Vendor Finance through the issue of a ‘single’ Vendor Bond.

Vendor finance is often used when a business or other high-value asset is being sold but the purchaser due to a lack of sufficient collateral security is unable to obtain the total amount of funds required to settle the transaction. In that case, the Vendor may agree to issue a Vendor Bond to finance the deal.

Raising debt funding through the issue of a ‘series’ of Bonds

A company or small business can issue a ‘series’ of Bonds to raise up to $2million or more in debt funding for business development or expansion, or for any other worthwhile purpose! The Bond issuer might call these Bonds ‘Development Bonds’; ‘SME Bonds’; ‘Special Project Bonds’; ‘Vendor Bonds’; ‘Bearer Bonds’, or any other name that might best describe the purpose for which they are being issued.

Banks not lending!

Bank lending is no longer the right tool for financing SME’s. Since 2008 Global Financial Crisis, the implementation of *Basel III, the Hayne Royal Commission into the banks and more recently the Global Corona Virus pandemic, the SME financing framework has changed dramatically! Bank lending has been shrinking & will reduce further.

Small to medium sized enterprises (SME’s) are an essential part of the economy, it’s where innovation, growth and job creation come from. However, SME’s are facing huge challenges in terms of funding, banks have come under the increasing pressure of Basel III. lending has tightened, and businesses have seen their traditional source of funding dry up.

*Basel III is a comprehensive set of banking reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector & was developed in response to deficiencies in financial regulation revealed by the global financial crisis of 2008.

Video: How money is created.

You can no longer rely on the Banks! 

SME Bonds offer an innovative instrument that is simple and cost-effective. It enables start-ups and early stage companies as well as established businesses to source funding.

An issue of SME Bonds provides a way for established businesses with strong cash flow to obtain debt finance without watering down the existing investors in the company. Investors receive regular interest payments until the end of the bond term and receive their initial investment back at the end as well.

A Vendor Bond provides a convenient way to Vendor finance the sale of personal property such as a (leasehold) business or goods & services.

Debt/Equity hybrid for business development funding.

Issuing a ‘series’ of Bonds as hybrid debt/equity instruments to raise funds. This can provide a simple and cost-effective way for a business to source funding for growth, or to cover off the expenses involved in an equity capital raising exercise.

Bonds act as a debt instrument but can be converted to equity. They can include an interest rate. However instead of paying out cash the Convertible Bonds are convertible into equity securities at the discretion of the investors where they can receive equity shares, or real estate bricks & mortar, rather than cash when the debt matures.

Bonds can be purchased by **retail and sophisticated as well as professional investors with fixed rate terms of 1 to 3 years for established businesses.

Investors Note: Bonds are not without risk to your capital. Interest payments and forward-looking financial projections are not guaranteed.

**Issuer Warning: Currently, in Australia, the limit on Bonds sold to retail investors is set by the Corporations Act at 20 in any 12-month period not exceeding $2million.

Personal Loans

If you’re thinking about making a loan for personal reasons or a business loan, it’s 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.

A Bond is a written promise, legally enforceable, to pay on demand, or on one or more specified dates, a specified sum and sets forth the terms and conditions of the loan arrangement between the Lender and the borrower.

A Vendor Bond provides a convenient way to Vendor finance the sale of personal property such as a (leasehold) business or goods & services.

Background to founder of Small Business Bonds

Tony Puls: Tony was the founding Chairman of the Australian Small Scale Offerings Board Limited (ASSOB), one of the World’s first crowdfunding platforms which raised in excess of $150,000,000 for over 300 start-ups and early stage businesses before he retired from that role in 2015.

See World Bank report – pages 18 & 46 where it references ASSOB as being the World’s longest running most successful equity crowdfunding platform. Tony has had over 30-years experience in raising funds for SME’s and and holds a wealth of information on the subject. He is recognised as one of the founding fathers of crowdfunding globally. In 2016 Tony was granted a life membership of the Crowdfunding Institute of Australia (CFIA).

SME Bonds Launched by Chairman of ASSOB: Download Article

Banks not lending to business! Puls said “even with the current low interest rate environment, the strict prudential (bricks & mortar) requirements of the Banks on business lending make it impossible to borrow on the merits of the business alone.”

Connect with Tony on Linkedin.