Business loans have normally been understood as a formula for financing long-term assets, normally being used to purchase assets that our company is going to use in its production process and thus be able to generate more income.
Examples of this could be the purchase of machinery, property, equipment, furniture, etc. or expansion projects. Therefore, the purchase of goods that are not those that we will directly transform or sell to our clients, but that we need for that production process in which we convert raw materials into our final product.
This use has been common due to the conditions that these financing formulas usually entail. They allow us to have a specific amount for the acquisition of these goods, which we will return in instalments that include payment of interest and return of the capital that has been granted to us.
It is convenient because the acquisition of these assets will not generate immediate income, and in this way, we have time to proceed to convert raw materials into income and be able to gradually return the capital.
However, the use of this source of financing should not always be underestimated for the payment of suppliers that provide us with products that we use in our production process. Therefore we could also use this source of financing in the short term if it is used correctly.
If our activity involves, for example, the purchase of raw materials with a very long maturation process (conversion into the final product and sale) and we also have highly concentrated customers, it could be a great idea as a source of financing.
An example of this is a construction company that has a concession with only one client. It is a very long project, and the financing needs are very specific: payment to suppliers of raw materials to be used in the construction process and enough cash to maintain your cost structure until you receive the money from your client at the end of the project.
Such a clear financing need in terms of time and capital could be easily financed by a financial institution through a loan. Now, what possibilities are there to finance business projects? Do you think banking is the only option?
It is not.
In recent years, thanks to the revolution in new technologies and the need for companies to diversify their sources of financing, new alternative systems have emerged.
The financial revolution
Thanks to new technologies, socio-cultural changes and the change of mentality in consumers, new ways of doing things have emerged, more efficient and in many cases, cheaper. This is happening in the transport, lodging or real estate sector. Surely an application that offers one of these services comes to mind. Well now, this revolution is also a reality in the financial sector with the emergence of the so-called Fintech.
A Fintech platform is one that unites finance (Fin) with Technology (Tech), which sells a financial product or service traditionally offered by banks (or not) through a web platform. The philosophy of these platforms is transparency, agility and ease of use, thus managing to breakthrough.
Crowdlending platforms are part of the Fintech sector since it is an alternative financing and investment method by virtue of which companies or individuals obtain financing directly from private investors who lend their money in exchange for a return. Crowdlending platforms act as intermediaries between both parties.