1st June 2023

Alternative Financing Solutions for Startups and SMEs

Carissa Parnell

In the current economic context, start-ups face challenges in securing funds due to factors such as geopolitical issues, record inflation, and increasing interest rates. Traditional financing from banks is becoming more difficult to obtain. However, there are alternative solutions available to support start-ups in their launch and growth.

To address the economic challenges, companies are focusing on profitability and exploring alternative financing options. The strategy involves ensuring profitability over several months to increase valuation multiples and improve financial stability. Start-ups are seeking non-dilutive financing options to cover themselves in case of a slowdown in fundraising.Blog image showcasing the process of financial solutions

There are both dilutive and non-dilutive financing solutions available to start-ups. Dilutive financing methods include fundraising, business angels, incubators and accelerators, crowd equity, and venture loans. These methods involve raising capital from investors or institutions, but they may not be suitable for all businesses.

On the other hand, non-dilutive financing methods allow entrepreneurs to finance their businesses while retaining their existing shareholders. Examples include bank loans, honour loans, factoring, crowdfunding, and subsidies or competitions. These methods provide cash flow without diluting ownership.

In addition to the traditional financing options, there are alternatives.

solutions worth considering. One such solution is Device-as-a-Service (DaaS), which allows companies to access high-end goods or services through leasing and monthly subscriptions. DaaS preserves cash flow and provides high-value-added services.Blog image showcasing DaaS

Another alternative is Revenue-Based Financing, which is suitable for digital companies with recurring income. This method converts future recurring revenue or margin into immediate cash, allowing companies to be refinanced monthly based on revenue growth.

These alternative financing solutions offer simplicity, predictability, and long-term cost management. They enable start-ups to focus on growth while maintaining their financial stability. To learn more about these options, it is recommended to watch a webinar or seek further information from experts in the field.

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