Benefits Of Alternative Finance Funding

benefits of alternative finance

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Alternate finance funding refers to non-traditional financiers which are not commercial or traditional banks. Instead, these institutions and individuals use different strategies to approve, disburse, and collect a loan. There are benefits of alternative finance if it is used correctly.

There are multiple ways to raise non-traditional finance: revenue-based funding, working capital funding, unsecured business funding, and junior debt funding.

In many situations there are benefits of alternative finance

1. You Have Multiple Funding Options

Under non-traditional financing, there are multiple choices for the borrowers to access funds. These choices include but not limited to revenue-based funding, working capital funding, unsecured funding, junior debt funding, and many other forms of financing are available.

benefits of alternative finance

So, borrowers have the choice to select from different financing arrangements. The selection of financing strategy needs to be made in line with the needs and capability of the business.

For instance, if the business is confident about revenue-generating ability, it’s advisable to opt for revenue-based financing.

Likewise, if there is an existing debt on the company, it can raise junior debt financing. Similarly, crowdfunding can be a good option if a business owner wants to test public awareness and social acceptance of their product/services.

Given discussion suggests that the borrowers have multiple choices to opt for the financing. And which of the options should be selected is dependent on the business capability and needs of the funds.

2. Financing Criteria Is Flexible

Alternative financiers have flexible criteria to approve financing. It’s the exact opposite of the traditional financing approach, which is strict in terms of approval criteria and funds disbursement.

Further, there is less bureaucracy in the alternative finance approach. Hence, operations and processes are well optimized and efficient.

Likewise, it can be difficult to raise finance for businesses with no tangible asset to offer as security. On the other hand, alternate financing does not generally require assets as a security. Hence, it’s equally suitable for all types of businesses irrespective of their size.

Similarly, a recent survey conducted by the Amicus (financial services group) concluded that borrowers were increasingly turning away from the traditional financing sources.

This was due to increased complexity and lengthy processing time. This time extension led to friction at the borrower’s end and unnecessary delays motivated to opt for quick financing via alternate financiers.

3. Fast Liquidity For Your Business

Alternate financing is expected to bring instant liquidity in business operations.

benefits of alternative finance

The cash funds received can be used for any purpose the business thinks fit. Further, there are no prepayment penalties. Further, it can be great news to consider that no collateral is required to raise the finance.

Similarly, an application process is simple and straightforward. The process gets completed within a few hours. For instance, at specialty capital, you are required to provide some basic details and get access to easy and quick financing.

4. Expert Advice

Especially at Specialty Capital, the alternative finance lenders deeply understand business needs and wants. They are professionals with strong competence to understand the business requirements and which types of funding should be raised.

Further, these financing professionals are expected to have sector-wise understanding and play an important role in the business performance.

5. Cash Flow Management

Alternate financiers ensure immediate availability of financing. With revenue-based financing, borrowers get access to funds within 24 hours.

This type of agility is not possible with the traditional financing methods that involve massive procedural formalities and consume time.

benefits of alternative finance

Hence, with instant cash flow management, the business can efficiently execute strategic decisions like purchasing PPE inventory, paying salaries, and managing other operational activities.

6. Easy Approval

Comparatively, it’s easier to get approval for finance from non-traditional lenders. It’s because banks and financial institutions have rigorous credit score and background assessment criteria.

On the other hand, approval criteria for the non-traditional loan are comparatively relaxed. Hence, these days small business owners are more focused on raising finance via non-traditional sources of finance.

So, why should small businesses opt to raise finance via alternate financing?

There benefits of alternative finance.

However, one of the main benefits of alternative finance is banks require collateral to disburse the funds, and it may not be feasible for small businesses because of limited assets under ownership.

Hence, it can be good to raise finance via alternate funders like specialty capital that value your time and appreciate your business.

Conclusion – Benefits Of Alternative Finance

The financing industry is changing with the increased awareness of information technology (IT) in the modern world. The financing industry has changed, and introduced non-traditional ways to raise finance. The newly introduced ways to raise finance include revenue-based financing, crowdfunding, unsecured financing, junior debt and many more types.

Alternative financing is a blessing for small businesses that comes with wider options, higher flexibility, enhanced business performance, instant cash flow management, easy approval, and cost-efficiency.

There are wider options available for modern financing. However, the business needs to ensure opted way of financing compatible with the business needs and capability.

For instance, raising funds via revenue-based financing can be a good option if the business has strong revenue.

Further, alternate funds providers are experts in the subject matter and have specialized sector understanding. Hence, they can better guide small businesses to raise funding and which type of funding should be raised.

Further, approval of non-financial funding does not require collateral. Hence, it can be a logical approach for businesses that do not have asset base to raise finance via this approach.

Likewise, the overall vetting, approving, disbursement, and collection function is smooth and efficient which makes it easy and attractive for the small businesses.

So, if you are still confused about which funding methods you should opt for, our experts can guide you about the complete process and how you can fulfill your financing needs with minimum cost and higher efficiency.

We make sure to understand strength of your business, and how funds can be used to add maximum value in your business.

Contact us!

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