are used in day-to-day life, and they make the life of users more comfortable. People design mobile apps for personal as well as business purposes. Commercial institutions are investing in creative applications to simplify their business processes and meet their customized needs. Individuals also develop mobile apps to get minor day-to-day tasks done. Personal budgeting software helps individuals monitor their expenditure, establish long-term goals, and develop plans to meet these goals. Continue reading
As an individual investor, I am always looking for new and innovative ways to diversify my portfolio and increase my earnings. I already have a healthy range of holdings in stocks, bonds, and mutual funds.
However, I’m always on the lookout for new ways to generate passive income. That’s where platforms like the SMBX come in. This new marketplace directly engages with its investors to make it simpler for you to invest in small businesses.
The platform is somewhat complicated and new, so here is some explanation of what it is.
What is the SMBX?
The SMBX is new investment platform where small business owners can directly connect to the public. Their model utilizes regulation crowdfunding to allow small businesses to go straight to the source. As their tagline states, individual investors get to “be the bank,” providing an entirely new way to raise capital. Rather than purchasing stock in a specific company, any investor can buy small business financial securities through their marketplace.
What sets the SMBX apart is that they have created a new asset class: the Small Business Bond. The idea is to help small businesses generate capital through bonds instead of relying on bank loans. Private investors purchase bonds, which are debt-based financial assets. The investor (you) loans money to an issuer (the small business) for a period of time. In exchange, the issuer has a legal obligation to repay them, plus interest.
It is a win-win scenario for everyone. Small businesses can bypass the loan process to get the funding they need at better prices than banks offer. Meanwhile, investors have more control over where their money goes since you can pick which small businesses to invest in.
What are the Advantages of Investing with SMBX?
The greatest advantage of the SMBX is that it creates new options for both small businesses and individual investors. Unlike other marketplaces that emphasize equity, the SMBX is transforming small business debt through community engagement. Additionally, investors have the opportunity to affect change by supporting these businesses. What seems like a modest investment to the individual has the potential to impact not only the business owners, but also the people they serve.
For Small Businesses
The greatest benefit to small businesses is that they have the ability to bypass traditional lenders. Small companies no longer have to be captive to bank loans. It is much easier and cheaper to raise capital through Small Business Bonds since they can appeal directly to the public. Furthermore, there are less regulations and fees associated with this type of asset. Here is what their website says:
There are even more advantages for individual investors. Since you get to replace corporate banks, you have the ability to affect change within your community. You support local commerce when you invest in small businesses, allowing them to continue operating. What seems like a modest investment from the individual can have a huge impact on hundreds of people by creating more jobs locally and returning profits back to their communities.
Another benefit is that the SMBX welcomes non-accredited investors to join. The platform is easily accessible and very user-friendly. There are no investors fees and you can begin with as little as $10. The average returns on investments is approximately 6.5%, and it pays the principle plus interest each month.
What are the Disadvantages?
As with any investment, there is always risk. It is possible that your investment will not see profitable returns, and you could lose your money. SMBX is offering bonds, so you’ll want to read the bond prospectus for each offering.
Another thing to keep in mind is that the SMBX is a relatively new platform. Any financial advisor will tell you that it is risky to invest with new firms that have a short history. However, the expertise and combined experience of the founders give me confidence that I’m not throwing my money away.
One thing that I was disappointed with was the limited offerings. Since it is a relatively new marketplace, this makes sense. However, I hope to see a wider variety of small businesses on the marketplace and more frequently updated offerings in the future.
Here are some of the companies in their marketplace offering bonds.
How Do You Start Investing with SMBX?
Getting started was the easiest part. It is simple to sign up. First, you need to create an account, which requires you to enter your personal details. They will ask for typical information including your legal name, address, estimated income, and estimated net worth. Once you verify your email and add a payment method, you are ready to get started. Just be aware that you must link to either a credit card or bank account to your profile.
After you confirm and submit everything, you can then browse the available offerings and choose which one to invest with. I carefully looked at each one, evaluating their financial goals, bond duration, expected yield, and overall mission.
Once I reviewed my options, I chose to purchase my first Small Business Bonds from ChildWise because I am very passionate about education. Furthermore, the bonds I bought have an estimated 8% yield. Not only can I feel good about where I am investing, but it also seems like I will see good returns.
Why Should You Use SMBX to Invest in Small Businesses?
My initial experience with the SMBX has been extremely positive. I feel it is important to find innovative ways to directly connect investors with the small businesses they want to invest in. Through their marketplace, investors are able to engage and interact with the company in an entirely new way. As the markets continue to evolve, it is important that small businesses find ways to thrive.
The best part is that it creates new revenue streams for your portfolio by supporting your local community. You don’t need thousands of dollars to get started. Even a modest investment in Small Business Bonds with a high yield can significantly increase your earnings. You can get started with as little as $10 and choose from the latest offerings at the SMBX. The bonds pay between 4% and 9%, which is higher than most bank accounts, although you are taking a bit more risk.
By way of a quick wrap up here, if your looking for some additional revenue and you like the idea of investing in small businesses, you can sign up here.
The idea that money can be tight when you’re starting a business is one that can gets a lot of attention. There is a great deal of talk about how entrepreneurs can save money, how to raise funds for a startup, and even how to redirect the earliest profits back into a startup. These are all important ideas to focus on, and often a diligent approach to funding can be the difference between a business “starting up” or failing in the first place. Continue reading
When seeking to continue to build your financial portfolio, adding investments is one idea that many choose to pursue. One way that such investments are typically made is by buying part of a business. Buying into an existing business means that you become one of the main stakeholders, owning a portion of the business itself. While this is something that is done frequently, business owners are often unaware of the many factors that are related to making this significant financial decision. Here are a few serious considerations before buying part of a business.
The Rewards of Buying a Business
Of course, buying part of a business may sound overwhelming, but there are many factors that make it a beneficial decision.
- There is an established company client base. One of the benefits of owning part of an established business is that the client base is already set. A new business has to attract customers and build a group of returning clients. However, one that is already functioning will have this taken care of. This will allow the business owners to focus more on customer service, client retention, and increasing the number of clients.
- You have greater ease of expansion. If you happen to buy part of a business that is looking to expand, it will be much easier with a company that has already made a name for itself. Look to see if the company has a good reputation and gets good feedback from its clients. It’s also easier to get an unsecured small business loan for expansion when the company has a proven track record of sales.
- You can focus on business improvements. You may like challenges and, thus, purchase part of a business that requires a few changes to improve. Luckily, the company should have a plan of operation in place. Then, you can focus on how to improve it for the company’s overall success.
- You have access to current owners’ knowledge. One of the greatest advantages of buying part of a business is that the current owners will be very familiar with the company. They can show you what has and hasn’t worked for business operations thus far. You, equipped with this knowledge, can then come up with innovative ideas to benefit the business.
The Risks of Buying a Business
As there are many pros to buying part of an existing business, there are just as many risks of shared ownership of a company. It is best to keep these factors in mind as you make your decision.
- You disagree with the current owners’ practices. It would be an absolute nightmare to purchase part of a business where the owners mismanaged funds. Upon learning more about a business you may want to purchase part of, be sure to research all financial records.
- The company has a bad reputation. Good use of customer feedback is to learn how the company fares amongst past clients. A company with a bad reputation will likely struggle with being successful.
- It has high turnover. In addition to clients being indicative of a company’s progress, the employees can serve the same purpose. It is a red flag if there have been numerous employees during the business’ lifespan, especially due to multiple resignations. This would be something to keep in mind as a problem area if you decide to take on the company.
- There are differences between owners. If the current owners are not open to change or new ideas, you could run into difficulties. You may meet resistance trying to take the company to the next level in terms of expansion, increasing profits, or employee and client satisfaction.
Checklist Before Buying Part of Business
Before you make any large purchases or investments, you should always do your homework. The Westmoreland Checklist of Due Diligence provides a great set of guidelines as you vet out potential investment options.
First and foremost you want to make sure the company is in good standing with government, financial, and community organizations. This includes issues about all the companies operations. It means you should look at all the company’s financial information. This includes everything from permits and tax compliance to its reputation with employees and clients.
The choice to buy part of a company should only be made after carefully considering all factors, good and bad, that are involved. It can also be helpful to seek the help of a business adviser who can answer your questions and give guidance as you take this big step.
Editors note: this article is a departure from our usual topics, but we’re including it here for any of our UK readers who may be small business owners.
Too much debt can be the end of a small business. While some debt can be necessary to grow your company, allowing you to hire new employees or purchase new equipment, too much debt can seriously damage your cash flow.
But if your business debt has crept up on you, you’re not alone. In the UK, insolvency is on the rise. According to The Insolvency Service, insolvency rose in 2019 compared to 2018, demonstrating that a growing number of small businesses are falling into significant debt.
Here are some ways that you can start to dig yourself out of business debt and survive becoming insolvent.
Chase Up Late Payments
Late payments from your clients can be problematic for your cash flow. While some late payments might be unavoidable due to the kind of business you run, once you’ve submitted an invoice, you should try to ensure that your clients are being chased for payments regularly.
Catching up on your owed payments will help you raise the funds you need to get out of debt. Take a look at all of your outstanding invoices and start to contact the customers, giving them a polite nudge to pay up. For new clients, you might want to consider shortening your payment terms or adding a late-payment penalty to encourage swift payment of invoices.
Debt consolidation is when you transfer your debts into a single business loan. Although this won’t make your debts disappear, merging them all into one loan can reduce your monthly payments and outgoings and help you better manage your money. Rather than having to make lots of separate payments, it becomes much more manageable as it all goes to a single loan provider. Once you have an easier time of repaying your debts, you can start paying it off and pull your business out of trouble.
Negotiate with Creditors
If you find yourself unable to make debt repayments, you could contact your creditors directly and see if you can renegotiate terms. Your creditors might be open to accepting smaller amounts of re-payment each month rather than risk the business defaulting on the loan.
To start the process of negotiation, send your creditors a hardship letter outlining your issues. You should explain why you cannot pay back the loan, what attempts you have made to remedy the situation and explain why your situation is unresolvable. They may be willing to let you pay your debts over a longer period of time, or even accept less money than you owe. From their perspective, they would rather get back some of their money than none of it, so they may be open to negotiation.
Cut Down on Expenses
If possible, you should look at cutting costs in your business to help your cash flow. This can be difficult, and you may have to be ruthless, but it could be essential to saving your business from going under.
Start by reviewing your budget and all your outgoings. Pick out what you can completely do without and cut it off right away. Take a look at where spending could be reduced, like switching to a cheaper supplier. Moving your business operations into a smaller, more affordable location could save thousands in rent, but it can be an expensive initial investment. Discuss your options with your accountant and only continue to pay for the essentials.
Increase Your Income
Boosting your cash flow can help with your long-term business goals outside of debt management. Promote your business to increase your earnings with low-cost promotions like a limited-time sale or offering discounts. If you have a lot of stock, those items represent money that is tied up in your business and unable to pay down debt. By selling it off in a sale, you can quickly free up cash to help ease those debts. For more long-term revenue-boosting, you could set up an affiliate marketing programme, ask for referrals, use ads and much more.
Enter a Company Voluntary Arrangement
If your business becomes insolvent, you could consider a Company Voluntary Arrangement (CVA). This is an agreement between your business and your creditors that allows you to pay off your debts over a set amount of time, but that blocks any legal action from being taken against you.
A CVA can help improve your cash flow, halt the pressure from your creditors and stop the threat of a winding-up petition. Only a licensed Insolvency Practitioner can create the arrangement and begin the proposal after gathering all the necessary information. A CVA is just one of the solutions to business insolvency. But an Insolvency Practitioner will be able to talk you through your options if your debt becomes unmanageable.
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Image source: Mike Lawrence.