By Ayan Mitra
When we at CrowdBnk started to think about venturing into mini bonds, I knew we needed a strong, stand-out business for our first deal. Hambledon Vineyard delivered in every sense. Our first ever mini bond for the award-winning English sparkling wine producer was obviously attractive and the issue was a phenomenal success, quickly raising £3.5 million.
Investors were no doubt drawn to the secured bond not only because it offered them an eight per cent return in cash per annum, plus the chance to convert their investment into equity at maturity, but also because they’ll receive bottles of fizz each year to toast their – and Hambledon’s – success.
I believe this is just the tip of the iceberg in terms of what these bonds can achieve for Britain’s businesses – and investors. In my opinion, the attraction for people looking to invest is obvious when one considers the risible rates currently afforded by conventional savings.
Many also say they enjoy feeling genuinely engaged with the companies involved. And companies are persuaded to fundraise in this way by the lower fees involved, the impressive range of investors available through platforms like ours and the rigour we apply to the investment process from start to finish.
There are plenty of other businesses keen to take up the mini bond opportunity. Next up is the LMSL Group. The family-owned firm has recognised how London’s center of gravity has been shifting eastwards for some time and it now owns more than 400 rental properties in the East of the city, generating over £2.7 million in rent annually.
Next month we’re issuing its Mini Bond, a five-year, fixed-term bond with a value of up to £10 million. Interest is accrued at ten per cent gross per annum, payable in cash monthly, giving investors a regular income stream. Plus, the bond is secured against LMSL’s current development of Grade II-listed Barking Magistrates’ Court into 37 stylish homes for tenants.
Then, there’s the “BeerBond” issue by Scottish brewers Innis & Gunn. For a minimum investment of £500, investors will receive cash interest at 7.25 per cent annually for at least a four-year fixed term. CrowdBnk is now helping it to get the £3 million total needed to build a new brewery, bottling line and barrel store under one roof in South-East Scotland.
And I’m pleased to say we’ll have yet more secured bonds to announce later in the summer, too. Many of the companies involved have big ambitions both for business growth and the sums they intend to raise.
Mini bonds are proving themselves applicable to so many varied and interesting companies. Sports venues, brewers, restaurateurs - even that British stalwart John Lewis - have recognised the merit of borrowing directly from investors. And it’s got the big institutions genuinely rattled – and rightly so.
Some are warning of the risk involved in investing this way and that naive investors will inevitably lose out. Investment is a risky business by definition, but that’s why we describe our bonds fairly, thoroughly and clearly, as the regulator recommends, so the public understands the nature of the investment and that their money is tied in until maturity. Other established City firms are more savvy and I know some are looking at ways of getting in on the peer-to-peer act. Good luck to them, I say.
In my mind one thing’s for sure, we’ll all be seeing far more mini bonds in the coming months and years and in an ever greater range of areas and industries. And the joy is the public can have a material role in the growth of these great British businesses. As Hambledon’s owner Ian Kellett said: “Crowdfunding our mini bond has been really important to us so that we might share our journey with as many people as we can.” I’ll happily raise a glass to that.
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Investing in unlisted securities carries a high level of risk and you may not get back all or any of your initial investment. The secondary market for such shares is highly illiquid. This means that any investment you make may not be easily sold or exchanged for cash without a substantial loss in its value, and in some cases may not be readily sold at any price. Investors may lose all their capital. Past performance is not a reliable indicator of future performance. The tax reliefs referred to in this blog are those currently applying or expected to apply. However, investors should be aware that tax reliefs can change. Their applicability and value will depend upon the individual circumstances of a given investor, and investors should seek their own independent professional advice on their particular tax situation and the application of such tax reliefs prior to making any investment.