Figuring out how to finance your small business is harder than ever in today’s unstable economy. Because of the tough financial climate, qualifying for traditional loans is difficult and this option is naturally becoming unpopular.Meanwhile, demand for alternative finance is steadily growing, making it one of the fastest expanding industries around the world.
So, what do you need to know about this new generation of funding options? Here are 3 facts about alternative finance that could turn you from a skeptic to a dream-achieving small business owner.
Truth #1 P2P marketplace lending is the biggest market within the alternative finance sector.
A recent study from the UK shows that peer-to-peer (P2P) business lending and consumer lending rank a top the 2014 alternative finance market breakdown by platform. While P2P lending is gaining popularity worldwide, it accounted for around £1.3 billion in lending in the UK alone, where alternative financing first burst onto the scene. As public awareness for alternative financing grows, similar great results are also observed in US and Canada markets. Powered by a huge wave of serious demand, this particular sector of the alternative finance market has become business-approved and is enjoying wider reach.
At the same time, only half of small and medium-sized businesses are aware of P2P lending. The tremendous growth which we’re seeing around the world comes from less than 15% of businesses, and this means that P2P lending shows great promise and huge potential going forward. This sector of alternative finance is sure to make an incredible impact, as it reaches an even bigger portion of businesses and more people dare to use it.
If you’re interested in finding more about P2P lending, here’s some basic information to start with:
- P2P Business Lending is a great solution for those aren’t able to obtain secure funds elsewhere. In fact, this is one of the main reasons why small businesses turn to this form of alternative financing in the first place. Experience shows that businesses which manage to secure such funding will likely experience a significant growth in profit after qualifying and using it. This is a great perk of P2P Business lending which shouldn’t be ignored or forgotten. It’s thus highly likely for your business venture to succeed if/when you use P2P business lending.
- P2P Consumer Lending is not far behind P2P business lending. The main appeal of this consumer-centered method of alternative finance is its lower interest rate compared to bank loans. Even though some customers may be able to get bank loan offers, they often still choose to go with alternative financing because of more favorable loan conditions. This is one of the main factors driving general public approval of this and other alternative financing options.
Truth #2 Businesses actually prefer invoice financing to bank loans.
Invoice trading is yet another possibility open to small and medium-sized business, as well as to startups. Do you have outstanding invoices from your customers and need help finding capital to fill their orders? A huge number of companies in the same position prefer invoice financing to bank loans. One of the biggest advantages is that you receive your capital in a matter of minutes, without a credit check nor lengthy paperwork. The invoice itself is enough leverage to support a loan that will help you fill the orders and finance your business while you wait to receive your clients’ payments.
Here at FundThrough, we specialize in providing invoice-based alternative finance for B2B startups and small businesses. We provide a secure and fast line of credit with no minimum, based on your outstanding invoices. As entrepreneurs ourselves, we know the importance of finding quick funding in moments of potential growth, and we’re dedicated to helping your business succeed. Our low-interest loans have an edge on traditional bank loans and simply work better for B2B companies.
Truth #3 Crowdfunding is the fastest growing market within the sector, and it's worth the hype.
Most companies that rely on crowdfunding use it to expand their businesses from small to medium-size, or to fund a great idea and seed startup capital. The great thing about crowdfunding as an alternative finance tool is that by raising the funds you need for your business, you also manage to get your brand out there, find out how bulletproof your idea is, and get valuable feedback and insight.
Crowdfunding simply gets the job done, without you having to go to a financial institution, apply for money, or provide extensive documentation to a loan provider. With a successful campaign, you get the money you need on top of expanding your idea’s publicity and reach. Sure, it’s a real challenge — the success rate of crowdfunding campaigns is rather low, at 10%-20% — but if you manage to win over the regular people visiting the platform, you’ll also likely be able to sway investors in your favor in the future. If the campaign doesn’t work out, you’ll at least receive valuable insight which you can use to improve your idea before trying again.
Crowdfunding’s top platforms are continuing to gain popularity and traffic, so don’t think it’s only a fad. As a proven and growing alternative financing tool, crowdfunding is worth the hype!