Earn up to 5% investing in veteran owned businesses (NOT FDIC insured)

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StreetShares - 5 Interest Bonds
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StreetShares - 5 Interest Bonds
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StreetShares - 5 Interest Bonds
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StreetShares - 5 Interest Bonds
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Website said: Common Questions
Q. Who can purchase Veteran Business Bonds?
A. Veteran Business Bonds are open to all Americans who support veteran-owned small businesses. You do not have to be affiliated with the military or a veteran.

Q. Is there a minimum veteran business bond purchase?
A. You may purchase Veteran Business Bonds in increments of $25, starting at $25.

Q. How much can I invest in Veteran Business Bonds?
A. You can invest up to $50,000.

Q. Can I invest more than $50,000?
A. Accredited and institutional investors may invest more than $50,000. Click here to learn more.

Q. When do I earn the interest?
A. You begin earning interest within a couple of days of your Veteran Business Bond purchase, as soon as your funds clear the banking system.


 

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Wonder how risky this is..

Basically, this looks like Prosper/Lending Club, but with the borrowers limited to military veterans, and investors automatically buying a slice of a portfolio.  Unless you're willing to sacrifice risk-adjusted return to support veteran businesses, lending money to small businesses at 5% doesn't seem like a very attractive proposition. 

StreetShares unveils business bonds for the masses at LendIt 2016
NEWS PROVIDED BY
StreetShares
Apr 11, 2016, 10:48 ET
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SAN FRANCISCO, April 11, 2016 /PRNewswire/ -- After getting historic approval from the U.S. Securities and Exchange Commission (SEC) in March, StreetShares will unveil the nation's first publicly-accessible small business funding community at the LendIt USA 2016 Conference in San Francisco. A demonstration of the technology will take place on Tuesday, April 12, 2016 at 9:50 a.m. in the Atrium Theatre of the San Francisco Marriott Marquis.

The StreetShares product will pay a fixed 5% interest (regardless of the performance of a particular underlying loan), is ensured by a provision fund, and provides liquidity as investors can access their funds at a 1% fee.

The initial offering is limited. The product launch is available first to military members, veterans, and their families. Investors may initially invest up to $1,000 each. The funds are used to back loans to small businesses that the investor wishes to support, such as those owned by military veterans.

"Marketplace lending to small businesses has been limited to wealthy individuals and institutional investors," said Mark L. Rockefeller, CEO of StreetShares. "We wanted to create a simple product to allow all Americans to earn solid returns while supporting small businesses they believe in."

Rockefeller, and former Capital One Senior Executive, Mickey Konson, both military veterans themselves, co-founded StreetShares on the theory that social loyalty between borrowers and investors could be used to decrease the risk of lending. They call the concept "affinity-based lending."

StreetShares has quickly ballooned to nearly 10,000 small business members. Investor and borrower members on StreetShares are matched by affinity status (e.g., veterans funding loans to veteran-owned businesses). StreetShares technology manages the interaction between investors and borrowers to maximize community loyalty and increase loan repayment rates. StreetShares' first "affinity" group is the military and veterans community. StreetShares has partnerships with over 30 veterans organizations to reach this population. Currently over 60% of StreetShares loans are made to veteran-owned businesses. StreetShares plans to expand their technology to other affinity groups as well.

About StreetShares: StreetShares is America's small business funding community. Borrower Members get fast, affordable loans, and Investor Members earn solid returns and support businesses they believe in.

This is not an offer or solicitation to invest in StreetShares. A copy of the product offering circular and relevant company filings are available at sec.gov.

I'm a veteran and I have to ask -- why would anyone think lending to veterans is more or less risky than lending to any other group of random strangers?

I didn't read it as questioning the lending to veterans. I think we were wondering how safe StreetShare's bonds are. StreetShare is an unprofitable company but that's true of most startups.

Here's the offering document:
https://www.sec.gov/Archives/edgar/data/1607838/0001571049160116...

They don't mention veterans much in their business plan other than "We continue to expect to rely on the veterans affinity networks for borrower acquisition and investor growth." which may or may not mean the goal is to truly support/serve veterans.

Basically StreetShare is borrowing money at 5% and then loaning it out at 9-40%. They are guaranteeing the payment but the guarantee is only as good as the company making it. I'd say they can't really walk away from this debt without closing down the company.

And for the geeks that understand this...I love the idea of a Regulation A+ bond! Not dumb equity crowdfunding which has almost no liquidity. They claim to have spent $275,000 in accounting and legal fees to get this qualified by the SEC...but now they can raise up to $50 million.

cestmoi123 said:   Basically, this looks like Prosper/Lending Club, but with the borrowers limited to military veterans, and investors automatically buying a slice of a portfolio.  Unless you're willing to sacrifice risk-adjusted return to support veteran businesses, lending money to small businesses at 5% doesn't seem like a very attractive proposition.
  This may "look" like Prosper or Lending club from how it is marketed or what the business does but you're investing in a small business bond where the company guarantees/promises the payment (by the nature it being a bond, i.e., loan, by definition.  In this case you are lending money to a company to do whatever they want with...they just happen to be a finance company and marketing to make business loans to veterans.

It's a completely different kind of investment after i did some research   Maybe or maybe not a similar risk profile.  I think also these will be qualified dividends tax-wise, but I'm not sure.  If true it's taxed at a max of 20% instead of a max of 39.6%.

Suckers bet. Play on the "veteran" thing. Scam to get money.

myfrogger said:   
cestmoi123 said:   Basically, this looks like Prosper/Lending Club, but with the borrowers limited to military veterans, and investors automatically buying a slice of a portfolio.  Unless you're willing to sacrifice risk-adjusted return to support veteran businesses, lending money to small businesses at 5% doesn't seem like a very attractive proposition.
  This may "look" like Prosper or Lending club from how it is marketed or what the business does but you're investing in a small business bond where the company guarantees/promises the payment (by the nature it being a bond, i.e., loan, by definition.  In this case you are lending money to a company to do whatever they want with...they just happen to be a finance company and marketing to make business loans to veterans.

It's a completely different kind of investment after i did some research   Maybe or maybe not a similar risk profile.  I think also these will be qualified dividends tax-wise, but I'm not sure.  If true it's taxed at a max of 20% instead of a max of 39.6%.

  
Interesting, thanks for the clarification. 

removed

For the fiscal year ended June 30, 2015, we had revenues of  $94,574 and operating expenses of $2,019,606. As of February 4, 2016, we had originated 317 loans since the inception of our business in July 2014 for a total principal balance of more than $6.7 million. We currently have 1 loan that has charged off and 5 loans that are 90+ days delinquent.

alamo11 said:   For the fiscal year ended June 30, 2015, we had revenues of  $94,574 and operating expenses of $2,019,606. As of February 4, 2016, we had originated 317 loans since the inception of our business in July 2014 for a total principal balance of more than $6.7 million. We currently have 1 loan that has charged off and 5 loans that are 90+ days delinquent.
Here's the most recent 1-k for more up-to-date information:
https://www.sec.gov/Archives/edgar/data/1607838/0001571049160191...

alamo11 said:   For the fiscal year ended June 30, 2015, we had revenues of  $94,574 and operating expenses of $2,019,606. As of February 4, 2016, we had originated 317 loans since the inception of our business in July 2014 for a total principal balance of more than $6.7 million. We currently have 1 loan that has charged off and 5 loans that are 90+ days delinquent.
  
HA.  2M in operating expenses and 6.7M in loans.  Someone gets a decent payroll, and when it collapses they sell the loans to another servicer.

this is an odd one. Too risky to be a fixed-income replacement and doesn't pay enough as an equity investment. And this is FWF. Since when do we invest non-trivial amounts in stuff to "support" it rather than optimize our return/risk?

One thing to note is that they actually have a different offering for accredited and institutional investors:

https://streetshares.com/landing/pro-investing

Who's in first-loss position and what is rhe capital structure?

The first loss position are always the shareholders....but I didn't dig into the financials enough to know where on the "position list" this is among the other loans they surely have. I wouldn't say to invest to support things---as in the marketing ploy in most equity crowdfunding deals because there is ZERO plan to ever allow your capital to be drawn out.

You could invest in a bond or subordinated note by a larger company through regular brokerage channels, but you have interest rate risk if you want to sell before maturity. Here they are allowing you to take your money out any time although they'll charge you a 1% fee if you don't do it on the anniversary window of your investment. But if interest rates continue to rise, and thus your bond or other debenture falls in tradable value, you're still able to sell it back to Streetsmart for 99-100% of your investment.

I'm not advocating investing into a startup unless that's your thing...but I personally like their pitch a whole lot better than the typical pitch out there...."I want you to invest with us...No we have no idea if/when you'll ever get your money back. We just hope to sell out and have a big exit someday. And we're raising money at a $10MM valuation even though we've never made a dime....and your shares might get diluted if we need to raise more money."



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