Small business bonds: a new way for DC residents to invest locally

If you were one of many who made an effort to put a little extra in the tip jar over the past 18 months, DC has a new way you can further support local businesses.

Mayor Muriel Bowser, the DC Office of the Deputy Mayor for Planning and Economic Development and community investing group SMBX are partnering up to launch DC’s Rebuild Bond program, via the Equitable Capital Access Fund.

The goal: allow local patrons and investors to put their money directly into the businesses in their neighborhood.

It works like this: instead of borrowing from the bank or government a la PPP loans, business can apply to borrow from a community of investors made up of, well, their community. Interested local investors can pledge as much or as little as they’d like, and are repaid through SMBX (CFO Services Group in DC and Garrett Music Academy in Owings, Maryland are already listed on the marketplace site). DC government is investing $500,000 in the program, which will specifically target Wards 5, 7 and 8, and it says the investment will fuel $5 million back into the city.

Interested businesses can reach out to and submit their financials to SMBX about receiving an investment, who will then determine if the applicant is able to pay back the investment and qualify for the loan. After qualifying, SMBX will make sure the privately-held businesses are publicly traded on its platform and regulated, which program director Annie Eser said will mean taking care of paperwork with the US Securities and Exchange Commission, and also marketing the business out to the potential neighborhood investors.

Although Eser encouraged any and all businesses to apply, she told Technical.ly they’re specifically looking for those that are partners in the community.

“When we look at small business owners, we’re looking at people who are as interested in reinvesting in the community as the community is in reinvesting in them,” Eser said.

According to SMBX, businesses can apply with no origination fees, and for a bond at a rate that either matches or is lower than the Small Business Administration’s, plus no private lending fees. Qualifying businesses can raise anywhere between $25,000 to $250,000, although Deputy Mayor for Planning and Economic Development John Falcicchio said that businesses can take part in the program more than once to raise even more.

Falcicchio said that the city is taking part in the program to help businesses go beyond surviving the pandemic. It will also be reaching out to businesses and BIPOC business owners located in Wards 5, 7 and 8, he said, by working with local groups like the Black Chamber of Commerce and Hispanic Chamber of Commerce to get the word out to businesses and local investors.

We're looking at people who are as interested in reinvesting in the community as the community is in reinvesting in them.

“Businesses that have survived the pandemic are now thinking about not just how they sustain, but how they grow their business,” Falcicchio said. “What we do is get this opportunity in front of them to actually get their neighbors to support them.”

In addition to marketing and fundraising, SMBX will also take care of any technical needs of applicants, like accounting, language assistance or general support. The focus on business growth, Falcicchio said, will hopefully mean local businesses hiring more DC residents, as well.

“We want to make sure, coming out of the pandemic, that we don’t lose that character that makes DC unique,” Falcicchio said. “SMBX allows independent, small businesses to take capital from those who want to see them succeed anyway. If you’re already a customer, you’re more likely to want to be an investor because you understand the business and you like what the business does, so you want to see it grow.”

Eser added that this cycle of local investment can also help grow overall wealth in the city by keeping gains and prosperity close by. While being a patron of local business helps, she noted, becoming an investor in one takes things one step further.

“We see the cycle of wealth changing and prosperity,” Eser said. “I think a partnership where instead of going to traditional resources for lending, you’re able to get that directly from the community and you’re able to repay the community…both parties feel like they’re able to be invested in one another. It’s a closer relationship than just being a customer at a local coffee shop.”

Rebuild Bond is accepting applications now, and the first businesses available for investment will be announced in the coming weeks.