Thinking about opening your own business or do you have a company and need to invest? Know that there are alternative solutions to traditional forms of financing for companies. Discover three options to boost your business.
The traditional ways of obtaining financing for companies (ie, through credit made available by banks and/or financial institutions) can, from the outset, be an option. If you are looking for business financing, compare all the solutions on the market first and make a thoughtful choice.
Financing for companies: alternative options
Fintechs are financial companies that use new technologies to make banking services available to consumers. These have revolutionized the Portuguese market and the proof of this is the startups that offer to finance companies in alternative ways to the traditional credits granted by banking institutions.
These ways of obtaining loans allow national small and medium-sized enterprises (SMEs) to achieve greater levels of liquidity.
RootRaize is a collaborative investment grant for SMEs. This startup acts as a financing intermediary for companies, linking them to investors with capital to invest. There are three ways to get credit at Raize:
- Advance payment of invoices;
- Treasury support;
- and investments.
Firstly, with regard to the advance of invoices, this is a form of financing for companies that allows SMEs to anticipate the receipt of invoices from their customers, using these same invoices as a guarantee for the payment of credit.
With regard to the other two types of financing – for cash support and for making investments -, these are reimbursed monthly, within a payment period of six to 60 months, with the possibility of having a grace period (SME will only pay interest for a certain initial period of the loan). In these two types of financing for Raize companies, it is necessary that the business has at least two years of activity.
Finally, Raize also offers a type of financing called “Start”: this is intended for younger SMEs (with less than two years of activity) that have not only good financial capacity but also growth potential.
In order to obtain financing for companies, they must register on the Raize website, send the necessary documentation and, after an analysis, the PME knows if it has been approved to be able to take its place at Raize. This SME study and analysis process is free of charge and approval takes just 48 hours.
But, after all, what are the advantages of requesting financing for companies through Raize instead of traditional forms of credit? The benefits are essentially three:
- Exemption from the payment of commissions for early amortization;
- Speed in effectively obtaining the requested value;
- There are no usual costs required by financial institutions – for example, annual costs of maintaining bank accounts.
José Maria Rego, the co-founder of Raize, says that in Portugal “ there is a large discrepancy in access to finance between small, medium and large companies. And it is precisely this discrepancy that makes Raize's work and investor funding so important and schedule 1 tax form. ”
Edebex has revolutionized the management of SME treasuries, helping to increase levels of financial liquidity. This Belgian Fintech entered the Portuguese market through a partnership with the bank BNI Europa, allowing SMEs to sell their unpaid invoices to investors who want to buy them.
Only six steps are needed to implement this financing for companies:
- The PME places its invoice for sale on the Edebex website (the minimum amount is 5 thousand euros) and the creditworthiness of the debtor of this invoice is immediately verified;
- Edebex verifies, with the debtor, all the characteristics of the unpaid invoice;
- An investor buys the invoice in question;
- The PME receives the amount corresponding to the invoice in its account, on average, within 72 hours;
- After transferring the debt owner (from the SME to the investor), Edebex informs the debtor of the current situation;
- The invoice debtor pays the invoice on the due date.
This becomes a simpler and more accessible financing alternative for startups and other small and medium-sized companies compared to traditional financial products.
By being able to obtain investment quickly, these businesses will obtain greater liquidity and, consequently, will be able to better manage their finances. Like Raize, Edebex also has no associated costs, requiring no deposits or guarantees.
In addition, this Fintech provides constant monitoring to SMEs throughout the debtor's payment process. Thus, in case of non-payment, Edebex does not return the invoice to the PME, taking charge of any possible collection.
Xavier Corman, CEO of Edebex, explains that “ One in four bankruptcies is directly linked to cash flow problems. Edebex is proud to have developed a practical, fast, and flexible solution regarding the acceptance of companies that are rejected by other entities. This approach has a macroeconomic impact on the country in which Edebex operates. By reducing the number of bankruptcies, Edebex helps economic growth and job development. With more than 150 million euros already financed, Edebex is a real and impactful solution for several SMEs in Europe. ”
Seedrs is the largest European equity crowdfunding platform that allows investors to fund startups. From just 10 euros, any investor can provide financing to companies that they consider to have the potential for future growth.
This Fintech thus allows SMEs to leverage their business in a simple and fully online way:
- It is necessary to register on the site and develop a campaign that will be previously approved by Seedrs;
- Afterward, the SME must develop a video and a marketing plan to capture the attention of investors;
- The campaign is then launched online and, after reaching the desired business loan amount, Seedrs handles all the necessary paperwork and legal processes;
- After the formalization of the process, the SME obtains the financed amount and can quickly boost its business.
Seedrs is involved throughout the process, ensuring maximum follow-up before, during, and after funding for companies. In 2017 alone, the five startups that turned to Seedrs in Portugal managed to obtain a joint business loan of 1.4 million euros.
Ricardo Brízido, CTO at Seedrs, underlines that “ Since its creation, Seedrs' objective has been to provide an excellent service to both entrepreneurs and investors. In five years of existence, we overcame the barrier of 330 million euros invested in campaigns, helped finance more than 590 businesses, created a secondary market, and, more recently, partnered with Portugal Ventures. The interest of both companies and investors in equity crowdfunding is growing, which demonstrates that Seedrs is increasingly an alternative and effective source of funding and investment in Europe ”.
Fintech came to boost the Portuguese economy
Undoubtedly, Fintech has changed the way the entire financial sector works. “ Credit institutions no longer compete only with each other, but also among Fintech companies that have developed as credit intermediaries and that allow small and medium-sized companies to have not only more capital, but also greater ease of financial management ”, says Sérgio Pereira, director-general of ComparaJá.pt.
Thus, “ Fintechs enable more and greater flow of money between companies, financing those that have the most difficulties in acquiring credit from banks, which consequently boosts our economy and the country's growth ”, concludes Sérgio Pereira.
However, for larger amounts of financing for companies, it makes sense that these SMEs resort to the traditional methods of obtaining credit: through financial institutions. As such, we suggest not only comparing the entire market but also looking at interest rates and the total cost of credit payable.