Worthy Bond, created and managed by Worthy Financial, Inc, is a private bond that pays a flat 5% interest. Worthy Financial uses the investor’s investment and loan it out to small businesses. Basically, the bond is used for lending money to small businesses that need it, in exchange for a decent return. Worthy Financial Inc. was founded in February 2016 and is based in Boca Raton, FL. The CEO of Worthy is Sally Outlaw.
Worthy Bonds isn’t a bond fund, but more like a crowdfunding platform for small businesses looking for financing. It provides that financing using SEC-qualified bonds, which are private, corporate bonds that don’t trade on public markets. The company works by the “Main Street instead of Wall Street” motto.
When investors invest with Worthy Bonds, investors earn a return that’s fixed at 5% and can get started with as little as $10. While the bonds have a three-year maturity, they can be cashed out at any time.
Worthy Bonds Features
|Accounts Offered||Individual, businesses, non-profits, trusts and IRAs|
|Investments Offered||Mostly private bonds to small businesses, with a small amount in other investments for diversification|
|Maximum Investment||$50,000 for accredited investors; 10% of annual income for non-accredited investors|
|Investor Accreditation||Both accredited and non-accredited investors|
|Access||Online, mobile apps|
|Customer Service||Phone, email and live chat|
|Account Protection||Bonds are not FDIC insured but are secured by 2/3 of the borrower’s assets|
Worthy Bonds Info
- When investors invest with Worthy Bonds, investors can invest in private bonds with a term of 36 months each. The bonds are SEC-qualified obligations of Worthy Peer Capital, Inc. Bonds are purchased in increments of $10, with a maximum investment of $50,000 (5,000 bonds).
- Under SEC regulations, the company can issue no more than $50 million in securities per year. That means once the company has sold $50 million in bonds in any calendar year, bonds will no longer be issued for that year.
- The current interest rate is 5%, which is not determined by any specific market factors. For instance, Worthy Bonds doesn’t adjust interest rates based on actions taken by the Federal Reserve, changes in the prime rate, or fluctuations in other interest rate benchmarks. The current rate — which the company indicates it has no intention of changing — is based on rates charged to borrowers for loans that secure the bonds.
- Interest is computed daily, though it will only be credited once it reaches a full $0.01. And if you’re wondering how Worthy Bonds makes money paying 5% interest to investors, they do so by charging a higher interest rate to business borrowers.
- Speaking of which, Worthy Bonds are not FDIC insured the way bank investments are. However, each bond is secured by assets owned by the borrowing business. The company limits loans to about two-thirds of a business’s inventory or commercial receivables. It lends less money than a business pledges in assets as security for the loan.
- For additional security, a portion of your investment is directed into real estate, U.S. Treasury securities, and certificates of deposit. This is done to create greater diversification beyond small business loans. The company discloses that these other assets may comprise as much as 40% of each bond’s value.
- At the end of 36 months, you can choose to either renew your bonds, cash them out, or even do a mix of both. You can also withdraw your money from the bonds at any time, penalty-free.
Is it Safe?
Investment risk in Worthy bonds is mitigated by doing primarily secured lending and lending across industries, different geographies and different types of loans and by lending at a significant discount to the collateral value. Therefore, the risk to your investment is relatively low. The interest rate is good as compared to the low-risk profile. The bonds are not insured. However, Worthy Bonds mitigates risks by securing company assets to back up its loans. Investors investments are asset-backed. If loan default occurs, inventory will be sold off to recover the amount. Worthy Bonds is not a bank which means the bonds cannot be insured by the FDIC. However, like other investment firms, it is registered with the SEC. That said, of course ultimately Worthy bonds are an investment and any investment is subject to loss so you would only want to invest an amount you are comfortable investing.
Therefore, for investors who are looking at alternative investment and want to back small businesses, this can be a great way to do it.
NOTE: To join Worthy Bond, see link below.