Will King likes to present himself as the plucky underdog. His shaving-tackle business, King of Shaves, has cleverly positioned itself as the small but superior product doing daily battle in the world’s bathrooms against the likes of Gillette and Wilkinson Sword. He has thrived thus far, able to claim that one million men now use his products.

This week he pushed the image of David pitched against Goliaths a notch further, announcing he was eschewing the sharp-toothed creatures of the private-equity world and the unloved high-street banks and instead asking ordinary members of the public for £5 million in fresh capital.

King of Shaves is to offer £1,000 bonds to up to 5,000 retail investors, who will receive 6 per cent interest per year and — King is a relentless marketer — free shaving products. Bonds are traditionally the preserve of big beasts — blue-chip companies or governments that have the track record and resources to gain an impressive credit rating, and big institutional investors that can afford the usually huge minimum investment levels. The foray into this world by a tiddler like King of Shaves is unheard of.

Strangely, though, there seems to be nothing preventing small firms marketing bonds to the public with minimum fuss and no great expense, so long as they are non-transferable. Mr King reckons the whole exercise will cost only £50,000 in fees to accountants BDO Stoy Hayward and lawyers Memery Crystal. The company has bypassed the normal rules that require offers of securities to more than 100 people to be accompanied by a full prospectus. All it has had to do is get the approval of an organisation authorised by the Financial Services Authority — in this case BDO, which has put Mr King’s financial projections under the microscope and is satisfied he will be able to meet interest and principal bills.

In the offer literature, there are risk warnings but no information on the history of the company, no profit and loss account, no balance sheet, and no details on how the bonds would rank in the event of a winding-up. The company has no track record, having only recently been demerged from a larger business. According to Mr King, it hasn’t even yet been decided how much bank finance should be apportioned to the new business.

Alas, no rational investor could possibly invest in the bonds on the basis of such sparse data. The upside may be a chunky 6 per cent income (for comparison, mainstream bank three-year bonds now yield about 4 per cent), but the downside is that investors are locked in for three years. They could also lose every neck-stinging penny if King of Shaves were to fail.

There is no reason to think it will but also no reason, in the literature, to be assured it will not. The one comforting aspect is that BDO is putting its reputation on the line and would look silly if the bonds were not honoured in full.

King of Shaves has already had 10,000 visits to the website offering the bonds and received “hundreds” of applications for them. It would be nice to believe it is blazing a new trail, one that could be followed by other smaller businesses fed up with their banks. The opportunity for small investors to cut out the middle man and lend directly to companies would also be a refreshing first.

But the firm looks unlikely to spawn many copycat bond issues. First, bank finance may be a bit scarce, but most viable small to medium firms can secure bank finance at little more than that 6 per cent, and in some cases less.

Second, investors may see such bonds as falling between two stools. Those looking for an alternative to a bank deposit will see them as a bit too risky. Those prepared to take a punt may be deterred by the paucity of the maximum return. For this kind of risk, they might expect equity-style rewards.

Use the razors but leave the bonds in the spongebag.

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