A BRIEF INTRODUCTION ON ALTERNATIVE ECONOMICS
After the financial crisis from 2007-2009, many businesses have struggled to improve their credits as they aim to reach their targets. This is due to their encounter with conflicts such as exposure to bad debts and other challenges, which have resulted to a hesitant attitude towards extending credit. Given this background, other forms of raising funds rose to popularity hence, backup economics was discovered. This trend has flourished greatly over a short span of time, expanding in different regions by over a hundred percent.
Crowdfunding This is the first method of fundraising wherein resources from several individuals are gathered, usually through the internet. This has aided many entrepreneurs collect millions to finance their businesses. Basically, the primary development that gave rise to this is Jumpstart Our Business Startups Act. Initially, it was limited to accredited investors only, but it was recently altered to include a wider range of people. There are still restrictions present as of now, in terms of the investment amount based on net worth.
Benefits of this strategy include reaching a wider range of investors and assistance in risk management, especially since additional expenses may still come up besides the needed capital for the business. For instance, this could be used for validation when it comes to acceptance in the market, as it provides as it allow a test of potential audience.
However, the downside of this is seen in rigid windows for raising funds, plus varying rules and fees for each platform.
P2P lending Peer-to-peer lending first came into the picture during a time when savers are having conflicts in generating satisfactory yields, and potential borrowers are having difficulties in getting assistance with their finances. This initiated participants to create a market that will offer credit for those who are needing it.
In this system, borrowers will have to fill out an application and quickly receive a response plus borrowing terms after. Aside from the advantage of a moderate timeframe, you also get to have your secured funds in a short order.
For lenders, they can earn higher interest rates in platforms under P2P, and have the option to choose who they want to have a negotiation with, be it in the form of auto loan or credit card consolidation.
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