Alternative Funding

Know Your Alternatives

Being in business will always entail a degree of risk, but it should not mean that business owners have to put the family home on the line. Financial advisors can play a key role in ensuring entrepreneurs can fund a growing business without having to take unnecessary risks. All they need to do is consider the alternatives.

Despite the headlines decrying the lack of finance for business over the last decade, there has never been a better choice in terms of the kinds of funding available. This is because, while traditional loans have dwindled, many alternatives have grown and developed to fill the demand from Australia’s SME community.

Some of the key alternative financing options that could make up part of a healthy mix include alternative lenders, crowd-sourced funding platforms, trade finance, invoice finance and supply chain finance.

Enabled by fintech and modern multichannel methods, these alternatives offer excellent possibilities for every kind of business and should be considered by any SME owner looking at funding. However, the options can seem daunting at first, and advisers therefore have a key role to play in pairing their clients with the best option for their business. 

Top Five Alternative Funding Methods for SMEs…

                             …and which Businesses they are Best Suited to.

Invoice Finance. Also known as cash flow finance or debtor finance, this well-established form of business funding helps businesses to access their own money. Any business selling to other busineses (B2B) will have a number of outstanding invoices in its accounts receivable, and many will take two or even three months to clear. Invoice finance allows them to access this cash straight away, often amounting to a significant sum. It is ideal for business owners who have no other collateral, no credit history, but do have a solid client list. It is only available to B2B sellers, and is not usually suited to early stage start-ups. 

Alternative Lenders. By bypassing the bricks and mortar ways of the established banks, internet-based lenders can offer loans faster and with fewer provisos. They are a better bet for a business that wants to move fast, and get a lending decision in days rather than weeks. Costs do vary considerably from lender to lender, and can be high, so the role or the advisor could be crucial.

Crowd-sourced Funding. Ideal for early stage start-ups with no income or collateral, this business finance system allows entrepreneurs to raise cash from thousands of supporters, small investors or future customers. In many countries this method has a bad rep, but Australia moved early to regulate it and build a responsible industry. For exciting start-ups, it can raise cash with no interest to pay while also building strong customer loyalty – but a major drawback is that you don’t know if it’s going to work for you until you try. 

Trade Finance. Depending on whether it is Export Finance or Import Finance, this form of funding can be similar to invoice finance or supply chain finance, only the buying and selling is with overseas customers and suppliers. Good trade finance also includes a considerable degree of logistical, legal and cultural support, and it can bring foreign markets into range for even quite small businesses. Many businesses that could benefit greatly from an international element could use trade finance – if only they realised that it exists!

Who is OptiPay?

OptiPay, one of Australia’s leading business finance providers, has been dedicated to helping small business owners solve cash flow challenges  for over a decade and has provided $1.5 billion in business funding to more than 500 Australian businesses. OptiPay specialises in modern financing solutions such as invoice factoringinvoice financedebtor finance, and lines of credit. OptiPay’s mission is to support business growth providing liquidity in as little as 24 hours, ensuring they have access to tomorrow’s cash flow today. This rapid access to funds helps businesses maintain smooth operations and seize growth opportunities without the stress of cash flow constraints. At OptiPay, we believe that healthy cash flow is the lifeblood of any successful business. Our commitment to helping businesses overcome financial hurdles and achieve their growth ambitions has solidified our reputation as a trusted partner in the business finance sector. Whether you are looking to stabilise your cash flow, expand your operations, or navigate financial challenges, OptiPay is here to support your journey with innovative and efficient financing solutions.

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