Investing
Providence bond pays income of 8.25 per cent
Providence Bonds, the UK arm of financial services provider Providence, has launched a mini-bond paying an income of 8.25 per cent per year for investors willing to tie up their money for four years.
The group is looking to raise £25m, which will be used to build the group’s UK business. Providence specialises in ‘factoring’ – a secured form of short-term business funding for small and medium-sized businesses.
Providence buys invoices and post-dated cheques at a discount from companies that would rather not wait the traditional 90 or more days for customers to settle their accounts. It makes its profit when the payments are fulfilled. The funding can help businesses with short-term cash flow problems.
Providence has recently moved its global business development headquarters from the US to London and is in the process of setting up a factoring business in the UK. The Providence bond is secured against the underlying assets of the business.
The Providence bond is not covered by the Financial Services Compensation Scheme. However, the group has appointed an FCA-authorised manager to act as security trustee, who can seize the assets in the event of a failure to fulfil obligations. The parent company is standing as guarantor.
