Mini-bonds are most commonly offered by smaller unlisted companies who would like to raise funds from investors.

Companies such as the Jockey Club, King of Shaves and Rhino Rugby are firms that have issued mini-bonds to cover costs associated with expansion and growth. For example, the Jockey Club issued a mini-bond to help it pay for the development of a new grandstand in Cheltenham.

Mini-bonds tend to offer higher returns than bank savings accounts, although are associated with two major risks:

  • They are not covered by the Financial Services Compensation Scheme – that means if the company goes bankrupt, an investors will not receive outstanding interest payments.
  • There is no secondary market available and commonly non-transferable – this locks investors in until maturity of the bond with no way out until expiration.