The Beauty of a Fixed-Income Interest Rate for Investing in Small Businesses
One of the best features for both small businesses and investors looking to support them that’s baked into Honeycomb is the fixed-income interest rate. Read along to find out more about the fixed-income interest rate and what’s so special about it - and what it means for you as a small business investor!
*Disclaimer: this is not investment advice and should be used for educational purposes only. Investing is inherently risky and investors should be prepared to lose some or all of their initial investment.
What is a fixed-income interest rate?
In the world of lending, there are different types of interest rates. Many of them are variable interest rates, which means that they’re based off of a benchmark called the prime rate. Usually, a business with a variable interest rate will be paying the prime rate plus a specified interest rate spread based on the level of risk involved in the loan. The prime rate fluctuates based on target rates set by the Federal Reserve, which means that the business could pay more in interest or less, based on the Fed.
What does a fixed-income interest rate mean for investors?
To put it simply, the static nature of a fixed-income interest rate means that when you invest, you lock yourself into a steady source of income for the period of the loan.
For example, if you choose to invest $1,000 in a small business’s crowdfunding campaign on Honeycomb that has an interest rate of 12%, you know that your quarterly disbursements are expected to be the same over the repayment period.
What other reasons are there to invest in small businesses?
Aside from the fixed-income interest rate, there are a number of different reasons to invest in small businesses.
For one, investing in small businesses is a great way of generating passive income. If you’ve got some extra money in the bank that you would rather like to see work for you, why not put it to work in a small business?
Also, when you invest in small businesses, you can make an impact with your investment. Honeycomb offers campaigns run by women-owned businesses and minority-owned businesses and also campaigns that make environmental impacts such as zero-waste refill shops and organic, family farms.
With a fixed-income interest rate, you know what you’re getting
And when you invest in a small business, you also get the added knowledge that you’re helping a small, local business grow with your investment. Learn more about investing in small businesses on Honeycomb, and when you’re ready, check out campaigns funding now to get started!