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Alternative financing: The importance of obtaining liquidity in the short term

Blog
27 October 2022
Alternative financing: The importance of obtaining liquidity in the short term

Winter is just around the corner. And with it looms an uncertain macroeconomic scenario: Will energy prices escalate to record highs? What will happen to inflation? Will the ECB approve further interest rate hikes? While waiting for time to resolve these questions, alternative financing platforms can become key allies for companies, making it easier for them to obtain liquidity in the short term and helping them to generate profits during Black Friday and Christmas.

Why is it so important to be able to finance quickly? In such an uncertain environment, where changes occur at high speed, a business may have liquidity needs, both to deal with unforeseen events and to make investments that result in greater economic benefit.

Faced with the bureaucracy of the traditional banking system, online alternative financing platforms, such as Inversa Invoice Market, offer agile mechanisms so that businesses can obtain the financing they need or want in the shortest possible time.

Below, we will discuss how alternative financing can help companies obtain liquidity in the short term and successfully overcome economic ups and downs, in such unpredictable times as the ones we are living in.

Complex quarters for the economy and society

The main international organizations warn us that the last quarter of 2022 and the first quarter of 2023 are going to be complex. The arrival of cold weather and the reduction of sunshine hours will increase gas and electricity consumption. The war in Ukraine seems far from over. And the euro zone's main economy, Germany, is on the verge of recession.

All these factors will have an impact on the commercial activity of businesses and will pose a challenge for companies in the real economy.

In this socio-economic context, alternative financing models such as crowdlending or crowdfactoring can become financing avenues for businesses to respond quickly to their financing needs and adapt to the changes that occur.

In addition, we must bear in mind that inflation continues to register figures not seen since the 1980s. This has a direct impact on the saving, spending, and investment capacity of families, but also companies.

Alternative financing models such as crowdfactoring can play an important role in terms of inflation. Why? Factoring protects against inflationary processes since you have the money in advance and it has not been devalued yet, so you do not lose purchasing power.

At a time like the present, with some raw materials rising in price almost weekly, it is not the same to buy the necessary materials for the activity of a business today as in one or two months.

Short-term liquidity to react quickly to challenges...

It is easier to adapt to change if companies and the self-employed have the liquidity to deal with it, or at least have different ways of obtaining it.

This is where alternative financing platforms come into play. In extremely short periods, a company can apply for financing and obtain liquidity from investors.

The agility of the process serves to provide certainty in an uncertain landscape. If a company needs liquidity in the short term, it can obtain it through alternative financing platforms.

For example, if a company that manufactures ready meals has problems with one of its most important machines and needs to invest a large amount of money to fix it, it can turn to alternative financing marketplaces to obtain liquidity with which to face this unforeseen event, without its accounts and its financial stability being affected. So you can turn to crowdlending or finance the invoices you have issued to the stores and supermarkets that sell your products but have not yet been paid.

Unforeseen events are just around the corner, but the rise of alternative financing opens up new ways to deal with them successfully and reduce their repercussions to a minimum.

Alternative financing: The importance of obtaining liquidity in the short term

... And to make the most of the holiday season.

Despite macroeconomic uncertainty, the last few months of the year are also one of the key times for thousands of companies. Black Friday and, above all, the Christmas campaign is crucial for the commercial performance of many businesses. There are companies that during November and December experience a significant peak in their sales that plays an essential role in closing the year with profits.

The increase in sales also means an increase in costs as more raw materials, goods, and services are purchased. For example, a shoe store that experiences a huge increase in demand for its products during Black Friday and Christmas needs to purchase a larger quantity of shoes and slippers from its distributors in advance and during these months. This means, therefore, having the liquidity to undertake these purchases before being able to convert them into sales and, therefore, into economic income.

Alternative financing platforms allow companies to obtain liquidity in the short term to be able to increase their stock to make the most of Black Friday and the Christmas campaign.

Let's consider another example, this one focused on the catering industry. A catering company increases its turnover considerably during December. Since many companies hire its services to organize their Christmas lunches and dinners.

To provide such services, the company must purchase raw materials, pay salaries and assume other expenses such as the cost of gasoline. Since many of the invoices it issues will not be collected until January 2023, it has to meet its rising expenses before revenues come in. Thanks to an alternative financing platform such as Inversa Invoice Market, you can obtain liquidity by financing some of those invoices you have not yet collected.

People helping people at key moments

Given what we have been unpacking throughout the article we can conclude that the next few months present many uncertainties, but they can also serve for companies to increase their revenues and maximize their profits.

Being able to obtain liquidity in the short term will be one of the pillars that will allow many businesses to squeeze the possibilities of Black Friday and Christmas without suffering any kind of imbalance in their accounts.

As is popularly said, "it takes money to make money". There is no point in a company offering top-quality goods or services at a highly competitive price if it cannot afford the costs involved.

Alternative financing makes it possible for these companies in the real economy to overcome the vicissitudes of the market and take advantage of all the opportunities it offers them in such an important period as the final part of the year. How? By facilitating channels for investors to finance these businesses.

One of the most important characteristics of the different alternative financing models is that they make it possible for small savers to invest their money and make it profitable in companies that make up what we know as the real economy. Projects that generate wealth and employment.

In other words, we are talking about people investing in people at times of special importance.

In short, the possibility of obtaining liquidity in the short term is one of the great advantages of alternative financing for companies. And in these months it is even more important, both because of the challenges of the economic context, as well as the commercial possibilities that Black Friday and Christmas bring with them.

Alternative Financing companies crowdfactoring investors real economy
Inversa Team
Inversa Team

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