The alternative source funding is the new buzz making word of the financial sector. As we know today various financial instruments are laid just in order to simplify the borrowing and lending transactions in order to further enhance the growth of the business.
In recent years, the alternative source of funding has become a very popular. Especially, after the global financial crisis of 2008 which was even worse hit than the Great Depression of the 1930s, when the banks had stopped lending personal loans to individuals or even to new business ventures. This had caused much trouble to the masses; this was when alternative platforms of raising funds were encouraged and grew popularity. Many called it the next generation of banking. Soon there is an evident growth of online peer-to-peer portals, crowdfunding, bitcoins and other FinTech based industries. To know more of the alternative source of finance we need to first understand the two basic platforms other than banks and bitcoins.
Equity-based Crowdfunding Platforms:
Especially focusing more towards the startup industry a company mainly generates its funds by offering a part of equity in exchange for money. So, a crowdfunding platform acts as an intermediary between the company and the investors. For startups traditionally private equity, angel investors and VC has been the primary source to raise funds but with this new concept, it has broken the older norms by offering equity to the general public to raise money. This has enhanced worldwide growth of startups and SMEs.
Peer-To-Peer Lending: – A step further to borrow is through P2P lending and borrowing platforms. It is an online based concept wherein lenders and borrowers meet on an online portal. The lenders make profit by gaining interest on the amount they have lent. The borrowers on the other hand have to pay far less amount of interest on their borrowing as compared to banks interest on loans. Online P2P companies seek to connect interested lenders with borrowers by further eliminating extra cost and intermediaries like banks.
Since banks see new startups as riskier and loans can be charged at a higher rate, such portals are an attractive option for borrowers to raise money. Moreover, the threat of failing credit score and regular credit monitoring is eliminated. For startups, there are a lot of options available in order raise the required money, yet the traditional method and the most authentic still remains the same. For every business, the primary source of funds or working capital comes from banks. Almost even after two decades of online funding techniques, Bitcoins, and other services, the prima source of raising funds are still banks for maximum percentage of the population all across the globe. However, banks often put up high collateral asset demand and for SMEs and other micro business it is extremely difficult to put up with such demands.
Also, once the funds are raised, making returns with such exorbitant rate of interest can become a challenging task for them. In comparison to bigger and established companies, banks often charge a higher rate of interest from smaller companies as they view such loans as risky. Online P2P sites seek to connect interested lenders with borrowers, thereby eliminating extra intermediaries and costs.
While making returns on the funds that were raised there may be some default in payments, but with the help of Lenders Choice Credit Solutions you can easily fulfill your financial needs without keeping a check on your credit score. In order to maintain your creditworthiness, you need to maintain a good credit score, Lenders Choice Credit Solutions helps you stay carefree and by helping you in daily credit monitoring and sending you three credit score reports by Experian, Equifax and TransUnion.