To be able to realize your plans as an entrepreneur, you generally need financing. It appears that there is enough money available at the moment. But still, the right financing is sometimes difficult to find. Banks do not give at home and other financiers are often difficult to find on the internet. Ever considered alternative financing?
Everyone is familiar with bank financing. These include, for example, the bank guarantee, the bank loan, factoring and debtor financing, the mortgage loan, credit insurance and leasing. But what are alternative methods for fulfilling a financing requirement? Below we describe a few.
We start with the strategic partner. This partner can be either an organization or a person. Consider, for example, a private equity firm. These organizations manage the assets of investors and investment funds in a fund. Private equity firms obtain a share in a company. This way, they can contribute to the growth of the organization with the help of their experience, network and knowledge. In addition, there are so-called business angels. These are often former entrepreneurs who act as informal or private investors. Just like private equity firms, they help organizations grow with the help of their experience, network and knowledge. A business angel fits best with a young, starting company, while a private equity firm generally fits in better with a company that has been around for a while.
In addition to leasing through a bank, there are numerous organizations that offer leasing for company assets, such as company cars, machines or computers. Leasing takes the forms of operational lease, financial lease and private lease. In the IT industry, another, often less well-known form of leasing is emerging. With these lease contracts, it is not the asset (the car, machine, etc.), but the cash flow that forms the collateral for the financing. These parties are willing to finance multi-year contracts with a fixed income stream.
Direct lending is a loan form without the intervention of a bank. This is achieved through funds and financing portals. These funds provide (often subordinated) loans to organizations. In the case of bankruptcy, the other creditors have priority. This form of financing is suitable for organizations that cannot obtain additional financing from a bank, but do generate sufficient cash flow and make a profit. In addition to these funds, you can go to online financing portals for direct lending. The application, the assessment and the payment can be realized quickly. A financier provides a loan for, for example, online credit or online working capital.
Reverse factoring is a specific way of factoring and is also referred to as chain financing. Especially companies that do business with large organizations that have long payment periods can benefit from this form of financing. With reverse factoring you receive a payment guarantee from the buyer for the approved invoices. Thanks to this guarantee, the factor can advance the invoice. This means you don’t have to wait a long period of time to receive the money, because the payment period at these large organizations can run up to more than 120 days. An additional advantage of this form of financing is the lower interest rate that the factor charges on the amount advanced. This is because the large buyers in most cases have a high credit rating. As a result, the risk factor is lower which in turn lowers the interest rate.
With crowdfunding you raise money with the general public. This can be done in various ways. The most common forms are loans, convertible loans, shares, donations, donations with non-financial consideration (for example a product or service) or combinations thereof. A point of attention is that these different forms have different tax consequences. This is something to take into account.
Do you have a financing request? Or are you curious about which form of financing is most suitable for your current situation? Feel free to contact us to see if we can do something for you. Our contact details can be found here.