WHY ALTERNATIVE FINANCE- GROWING INFLUENCE IN MODERN FINANCE

WHY ALTERNATIVE FINANCE- GROWING INFLUENCE IN MODERN FINANCE

There were days when the business owners had to wait for the mercy of main street bankers to fund their business requirements. The stringent evaluation process and documentation hassless made these mainstream finance only accessible to the elite businesses. This sparked the need of an Alternative Financing system for the small business owners whose funding requests were mostly spurned by the high street lenders.

A CASE FROM OUR CLIENT PORTFOLIO

A Small business owner approached us in 2017, for a small financing to stay afloat in his retail business. He was desperate for finance as many of the mainstream lenders snubbed him due to his excessive indebtedness. His Credit history was affected as he recently missed out on one of his credit card payments due to the financial stress. When we looked into his business history, we understood that he was a good entrepreneur and some unfortunate incidents that occurred very recently in his Personal life shook him up and he had to withdraw some money out of business to meet those needs. When we evaluated his business and credit scenario, he was a very high risk customer and the funding capital is at high risk of default as it is unsecured. From his perspective, if he did not get the £10,000 to raise the stock then his business will crumble. Generally it is highly unlikely that a Conventional Financier/Lender will extend credit facilities to him, but we trusted his business competence as an entrepreneur and validated his prospects of generating business revenue to pay back the finance. This was the most crucial time of his life and we supported him as a friend with our finances and business advice. This paid off and his business got reinvigorated. He was thankful for our friendly help in the time that is needed the most. Now he is one of our long standing clients and whenever he is in need of finance he gets back to us.

TYPES OF ALTERNATIVE FUNDING

• Unsecured Business Loans – Small Business loans that are available quickly without the need of any collateral.
• Business Cash Advances – Your Historical card turnover is used to gain finance, potentially overcoming some seasonality in a business.
• Secured Business Loans – They are small business loans that are secured on an asset such as a property, which for most business owners is usually their residential property.
• Crowdfunded Loans – Cheaper flexible loans raised from a Crowd of Investors either directly or through a platform.
• Asset Finance – Finance to obtain cars or equipment for the business.
• Invoice Discounting / factoring – Unpaid invoices that has delayed realisation is discounted to get instant cash for boosting the cash flow.
• Bridging Loans – Short-term access to money to allow you to complete on a purchase before the sale, usually of property.
• Commercial Mortgages – When buying property for business or investment purposes.

HOW TO IDENTIFY WHAT IS BEST FOR YOUR BUSINESS?

This is a very vital question of introspection for you as many options listed above may not be ideal for your business. All the options that require collateral will be available only after risking something you own just like your home. So this makes unsecured business funding options popular among small business owners as many of them may be in a path of growth professionally wherein they might not have anything to offer as collateral for secured financing options. Some crowdfunding options may ask for your equity, which is quite compromising your ownership as they will be buying out a share in your efforts and growth. So the business must be prudent enough to choose what suits the best for them. Even Though some unsecured business finance carries some extra cost in comparison to the secured finances, still some businesses use them as they are quick and hassle free.