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5 reasons to diversify a company's financing channels

Blog
24 January 2023
5 reasons to diversify a company's funding streams

Exclusive and lifelong relationships are increasingly difficult to find. And we are not talking about love and affection, but about business. Today, it is clear to entrepreneurs and those responsible for the finances of a business that diversifying their company's financing channels is a strategic bet of great value.

Relying solely on a specific entity to provide the financing that the company needs throughout its life cycle is, on the other hand, a very risky bet. This is because financial sector entities and businesses have their objectives, rhythms and phases. And they do not always go hand in hand.

Diversifying a company's financing channels involves, to a large extent, combining traditional banking products with obtaining additional liquidity through alternative sources of financing.

In this article, we will dissect 5 reasons to diversify a company's financing channels and opt for alternative financing methods such as crowdfactoring.

1. Freedom to contract the financing products that best suit the needs of the business.

If there are few financing channels, the possibility of finding products that fit the company's characteristics, objectives and needs is reduced. On the other hand, if the business has a wide range of financing channels, it is more likely to find the products that best fit what it is looking for.

The classic "take it or leave it" is a thing of the past.

The bank concentration experienced in recent decades reduced the financing channels available to companies in the real economy. However, the rise and consolidation of alternative financing have brought an increase in supply. In addition, the range of services available to businesses has also become more varied.

As a result, companies and professionals can plan their accounts and financing needs with greater freedom without having to depend solely on a specific entity or financial service.

2. Increased ability to obtain liquidity

As a direct consequence of this broadening of the players involved in the financial sector, companies' ability to find financing sources has increased.

Take, for example, a company that manufactures parts for various companies. It wants to invest in new machinery to optimize its processes, but to do so, it needs financing.

Nowadays, you can not only go to one or more banks to obtain a line of financing, but you can also assign invoices on a crowdfactoring platform, such as Inversa Invoice Market, apply for a loan in a crowdlending marketplace or get financing through crowd equity.

So you have more options to get the money you need to optimize your operation and keep growing.

Combining different financial products with different features and benefits can be a great idea. Diversifying financing channels gives companies more room for maneuver.

3. Agile access to financing

One of the handicaps of traditional financial products is the time taken by banks. For example, a loan is not obtained from one day to the next, but it is necessary to go through the whole bureaucratic process to contract this service.

On the other hand, alternative financing platforms stand out, among many other things, for their agility. For example, from the moment a company uploads an invoice that it wants to assign to Inversa Invoice Market until it manages to finance it and obtains the liquidity it needs, only a few days can pass.

Considering that we live in an increasingly fast-paced world, this is not a trivial issue. Moreover, the economic, social and political context can change from one day to the next. As a result, a challenge may arise unpredictably, or a business opportunity may emerge that requires the company to have the money to face it or take advantage of it.

The world is moving fast, and companies must be able to move with it. Or even to anticipate its movement.

5 reasons to diversify a company's funding streams

4. Adapting to change and seizing opportunities

In line with the previous reason for diversifying financing channels, there is another: the possibility for the business to adapt to transformations and make the most of them.

The history of humankind shows the capacity of our species to adapt to the environment and to transform it to its benefit.

This can be transferred to the business world. For example, large companies that enjoyed enormous commercial success were overtaken by changes to which they could not adapt.

For a business to be versatile and malleable, more is needed for it to have professionals with vision and talent. It also needs to have the financial resources to enable it to undertake transformations. Or, to put it more poetically, to evolve simultaneously as the world.

Moreover, opportunities arise daily that a company must be able to seize. Let's return to our previous example. A company wants to replace its machinery with a more modern and productive one. If a supplier offers an unlimited period that could lead to fantastic savings, the company must have the financial resources to close the deal. The operation can be completed successfully if it has a fast and agile means of financing at its disposal. On the other hand, if it lacks such a channel, it may be overtaken by the competition. As the saying goes: "there are trains that only run once in a lifetime."

5. Increased independence

Freedom is one of the basic values of our society. We all want to be as free as possible to make our own decisions. This goes beyond the individual and is also true in the business world.

Companies want to be free to manage their entire life cycle independently. To this end, they must have the financial resources to implement their decisions. There is no point in a business being able to understand its market and detect what it can improve in its business processes and performance if it lacks the money to move from analysis to action. From premises and objectives to results.

If a company can diversify its sources of financing, it will gain independence. It will no longer depend solely on a single actor.

Alternative financing has expanded the number of entities participating in the financial sector, increasing the financing channels for companies and reducing their dependence on the traditional banking sector.

Independence allows companies to plan their accounts more freely and to contract financial services that fit their needs and objectives. Complementing traditional financial products with the services of alternative financing platforms is a successful recipe for meeting the challenges of the present and the future with solvency.

alternative finance Alternative Financing companies crowdfactoring
Inversa Team
Inversa Team

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