A Scottish craft beer brewer, Innis & Gunn, is trying to raise £3 million ($4.6 million) by selling "mini-bonds" to investors.
The family-owner independent brewer, which was established in 2003, will use the capital raised to build its first brewery in the south east of Scotland and create up to 35 jobs. A mini-bond is a type of bond aimed at retail investors that often cannot be traded and may not be listed on an index.
Innis & Gunn's four-year fixed-term mini-bond will pay 7.25 percent interest to debt holders each year. The brewer is referring to this issue as a "BeerBondTM."
As with conventional bonds, investors' initial investments will be returned to them at the end of the bond-term, assuming the company does not default on its debt.
Alternatively, Innis & Gunn bondholders can receive a higher interest rate of 9 percent, which would be paid in "BeerBucks"—vouchers that can be redeemed at Innis & Gunn's online store.
In addition, bondholders will receive a 12.5 percent discount on online purchases from the company.
The bonds are unsecured, which means they are not back by an asset, so investors do not have a claim on any of Innis & Gunn's collateral if it defaults.
Innis & Gunn said it had an annual turnover of £11.8 million in 2014, up from £10.5 million in 2013, and estimated it has grown by an average of 30 percent annually over the last 2 years. It sells beer to more than 20 countries around the world.
"The BeerBondTM is all about inviting our fans and the craft beer community to invest to help us build this brewery - and we hope they'll join us on this exciting new venture for Innis & Gunn," said Dougal Gunn Sharp, founder and CEO of Innis & Gunn, in a news release.
"Our state-of-the-art brewery is where we will get even more creative and make epic new beers for craft beer drinkers to enjoy."
The Innis & Gunn mini-bonds are available through their website. This comes as crowdfunding—where a project or venture is funded by large numbers of people, typically through Internet payment—takes off in the U.K. and other countries.
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Mini-bonds differ to conventional retail bonds, which can be traded or sold to other investors.
Nonetheless, mini-bonds are becoming increasing popular with both investors and issuers, as they offer higher rates of interest compared to traditional savings accounts and companies are an alternative means of raising capital.
In February 2015, the U.K.'s Financial Conduct Authority reviewed the U.K.'s crowdfunding market and released a warning stating: "It is important for prospective investors to understand the risks. Mini-bonds are illiquid and can be high risk, as the failure rate of small businesses is high."
