Special forms of external financing: factoring, leasing and crowdfunding
Businesses may resort to special forms of financing such as factoring, leasing, crowdfunding (crowddonating, crowdsupporting, crowdlending or crowdinvesting) or cryptocurrency capital-raising efforts (ICO/ITO).
Factoring can be an attractive source of financing, especially for existing businesses that receive orders from their customers. It consists of selling receivables to obtain immediate cash inflows, regardless of the payment term, and to avoid the risk of default (which includes monitoring for such circumstances). This form of financing is less suitable for young entrepreneurs, as they have not yet amassed sufficient accounts receivable.
Leasing. If they do not want to raise foreign funds, entrepreneurs can opt to lease capital goods. This form of financing is particularly suitable for young, dynamic businesses with a high return potential but low equity.
Crowdfunding. Numerous online crowdfunding platforms enable Swiss SMEs to obtain financing directly from individuals, bypassing traditional players. They are active in crowddonating, crowdsupporting, crowdlending and crowdinvesting.
New SMEs may also raise capital with cryptocurrencies, thus opting for so-called Initial Coin Offerings (ICO), or Initial Token Offerings (ITO). This form of financing is similar to a crowdfunding campaign, but in this case investors invest their virtual currencies to help companies pre-finance their product or service.
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Factoring: When receivables are turned into cash assets
Factoring can prove to be an advantageous source of financing. It allows early conversion of the company's receivables into cash assets.
Initial Coin Offering (ICO), a crypto currency fundraising
The ICO for Start-Ups is similar to a crowdfunding operation during which investors commit virtual money to help a company pre-finance a service or product. These funds can go to blockchain projects such as companies active in more traditional sectors.
Leasing of capital goods
Leasing capital goods is an alternative to foreign funds. It is particularly well suited to dynamic companies, with low equity levels.