For the past year, it has all been about the rise of cryptocurrency. As tempting as it may sound, bitcoin and others are not the ideal investments. We have seen increased volatility in the price of bitcoin and other cryptocurrencies. Furthermore, as the price of bitcoin has fallen, there has been an increase in complaints surrounding bitcoin markets.
This article gives a general overview of four alternative investment options and crowdfunding is one of those options. Crowdfunding has democratised finance. Groups of individuals investors can now provide funds to small businesses that previously struggled to get financed. There are plenty of investment opportunities in local businesses including invoice financing, loans and equity shares. In Singapore, some of these platforms offer annualised returns as high as 30%. These platforms give individuals an exciting way to invest in small local businesses, which was not previously possible.
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The vulnerabilities and risks associated with an industry promising quick returns to growth-hungry SMEs were laid bare after an unravelling $6.9 million sham at at Singapore crowdfunding site.
Obtaining financing is the fourth biggest growth challenge which startups face and numerous financing methods have surfaced to meet the capital needs of growing businesses. Invoice financing allows businesses to secure cash by leveraging against the value of payments they are owed from their customers for an agreed return to investors, providing them with the capital needed to grow.
“Businesses with tight cash flows due to large receivables or long credit terms from customers usually utilise this product. Historic or existing cash balances do not matter as much as repayments are secured via payment on invoice,” said Pawel Kuznicki, CEO of peer-to-peer and invoice financing platform Capital Match.
The recent fraud that occured calls attention to the relatively unregulated nature of the industry and crowdfunding platforms are doing their part to increase risk management capabilities.
Click here to find out more on the views of other industry experts and how crowdfunding platforms are managing risks.