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This article was made possible by the fine folks at SMBX.

Last year a new financial system launched right here in San Francisco.

A company called the SMBX, which dubs itself “the world’s first Small Business Bond marketplace”, quietly opened for business, and quickly helped the beloved San Francisco-based knife shop Bernal Cutlery raise $140,000 to fund its expansion. Notably, it did so by helping Bernal issue an interesting new kind of financial security to Bernal’s own customers, social media followers, and other people in the Bernal network.

They call it The Small Business Bond.

What’s a Small Business Bond?

At first glance the Small Business Bond is nothing remarkable: it’s sold, or “issued” by small businesses to people who want to buy and hold them. Much like a loan, it pays its holder monthly principle and interest. And yet like a bond, it can bought and sold, or “traded”.

And now Degrees Plato, the Oakland-based tap room, bottle shop, and kitchen, is doing it too.

So what?

Let’s put the Small Business Bond in context:

1.  Today small businesses that want to grow usually take out loans from a bank.
2.  But bank loans are basically just banks taking our bank deposits (i.e. our money) and lending it out to small businesses.
3.  And yet when small businesses pay back these loans by making monthly interest payments, banks keep the profits earned for themselves.

However, we know that:

1.  Businesses dislike bank loans because they take too long and cost too much. And likewise, people are presumably not that excited about the idea of ‘funding’ their banks with their bank deposits.
2.  So the SMBX created The Small Business Bond, which now allows small businesses to bypass banks and borrow money directly from people who want to invest in them, i.e. their customers, Instagram followers, etc. And as investors we can now lend money directly to businesses we know and love, and keep the profits earned by lending out our money.

Is this not totally obvious and fucking brilliant at the same time!?

Be the Bank

As Bernal’s co-owner Josh Donald put it in this Instagram post:

‘As you all most likely know we are in the middle of a big expansion…and are of course raising capital to do so. We are excited to be doing so with the [SMBX]…. We are super proud to be the first business offered through the SMBX and love the idea of allowing our customers and community to be the bank and be active participants in our growth. We could have taken out private financing [to fund our growth] but chose to engage and elevate our community and most importantly keep the profits from financing charges with them.’

In other words, Josh is more or less saying to Bernal’s IG followers: many of you are already our customers, but now we’re also offering you the opportunity to share in the financing profits earned when our business borrows money to grow. To which one of Bernal’s IG followers replied: ‘This is so dope.’

Degrees Plato’s Small Business Bond

Degrees Plato, like Bernal Cutlery, is your quintessential community-based small business. It’s located in the heart of Oakland’s Laurel District, and owners Rich Allen and Mercedes Sperling, who are husband-and wife, lived just a few blocks away. Rich and Mercedes state on their website that they ‘envisioned the café to make craft beer approachable in a safe and inviting space for families.’

The very idea of Degrees’ customers and IG followers buying Bonds issued by a local business where they already go is incredible. The contrast between our current shitty financial system and the financial system SMBX is co-creating with small businesses like Bernal and Degrees, couldn’t be starker.

For most Broke-Ass readers the thought of “big finance” convokes images of greed, corruption, crisis, and individualism. But the Small Business Bond now summons a refreshingly different set of images – knives and beer, friends and family, the joy of buying local, and sharing in the profits earned by financing one’s community.

I don’t know about you but if this is finance then call me a fucking bank and sign me up!

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Broke-Ass Stuart - Editor In Cheap

Broke-Ass Stuart - Editor In Cheap

I've been called "an Underground legend": SF Chronicle , "an SF cult hero": SF Bay Guardian, and "the chief of cheap": Time Out New York, but to those familiar with my work, I'm just "that douchebag who writes books about cheap stuff and drinks a lot".