What are mini bonds?

Mini-bonds are a form of debt that allows investors to invest in a company and receive a fixed return over a set period of time, with the initial investment returned at the end of the prescribed duration.

Mini-bonds allow you to lend money directly to businesses. They are in effect IOUs which the companies sell to investors.

Typically they have terms of three to five years, and investors earn regular interest payments during the life of the mini-bond. At the end of the term, the investors typically receive back their initial investment plus a lump sum of interest, although some bonds offer rewards in another form such as discounts of their product.

In the news

Over the past few years, companies as diverse as Hotel Chocolat, Naked Wines and John Lewis have issued mini-bonds to as a way of securing debt-based finance. More recently, CrowdCube launched one for the Eden Project. Some offer rates such as 7% or 8% interest to investors, or in the case of Naked Wine - 10% gross in wine credits.

How flexible are they?

Unlike traditional bonds, mini-bonds cannot be traded and are not listed on any market. This means they must be held until they mature and cannot be cashed in early, which can make them a less flexible choice for investors.

What are the risks?

The regulatory requirements are much less stringent for mini bonds than for listed bonds. This is good news for the businesses issuing them as it saves them a lot of paperwork and reduces the hassle of dealing with banks.

However, for investors this means an increased degree of risk; if the issuer goes bust, then the investors will have to join the queue along with all the other creditors. Investments in mini-bonds are also not protected by the Financial Services Compensation Scheme. They are generally unsecured, non-convertible, untradable and do carry risk, so a return on investment is not guaranteed.


The current increase in popularity of mini-bonds stems from the recent financial crisis, which saw many smaller companies unable to raise capital from banks. Instead, some turned to equity crowdfunding to raise funds, while others began to offer mini-bonds directly to the public.

Given the current poor rate of return on savings, many investors have welcomed the opportunities that mini-bonds present. The promised returns are usually considerably more than those offered by a standard bank or building society savings account. Plus, some companies offer innovative ways to pay returns to their customers – Hotel Chocolat’s return included monthly chocolate box selections for investors.

Making investors into true stakeholders

Another reason companies offer mini-bonds to individual investors is that these can be a way of engaging with their customers. Some companies hope that by using mini-bonds, they can encourage investors to become true stakeholders in their business and strong advocates of the brand. Look at it this way, and mini-bonds could almost be called loyalty bonds.

Alternative investments

If you're in the market to diversify your portfolio and aren't sure whether mini-bonds are for you, not to worry – there are plenty alternatives on the table.

Alternative investments include investments in tangible assets, such as art and wine, as well as financial assets, like cryptocurrency and private equity – basically anything falling outside the purview of the more ‘traditional’ investments: cash, bonds and stocks.

View alternative investments