Struggling to get a loan? Or maybe the interest rate is too high? Or maybe you’re too scared to take out a loan with the EGP going down and your anxiety going up! Maybe you’re looking for an alternative? Well, we’ve got you covered!
What is alternative finance or funding? It’s basically your way of getting money outside of the traditional banking methods. They’re your best source of money if you’re a person that banks wouldn’t usually trust enough to loan you money. By that I don’t mean sketchy, I mean someone with vision and ambition who lacks funding but at the same time cannot guarantee a 100% success rate for his business. So basically, young people!
Alternative finance fills the gap left by traditional finance systems. It is also part of the financial inclusion movement by allowing people to have access to useful and affordable financial products and services that meet their needs. Whether you’re a business owner or just in need of money, let us explore one way alternative finance can help you with!
I think this one is self-explanatory, but just to make sure I’m gonna tell you what it is! Crowdfunding is simply when a crowd funds your project. There are four categories for crowdfunding; donation, debt, rewards, and equity.
Donation is exactly as it sounds; people give you money out of the goodness of their hearts and because of how much they believe in you and your business. They do not take anything in return for their generosity.
Debt-based contributions are borrowed money that you need to pay back with interest in a specific timeframe. They’re like traditional loans but without the paperwork. Rewards-based contributions are when an investor or a donor gives you money but takes something else in return depending on how much they contributed to your business or project. This could look like a gift bag, freebie, product, or a discount from your business.
Lastly, we have equity. Equity is when you give away a portion of your company in exchange for funding. This is a win-win for all parties, for business owners, you get to keep the money, debt-free. For investors, they get to have some shares in the company based on their contributions. Getting paid in equity could really take you places as an investor, like Beyonce said “pay me in equity, watch me reverse out of debt.”