Boutique online hotel directory Mr & Mrs Smith is going down the crowd funding route offering its members the chance to earn guaranteed interest if they invest in the firm.
Emails went out this week offering up to 9.5% interest every year for four years to support its future growth plans including a new Smith & Family brand that will be launched later this year.
Prospective investors have just eight weeks to register their interest in buying a four-year Smith Bond or until the company reaches its £5 million target.
They can invest from £1,000 with no upper limit and earn 7.5% annual interest in cash or, if they prefer, 9.5% in loyalty money to spend on Smith hotel stays.
Mr & Mrs Smith claims the move is a first in the travel industry following similar successful intiatives in other retail sectors by Hotel Chocolat, John Lewis and Ecotricity.
The bond is available on a first-come, first-served basis, and the initial term is four years, after which investors can claim back their investment.
If investors choose to opt for interest payments these will be paid out twice a year otherwise they will receive loyalty money which can be used at any of the firm's 900 hotels.
The email from founders James and Tamara Lohan says: “In the 10 years since our first book came out, we've grown from being 'the boutique hotel guide people' to becoming a booking service and travel club.
“We've expanded into new countries, opened offices in Australia and the US, built apps, made albums, won our fair share of awards and been incredibly lucky to have built such a loyal group of customers.
“However, we believe the team and the brand can do much more. We've begun work on several exciting developments, including new sister brands (Smith & Family will be launching later this year), and to help us raise the funds to develop them, we're introducing the Smith Bond.”
Luke Johnson, chairman of Risk Capital, an FT columnist, and the entrepreneur behind Pizza Express and Giraffe, said:
“As economic conditions have deteriorated, owners of small businesses feel less confident about raising equity or borrowing money and it also certain that bank credit has got harder to obtain, and is more expensive than it was.
"It is not surprising therefore that the entrepreneurial minds behind many SMEs are seeking more enterprising methods of raising debt capital without the help of the banks.
"Crowdfunding may prove a useful addition to the repertoire of places founders can go for money. "it's interesting that America has recently passed the JOBS (Jumpstart Our Business Startups) Act to encourage this form of investment too.
"In the UK the nascent yet growing SME bond market is enabling some SMEs, particularly those with powerful brands, to leverage their brand loyalty and raise funds for their further growth.”
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