10.8 Alternative finance and web innovations

Question 1

Of what does “alternative finance” consist?

Answer 1

Reward-based crowdfunding
Peer-to-peer lending
Invoicing trading third party payment platforms

Question 2

Why has alternative finance become so popular?

Answer 2

Traditional lenders are increasingly risk adverse and come with a high administrative burden. Alt. finance allows easy and high risk finance sourcing.

Question 3

What are 3 examples of crowdfunding platforms?

Answer 3

• Kickstarter
• Indiegogo
• GoFundMe

Question 4

Give an example of a successful Kickstarter project.

Answer 4

The Pebble Watch, which raised over £10M in 30 days.

Question 5

What is peer-to-peer lending (a.k.a crowdlending?)

Answer 5

Lending facilities which arrange the matching of lenders with borrowers, generally operating online.

Question 6

What is peer-to-peer invoice trading?

Answer 6

A new type of invoice finance where businesses auction their outstanding invoices for an attractive return (online).

Question 7

What are the advantages of alternative finance options?

Answer 7

• provides quick access to money with online applications
• provides new, innovative ways to connect borrowers and investors online
• can save businesses from unexpected finance distress
• provides access to funds previously unavailable through more traditional forms

Question 8

What are the disadvantages of alternative finance options?

Answer 8

• not subject to regulatory reporting
• costs more than returns associated with traditional financing methods
• the amount of money available is quite limited (usually less than £100K
• small businesses may prefer working with more established lenders
• increased risk of fraud
• market is still evolving