Blog.

5 benefits of alternative financing for investors

Blog
4 October 2022
5 benefits of alternative financing for investors

Increasing investment avenues, streamlining procedures, and reducing payback times are some of the benefits of alternative financing for investors

As Liza Minnelli and Joel Grey sang in Cabaret: «money makes the world go round». Both individuals and businesses need money not only to ensure their survival but also to grow. For money to make the world go round, it is necessary, first of all, for money itself to go round, that is, for it to flow between investors and businesses. This is precisely one of the benefits of alternative financing for investors: its ability to create new investment mechanisms to help savers get a return on their money and companies to obtain liquidity to carry out their business plans.

In contrast to the monolithic traditional financial system, alternative financing advocates bringing investment and financing closer to small savers, the self-employed, and SMEs through technological development. Thanks to platforms such as Inversa Invoice Market, everyone can invest their money in financing companies in the real economy and obtain a profit from this operation.

Today we will discuss the main benefits of alternative financing for investors.

1. Increased investment channels and models

Traditional investment mechanisms are controlled by banks. These have catalogs of similar investment products, both in terms of their characteristics and their profitability and conditions.

This reality has been exacerbated by the bank concentration that has taken place over the last decade, following the outbreak of the 2008 financial crisis.

The reduction in the number of banks has also led to a contraction in the range of investment services available to savers and, therefore, less competition.

Given the scenario we have just presented, one of the greatest benefits of alternative financing is undoubtedly the breadth of mechanisms available to investors to get a return on their money.

Now, if a person wants to invest his or her money, there are multiple channels available beyond banking institutions, such as crowdlending or crowdfactoring platforms.

Thus, the most cutting-edge technological developments are at the service of investors who, from home, can decide to contract safe and profitable investment products.

The increase in the number of players involved in the investment sector facilitates the increase in competition and the profitability of investment products also increases.

2. Multiple investment options

Not only is the number of entities offering investment products increasing, but another of the benefits of alternative financing is the expansion of the catalog of products available to investors.

Thus, a saver can decide to finance the invoices issued by a business through crowdfactoring, obtain shares in exchange for investing in innovative projects through crowdequity or make direct loans to companies in need of liquidity.

This increase in the type of investment products available to savers has the direct consequence that investors are more likely to find products that precisely match what they want.

5 benefits of alternative financing for investors

3. Faster time to invest... and to make a profit.

Bank bureaucracy can be an inconvenience for many investors and a reason for them not to obtain returns on their hard-earned money.

In contrast to the rigidity of banking processes, one of the most important benefits of alternative financing for investors is the flexibility and agility of its processes.

It can take an extraordinarily short period from the time an investor is interested in a product to the time he or she buys it. All this is thanks to digitalization.

For example, in Inversa Invoice Market it is enough for the investor to register on the platform by filling out an online form and uploading the required documentation:

  • Identity document
  • Certificate of ownership of bank account

Within 24 hours the documentation will be reviewed and the account will be activated. It should be noted that all accounts are under the supervision of the Bank of Spain and money cannot be moved without all the actors being duly identified and the origin and destination of the money being known.

On the other hand, obtaining profits is also speeded up. In the case of Inversa, the payback period ranges from 30 to 180 days. In other words, the maximum time to recover the investment is only half a year.

4. Supporting the real economy and the local productive fabric

When a person decides to invest his or her savings, many factors are taken into account. Such as the security of the investment, the profitability, when the interest is collected, or the return period. Beyond these questions, it is also fundamental for many investors to know what their money is going to be used for. Or, in other words, what kind of project they are financing.

Hence, we can point out that one of the benefits of alternative financing is that the investor knows exactly what company he is financing.

For example, a person who opts for crowdfactoring knows which invoice they are investing in and which company or public administration they are investing in.

The same happens when a person finances, through a crowdequity platform, a project in which he will have a stake.

Moreover, this is complemented by an issue that we have to take into account: alternative financing mechanisms allow small and medium-sized businesses to have fast and agile direct financing channels at their disposal.

Seen from the investors' point of view, this translates into the fact that the companies to which financial support is offered are businesses in the real economy. In other words, organizations of modest size are strongly rooted in the territory and contribute to the consolidation of local productive fabric.

The raison d'être of alternative financing and ethical investment is not only exclusively to generate profits for investors, but also to support real economy companies and innovative projects.

5. Investment à la carte: Tailoring products to investors' needs

Given the above, we can draw a logical conclusion: one of the benefits of alternative financing for investors is its ability to adapt to them.

Why is this relevant? In the analog era, investment products were less ductile. This meant that it was savers who had to adapt to the characteristics of the products available on the market. A reduced and similar catalog in the different banks that offered them.

On the other hand, the emergence of alternative financing has meant that the catalog of investment products has expanded.

Moreover, one of the benefits of alternative financing for investors is that it allows small savers to contract investment products. For example, the minimum amount of money required to invest in Inversa is only 20 euros. In other words, this crowdfactoring platform is open to all types of investors, not only to those who have a large amount of money.

In this way, the idea that only people or organizations with large sums of money can invest is banished. And the investment channels are opened to all types of savers, whose desire is to get a return on the savings they have harvested thanks to their efforts while financing companies in the real economy.

Alternative Financing ethical investment investment investors
Inversa Team
Inversa Team

If you would like to contribute to Inversa's Blog as an expert, become a knowledge partner.

Sign in