Advantages of a Mini-Bond

There are many advantages of a mini bond for both investors and the small business. There are many government programs that offer mini bonds as an alternative finance method for smaller businesses that require capital for manufacturing, or other projects. There are also state and local programs.

Investor Advantages

When a bank funds a mini bond they then turn around and sell it or trade it. In this way, a mini-bond works much like a stock. The bonds have a maturity date and you must wait for that date in order to receive maximum payout on the investment. They are typically available in small denominations, beginning with $25 dollars, and increasing from there.

They are considered a low risk bond. In the event that the company who owes the mini bond goes under, the mini bond is usually one of the first things to be settled. Typically, an investor will receive at least their minimum investment back. Another advantage to investors is that the bonds have a limited type of protection. Even with a rise in interest rates, the value of the initial bond amount will stay the same.

Business Advantages

The advantages to a mini bond for a small business are many. They have tax free interest, so the business will get to claim an exemption on the total interest paid. Also, rates are generally lower by one and a half to two and a half percentage points, when compared to conventional rates. This can save thousands of dollars in interest for the business.

Another great advantage is that the paperwork is more streamlined than it is for a conventional loan. The benefits that are offered are usually in line with traditional corporate bond, making mini-bonds profitable.

The advantages of a mini bond as an investor or as a business will give you something to think about. If you can qualify for a bond that will give you less interest to pay, less paperwork to fill out and a great tax benefit then it might be worth it to try them out. The low investment risk to investors can also help the economy. Check into local and government mini bonds when your business calls for expansion or a little more capital. You might be surprised by some of the products that are offered.