In today’s world, if you want something, you don’t have to necessarily buy it. The UK is now saturated with companies renting out their wares, from properties to dogs. The sharing economy has seen businesses such as Uber and Airbnb thrive. However, all successful companies of the peer-to-peer based sharing world have two things in common: solely accessed online and mobile apps.

Financial providers noticed this trend and now virtually every banking task can now be carried out online via a variety of devices. The wider financial services industry took note of the online success of others and enabled users with apps or online options. Some alternative finance providers have adopted this way of operating and have carved positions as legitimate intermediaries in the supply and demand of capital.

Using technology to operate online, these alternative finance platforms offer flexibility to their customers and the ease of investing from the comfort of their own homes or on the go. Alternative finance providers are offering products online that allow for a seamless connection between investors and borrowers which has all been made possible by the emergence of new technologies because of the booming sharing economy. However, some sectors are changing the game more than others …

Peer-to-Peer Lending

Peer-to-peer lending is a match made in heaven between an entity in need of finance and an investor wanting more from their money. P2P providers, like Huddle Capital, act as the intermediary between investors and borrowers. At Huddle Capital, we have an innovative lending platform that allows individuals the opportunity to diversify their investment portfolio and make their money work harder for them. On the other side, borrowers can get their hands on the capital they require to expand their business, purchase inventory or to finance other business-related expenses. This all comes with the added bonus of being able to manage and handle capital through an online portal.

The Benefits of P2P Lending

Technology has enabled peer-to-peer lending to become revolutionary in the world of alternative finance. Some other benefits include:

  • attractive interest rates
  • investors can spread capital across multiple investments
  • investors and borrowers have transparency
  • regular income
  • portfolio diversification

Reward-Based Crowdfunding 
Chances are your social media feeds have seen their fair share of GoFundMe and Kickstarter pages. From creative ventures to sports challenges, money can be raised by simply plugging a URL to a page which details the project and the financial goal of the account. This gives investors a new avenue to support causes they believe in by donating as little as £1 at the click of a button.

Rewards-based crowdfunding is often utilised by borrowers who want an increased chance of securing their end goal. Investors will receive a gift based upon the amount of money they donate to the project. Most borrowers will usually detail the different gifts that align with the payment brackets. However, it is typical that the more money invested, the better the return. Some campaigns also operate on an all-or-nothing basis for greater success at a greater risk – as the project will not receive any money invested unless the goal amount is achieved.

Oculus VR utilised online alternative finance provider Kickstarter for an all-or-nothing reward-based campaign back in 2012. They set out to receive $250,000 to fund the development of the Oculus Rift VR headset.

Oculus set out a variety of different rewards for investors to get their hands on, but the majority of the 9,522 backers opted for the $300 option to receive a developer kit and Oculus Rift headset once they were available. The campaign flew 875% over its cash target amount, with the final amount from online investors totalling £2,437,429.

Invoice Trading
Businesses of all sizes can benefit from invoice trading. By applying online via an intermediary, companies can sell invoices online to free up their capital whilst not being tied in by a lock-in period. Furthermore, there is no obligation for organisations to discount their entire debtor ledger as this is a way of them gaining back control of their finances in a way that suits them best.

For businesses, waiting for clients to pay invoices can cause cashflow issues. Invoice trading allows for the sale of multiple invoices at a time and investors can purchase percentages of single or multiple invoices via secure online platforms.

Both borrowers and lenders must apply online to an invoice trading network and follow a screening process. Once approved, a client bank account is set up and the business can sell an invoice on the platform, from as little as £1,000 to over £1 million. Investors get to earn returns at the click of a button whilst organisations can benefit from an immediate cash boost.

Opportunities of the Sharing Economy

The emergence and growth of the sharing economy have introduced new technology and ways of conducting business. The finance industry has utilised this innovation and alternative finance platforms that operate solely online are pioneers in a new wave of investing and borrowing.

With the majority of amenities becoming available via devices in the palm of our hand, more and more platforms are following suit as the world of online-only continues to evolve.

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