The point need not be overemphasized because startups, SMEs, and creative projects around the world have been using alternative funding to launch new products and services. The recession after 2008 caused banks and credit unions to become more rigid with their lending requirements. Focusing on loans north of £500k left a huge funding gap for “main street” small businesses without access to capital.
While the recession created a need for alternative funding, a good number of reasons account for its recent popularity. Let’s explore just a few.
Due to stricter policies and criteria for obtaining traditional bank financing, entrepreneurs are turning to alternative funding for the solution. Alternative funding now comprises a huge array of services and platforms. These include peer-to-peer lending services, crowdfunding platforms, and pension funding to name a few. Finance entrepreneurs are building culturally contextualized alternative funding services, making it accessible to a broad range of small businesses.
Legendary stories of alternative funding providing growth capital for small businesses within minutes are common. Nevertheless, this is beyond the point, which is that alternative funding can simply be accessed much faster and more conveniently. Traditional methods get you a five-man detail loan committee that may take weeks or months to underwrite a loan. Alternative funding, occurring frequently online, can get you sorted within hours or days – directly from your desktop.
According to an article published in the Wall Street Journal late last year, a huge problem is equity, not debt. While there are many equity-based alternative funding schemes, the more popular peer-to-peer lending and crowdfunding forms are not. This gives growing businesses access to small, short-term funding that they need without losing equity. What better option could there be for a budding entrepreneur?
While there are several alternative funding schemes emerging, there is still a low level of awareness about the sector. Still, the fact that even traditional investors are backing alternative funding is adding gravitas to the buzzword. Join us in 2016 to learn more about alternative funding at Business Funding Show ’16. Get a head start, download our free Business Funding Guide.
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