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What is alternative financing, and how is it altering the funding landscape?

Updated: Mar 14, 2023

Have you come across more alternative lenders lately? If so, you're not alone; players outside of traditional banks are now a part of the evolving financing market.


At Debtworks, we frequently get inquiries about alternative financing and what that means for founders. Our mission is to support founders in making the best decisions and selecting the appropriate financing options for their individual requirements. In order to help you navigate the alternative financing ecosystem as a whole and select the best options for your business, we have put together a quick guide.

What’s driving the change?

To put it in simple terms, it has to do with the recent acceleration in the adoption of technology. The demand for digital services is rising as more people choose to work from home or remotely. As a result, many businesses are often under pressure to keep up with market demands.

In light of the current economic transition, startups need financial resources to adapt to the market and look for expansion opportunities. It is crucial for businesses to have access to working capital. They require this to overcome the obstacles they encounter along the way in the fiercely competitive technology ecosystem.

To meet the demands of founders, new types of financial service providers are emerging, ranging from independent private financing partners to small banks and venture-backed technology companies. There are numerous choices available.

What is "alternative financing"?

Simply put, "alternative financing" is funding that’s available outside of traditional major banks. It gives founders more flexibility and variety in choosing solutions for financial services.

Alternative financing specifically refers to a class of financing products, such as debt and venture capital, that fill in gaps in traditional financial markets. This development is part of a larger movement toward financial inclusion, in which more people have access to established banking infrastructure.

Financial inclusion is about making sure that businesses have access to useful and affordable financial products that meet their needs in a responsible and sustainable way, according to the World Bank.

For instance, how can financial institutions more effectively assist those with spotty credit histories? What about those who cannot obtain conventional mortgages? or businesses that are not eligible for conventional bank loans? ‍

Morgan Stanley points out that alternative financing models are arising due to a market opportunity for individual investors. These models include invoice discounting, subscription-based financing, purchase order financing, recurring revenue-based financing, and many more.

The field is now evolving and expanding. People and businesses have the power of choice over their funding options thanks to alternative financing.

In short, there are many different financial products available. So before settling on a particular solution, it's a good idea to do some research and educate yourself.

Above all, it’s important to work with a financing partner that is committed to your business’ success and evolution over the long term. Founders should never settle for anything less.

To access funding that's easy and tailor-made for your business needs, write to us on connect@debtworks.in.

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