Not all businesses are created equal. There are small businesses, big businesses, online-only brands, brick-and-mortar shops, enterprises with hundreds of employees, and those that are limited to a singular proprietor. 

 

You have one-person startups trying to make it in the tech industry and horse breeders forming cooperatives so they can buy resources at bulk discounts. For some businesses, seed money is an insurmountable obstacle; for others, the only problem is the type of seed they need.

 

Depending on your reasons for needing funding, there are many different platforms you can look into. But, unfortunately, just because you’re launching a startup doesn’t mean you’ll be accepted by every platform out there —you may not even be accepted by one. 

Different platforms have different criteria and limitations, so you should take the time to find out what each platform is looking for before applying.

 

Do your research before applying to any business funding platform. Even if all you need is small-pound microloans, there are still some things to consider, such as application fees and interest rates. It’ll save you money in the long run!

 

There Are Four Main Types Of Alternative Business Funding Platforms:

 

1. Bank Guarantee

The first type (and probably the most familiar alternative business funding platforms) is a bank guarantee. The buyer agrees to put up collateral (usually money) to back the purchase of your goods or services. 

 

The bank will hold the funds until you deliver on what you promised. If everything goes smoothly, then both parties are happy. However, if something happens and the buyer doesn’t receive what they pay for, then it’s up to you to refund their money.

 

In short, a bank guarantee is a conditional guarantee issued by a bank to a borrower, guaranteeing the fulfilment of a contract. The guarantee is issued as an insurance policy for the purpose of taking on credit risk. 

 

A major benefit of purchasing or writing a bank-guaranteed instrument is that it provides alternative funding methods to corporations with limited financial resources. In addition, when used for taking on credit risk, it will provide compensation from the issuer in case default occurs.

2. Crowdfunding 

Crowdfunding can be defined as “the practice of funding a project or venture by raising monetary contributions from a large number of people”. Crowdfunding platforms allow entrepreneurs who need capital to connect directly with investors who want to finance their business.

 

The platform can also consist of many small donations from interested parties around the world. However, unlike a bank guarantee where buyers put up collateral with the hope of getting their money back with interest, crowdfunding donors expect them to make no money (or at least very little). 

 

Instead, people donate because they believe in your cause, product, and service and want to see it exist in spite of any financial setbacks.

 

3. Investors

Investors are people who provide capital for starting a business or expanding it to help create jobs, generate products and services, and grow the economy. 

Investors can be individuals, corporations, banks, venture capitalists, governments, or foundations that finance new firms or expansions by providing equity or loans, which will later convert to equity in case of bankruptcy. 

 

Many investors rely on outside sources of information when selecting investments, such as bank reports and independent rankings from industry groups. In addition, other investment choices such as real estate and gold are popular alternatives to the stock market.

 

4. Peer-to-peer Lending

Peer-to-peer lending (P2P) refers to a financial transaction that occurs between two parties without the intermediation of a third party, such as a bank or other traditional financial institution. 

The “intermediaries” in peer-to-peer lending effectively play the role of investors, and many of them advertise themselves. Their advertised role is also something they can rely on legally as long as they provide borrowers with higher interest rates than those provided by banks and share in the borrower’s credit risk.

 Conclusion

Alternative business funding methods, such as bank guarantee lending and crowdfunding platforms, provide corporations with much-needed capital and help entrepreneurs start or expand their businesses by providing them access to alternative sources of financing. 

 

Peer-to-peer lending provides investors with an opportunity to invest in individuals and small businesses while avoiding banks and participating in a high rate of return within a short duration. 

 

Whereas investing in gold or real estate is seen as another viable investment option that is not dependent on economic conditions or other financial factors like interest rates. 

Also contributing to the success of businesses are investors who provide the necessary capital for the business to create jobs, generate products and services, and grow the economy.