SME Bonds are debt capital instruments to fund established Australian companies
Non-bank funding| Fixed income 10%+ paid monthly | Diversify your SMSF portfolio | Raise debt capital
SME Bonds Debt Funding
SME Bonds act as a debt facility for the Issuing company. It can include a negotiated interest rate. Ideal capital raising option for vendor finance where the debt can be repaid or refinanced at maturity. Highly beneficial for new business models where the owners do not have sufficient trading history to satisfy the bank requirements.
What is a SME Bond?
A hybrid debt / equity instrument that provides a direct and cost-effective avenue for established companies to raise capital.
How does it work?
Bond investors receive regular interest payments until the end of the SME Bond term and the initial principal invested is repaid in full.
HOW DO SME BONDS WORK?
A SME Bond is an agreement between a company and an investor that the investor will lend the company an amount of money, which the company will repay to the investor at the end of an agreed term. The ‘face value’ of the SME Bond represents the principal amount that the company has promised to pay to the investor and is the basis for the calculation of the interest payable on the Bond. The Issue price is the same; usually is the same as the face value (unless otherwise specified).
While the company is borrowing your money, the company will pay you the investor interest over the term of the Bond. The amount of interest payable on each SME Bond is equal to the value multiplied by the agreed interest rate and paid monthly or quarterly.
SME Bonds may be considered as part of a diversified investment plan. In a balanced portfolio, SME Bonds may offer a higher fixed stream, compared with shares and saving accounts which fluctuate with market conditions and interest rates.
SME Bonds Terms
The Bond investor and Bond Issuer agree on the term, security, maturity date, and if converted to equity at end of the term.
Smart investors use both shares and fixed income to diversify.
Choosing the right mix in your SMSF or investment portfolio considers your time to retirement, tolerance for risk, and your expected investment returns.
SME Bonds for Growth
- A new source of financing on the debt capital SME side. The Basel III regulatory banking measures have placed a squeeze on lending, and already impacting on SME’s seeking finance globally.
- As a result growing companies continue to source alternative capital sources and a SME Bond is private finance that fills the gap.
- SME Bonds funding for acquisition finance or refinancing of expiring debt. Well known brand name have the advantage when placing bonds backed by a balanced financing structure.
SME Bonds for acquisition
- Seller could offer SME Bonds as Vendor finance for franchises, management buyouts or acquisition. Suit most industries like logistics, energy, automotive and consumer sectors.
- SME Bonds are ideal as funding alternatives for companies too small to tap into the Corporate Bond market and want to invest in a self-sustaining cash-generating asset.
- The SME Bond rate is negotiated around the terms of the acquisition or buy-out and converted to equity or refinanced. Can use company assets as security.
Why use SME Bonds
- You have NO security to offer the bank, or cannot get approval
- No funds to acquire an established business
- You want a legal structure that is documented
- You want to negotiate flexible terms with the seller
- You need to establish trading history for lending approval
- You want to use short-term bonds to acquire commercial asset
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Fees and charges apply to PREPARE and ISSUE your SME Bond
SME Bonds as Small-Scale Offers
Accessing alternative capital by issuing a SME Bond is a simple and legal method to raise money from the private debt or equity market through a small-scale offer. Accrutus Capital provides the legal framework and services for you, the Issuer of the Bonds, and assists you in the preparation of a compliant information memorandum about the business opportunity that investors will need to make an investment decision.
SME Bonds are Promissory Notes
A SME Bond (promissory note or note) is a written promise, legally enforceable; to pay on demand, or on one or more specified dates, a specified sum. The note sets forth the terms and conditions of the loan arrangement between the individual or company (issuing the SME Bond(s)) and the buyer or investor. The term ‘SME Bond’ is interchangeable with the terms ‘Promissory Note’ and ‘Note’. SME Bonds are issued under the Bills of Exchange Act 1909
Bond guidance from ASIC & ASX
To provide a general overview of HOW BONDS WORKS visit ASIC’s guidance is called ‘Investing in corporate Bonds’, and can be found at the MoneySmart website. ASX’s guidance is called ‘Understanding Bonds’ and can be found at Bonds Product page.
SME Bonds issued from unlisted public companies NOT traded on the ASX in Australia. However, there are SME Bond exchange platforms specially created in Europe that trade in SME Bonds.