In the wake of Global Economic Crisis of 2008, Alternative financing started to get a pace. Today, it is an established financing device that is readily leveraging businesses around the world. Indeed, agree or not but Alternative Lending is giving banks a run for their money.
However, alternative Lending industry though has gained a lot of traction and reputation in the recent years; there are numerous widespread misconceptions about the technology. Undoubtedly, these myths are affecting the industry on a wrong side. Therefore, let us take a look at the some of the most common misconceptions revolving around the Alternative Financing Industry.
5 Common Misconceptions about Alternative Financing
Businesses that can’t make it to Traditional Financing Choose for Alternative Lending
Traditional financing has been around the corner since eternity. Still, it has a reputation of being the last resort for businesses and not the first choice; which of course is dead wrong. There are so many firms and companies, who choose to go the alternative lending way for the mere reason of saving themselves from the cumbersome paperwork. Plus, traditional financing ways do not require substantial collateral deposits. Therefore, it is a great win-win choice for every business house these days, irrespective of its size.
It may look expensive in the short run, mostly due to the higher rate of interests, but, over the long term, it turns out to be a sensible choice. Alternative lending processes the transaction faster, and companies get the needed funds on time. That helps in faster execution too. Besides, companies that go to banks for loans require keeping collateral with them. That means blocking a big part of their assets with a third party.
May Harm the Credit Score
Loans taken for your organization through the alternative lending does not appear on your personal credit report. Therefore, there is no way it is going to do any harm to your credit score. Enterprises should just take enough care that funds generated through alternative lending are not going into their personal files.
It is for Firms in Distress
Big multinationals like Whirlpool, Coca-Cola, Phillips, and so many others are picking up on crowdfunding rather actively. That explains that it is not only the new ventures or thirsty SMEs taking the alternative financing road, but established brands too. Besides, crowdfunding is no more seen as a tool that is used for raising funds only. However, it is widely used as a tool for concept validation too.
Alternative Lending is an Unregulated Industry
All the platforms that are operating in the alternative lending arena are heavily regulated by the financial watchdogs of the governments. There are regulations and guidelines in place that needs to be followed; along with mandatory clauses and restrictions. Besides, governments throughout the globe have agreed to the potential of this industry; and, are in the process of refining the alternative lending policies for encouraging the industry to reach newer heights.
This article is written by the Crowdfunders Editorial Team. In Asia, Crowdfunders.Asia is a leading portal on providing news related to crowdfunding, start-up, property and business. It is operated byCoAssets.com.
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