In the age of algorithms, artificial intelligence and machine learning, many people forget that behind the technological advances, data and numbers, there are people. The same is true when it comes to financing. When we invest our money, we do it in something or someone. That is why more and more people want to take an active role and decide how and in what their money is invested.
The author Joël Dicker wrote in one of his most famous novels that «life is a succession of choices that must then be made.» Therefore, where we invest our money is a relevant decision. Because with it, we are allowing a certain business project to be financed to the detriment of another.
The different forms of alternative financing allow small investors to play a role in business financing and give them the ability to decide how and in whom they invest their money.
Throughout this article, we will discuss how alternative financing represents a paradigm shift that empowers investors and allows them to contribute to the success of some business projects.
You decide how, when, where and why you invest
As we have already pointed out on more than one occasion, one of the keys to alternative financing is the ability to act that is attributed to investors. Regardless of their size.
For example, if a saver registers in Inversa Invoice Market, he can start investing his money from only 20 euros. In addition, he will have the credit information, the operation’s profitability, and the name of the entity that seeks to finance their invoices.
With all these data, the investor can decide how to invest his money. For example, whether to diversify it into several invoices from different companies or deposit it in a single invoice. When he takes out the product. Or, more importantly: why does he do it – just for the return? Or also to support the company?
We are therefore playing in the realm of micro-decisions. Or, to put it another way, the actions that small investors take to employ their money in the way that most closely matches their goals and desires.
And also who you invest in
Opting for alternative financing mechanisms allows investors to choose the economic activities and the type of projects they are most interested in. They can also decide to which specific company their money will go.
Through crowdlending, a loan can be arranged between multiple small investors and a business that needs to obtain liquidity to carry out its operations, meet its expenses, make investments or expand into new markets.
As we said at the beginning of this article, behind the numbers, there are people. Naturally, therefore, investments impact the operation of the companies that obtain liquidity and the lives of those who lead and/or work in them.
Alternative financing lets investors know the companies in which they invest their money. Putting faces to the numbers behind their investment and the return they get for it.
As we always say, crowdfactoring and other forms of alternative financing are based on the idea of people investing in people.
Use your money to make a positive impact on society
The increased decision-making power of small investors translates into the fact that they can autonomously decide which business projects they will and will not invest in.
Alternative financing services differ from other investment products, where the money is managed in an opaque manner, and the only benefit is a return.
Investors who opt for alternative investment channels such as crowdfactoring not only get the most out of their money but also contribute to providing a company with liquidity and, therefore, facilitating its access to the financial resources it needs to carry out its business strategy and operations successfully.
Moreover, by knowing which companies or professionals are financed, investors can introduce values such as sustainability or the generation of employment and wealth at the local level into their decision-making. Thus, an investor may prefer to invest in a company whose economic activities positively impact society as a whole. For example, it develops a technology that is beneficial to health. Or because it employs a large number of workers in a rural area that is combating depopulation. Or because it transforms waste into new products, supporting the circular economy.
The reasons are manifold. And so are companies capable of generating wealth, being sustainable and socially responsible.
Throughout their life cycle, these projects need to obtain financing to manage each of their development phases. Investors are essential for them to obtain it.
It contributes to the success of companies and the generation of wealth
Precisely, one of the great attractions of alternative financing for investors is that they obtain a juicy return for their money and other intangible benefits, such as the satisfaction of contributing to the success of the companies in which they invest. Or, on a more general level, they can contribute with their financial micro-decisions to transforming the production and consumption model, doing their bit to build a more sustainable world.
Although profitability continues to be a central theme in contracting any investment product, it is undeniable that we are experiencing a major change in the desires and wishes of people who wish to invest their money.
The challenges we face (climate change, the demographic challenge…) and the opportunities before us (artificial intelligence, robotization…) are already transforming the world of finance and the way we invest.
Companies’ values, ability to generate wealth while being sustainable and commitments to labor are increasingly valuable assets. And elements that condition the micro-decisions of small investors who, through alternative crowd financing (lending, funding, equity…), can take sides in the direction of the economy and society. A set of multiple micro-decisions can be decisive for an entrepreneurial project’s success or failure.