New Providence mini-bond pays 8.25% for four years
Providence Bonds, UK subsidiary of the international factoring business Providence Global, has launched its first 'mini-bond', which promises to pay 8.25% for four years.
The firm is hoping to raise £25 million through Independent Portfolio Managers Ltd, which it will use to finance growing small and medium-sized businesses in the UK and internationally.
Unusually, the Providence Bond is secured against the underlying assets of the bond issuer. The money raised will be invested in small and medium-sized businesses internationally at first, but within the UK as the firm builds relationships with British companies.
Recent research found that a third of UK economic growth was generated by fast-growing small businesses.
Providence Bonds will act as a guarantor to ensure bondholders get their money back in case anything goes wrong.
Paul Everitt, director of Providence Bonds, says: "Government studies show that more than 99% of private firms in this country are SMEs employing up to 249 people. They are the engine of the UK economy.
"These firms need capital to survive and thrive, and the banks are in general failing to provide it. In the meantime many savers are being offered a below-inflation return on their cash savings. This mini-bond is allowing us to help with both problems."
Although the bond includes safeguards including those mentioned above, investors should be aware that it is not covered by the Financial Services Compensation Scheme. This means that investors will not necessarily be due compensation should things go wrong.
This article was written for our sister website Money Observer
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).