The Alternatives To Your Economic Business Blues
By Webb WardYou can still hear that catastrophic boom – it’s the sound of 2008’s economic meltdown bringing the global banking institution to its knees. And while banks and businesses slowly recover, the seismic impact of 2008 is still being felt by smaller businesses.
Indeed, in 2011 only 65 per cent of loan applications were successful, down from 90 per cent in 2007, and the situation hasn’t improved in 2014. The mentality is so downbeat that many SMEs have stopped even bothering to tackle a loan application.
But, as banks continue in their reticence to fuel the flames of UK business, alternative financing has stepped in to act as a new and more diverse pilot light.
Alternative financing is essentially an umbrella term covering everything from invoice discounting, crowdfunding, equity crowdfunding, construction finance and even government grants. While it was previously a niche interest, the aftermath of the financial collapse has turned it into a billion pound industry.
The billion pound industry that’s helping you
Crowdfunding is the most obvious barometer for alternative financing’s success, and is also one of the simplest methods to reap financial rewards.
Used primarily by creative industries, crowdfunding works by a business putting their proposal online and requesting donations from the general public. In return, the donators receive some kind of reward and get to see the production of something that interests them.
And the success stories continue to pour in
Legendary singer Neil Young raised more than $4 million to create an alternative to MP3 players; actor and filmmaker Zach Braff gathered more than $3 million to make the film Wish I Was Here; Game developers Double Fine made more than $3 million after floating the idea of a new point and click adventure game.
While these are all high profile cases, the crowdfunding phenomenon is helping give smaller projects – first time filmmakers, broke writers, aspiring game developers – the chance to raise the money they need for financial independence away from banks.
All this shouldn’t put other forms of alternative finance in the shadows. After all, crowdfunding platforms like Kickstarter and Indiegogo can sometimes be nothing more than a spin of the wheel.
More solid forms of alternative finance include invoice discounting, which allows an established business to turn its unpaid invoices into cash, by giving them away to a company. While it won’t let start-ups thrive, it will allow established business the chance to stay afloat.
Because that’s what this is all about, really – as banks shut their doors, businesses have been seeking out new ways to keep their finances, at the very least, ticking over.
With the increasing breadth of choice on offer to the budding business, it’s become clear that, in many ways, the economic collapse has helped enterprisees find a new kind of autonomy away from the shackles of major banks.
So, although you can still hear the boom, its aftermath may just have reaped some positive results.