Alternative Funding Services refer to non-traditional methods for raising money for projects and businesses. It is an alternative type of financing that often uses an online forum as a primary tool. There are many types: equity crowdfunding, venture capital funding or innovation funding, non-recourse equity or Seedstage financing, angel investor networks or syndicate investment funding, commercial Lending groups, placement services, private placement services, and licensees.
The Act specifies that a crowdfunding platform is an unincorporated or unregistered person who offers or provides alternative funding services in the country of Belgium, and is not a registered business.
Equity Crowdfunding refers to raising money through the sale of stock or other ownership interest in a company or organization. The equity of the company can be converted into cash by offering shares to the public.
This method does not require any commitment to the value of the equity; hence, it is considered to be an attractive method of raising funds. Equity crowdfunding can be used to raise money for start-up companies, to cover the costs of commercial expansion, for repayment of debts, for the payment of staff wages and salaries, for the purchase of new equipment or tools, for expansion purposes, and for repaying the bank loan for a business startup. It is usually done by members or associates of an organization.
Judah Karkowsky explains that venture Capital Funding refers to the pool of financial resources from multiple investors for the investment of a company in a venture capital or growth stage. The partners of the venture fund use their assets as capital. This alternative is useful when the companies have no ready sources of funds. In this case, the venture fund may provide additional capital to the company, which may be required for the successful operation of the business.
Credit Funding is a type of equity financing in which a company receives credit card payments for purchases, instead of equity financing. The credit company gives these credit cards to the company and then uses the payments as collateral on loans. These loans are called revolving credit. This type of financing is available to companies in all sectors, including companies that do not have their credit card processing system.
Debt and Loan Funding are a capital source that provides loans and debt for specific purposes such as purchasing raw materials, equipment, expansion, and projects. These methods of financing may be classified according to the interest rates, credit terms, and repayment schedules. Some companies prefer to obtain funding from external sources as they may be more reliable. Most banks offer specialized funding programs according to the specific needs of the companies.
Private Placement Series is a popular method of financing. In this method, equity capital from existing private equity firms is used for short-term financing. It is also known as the sale and leaseback method. The value of the equity depends upon the health of the sponsor firm and its ability to generate profits. There are many other methods available, but the above-mentioned three offer a good alternative to the traditional capital markets.