Alternatives to financing without resorting to traditional banking

For SMEs, the approval of a loan can be a life or death situation. [Courtesy]

Companies need money to expand business, invest in capital or technology, increase their inventory, pay off debts or cover daily office expenses.

However, the current economic context has been challenging: businesses that still carry the effects of the pandemic, inflation, shortages of products, among others, reduce the growth possibilities of many companies, particularly SMEs. 

By the end of the year, businesses urgently need cash flow, but applying for a loan at a traditional financial institution can be a torturous process.

Banking products are mainly focused on larger clients who have other needs and payment possibilities. 

For SMEs, the approval of a loan can be a life or death situation.

According to the figures from the 2020 Entrepreneurship Radiography prepared by the Association of Entrepreneurs of Mexico (ASEM), 57 per cent of entrepreneurs consider that financing alternatives are one of the main factors that hinder the growth of their business.

For Bernardo Prum, managing director of Creze, a platform that offers online loans for small and medium-sized companies in Mexico, “the needs of an SME or a startup are different from those of a large and consolidated company.

These types of businesses can disappear from one moment to the next if they do not get the leverage they need at the exact moment.

That is why the financing options must consider other variables, such as the approval time and the loan amounts.” 
According to Creze, these are some loan alternatives for small and medium-sized businesses:

Digital loan platforms

SMEs cannot wait long to access financing.

One day can mean the difference between surviving or lowering the curtains for good. 

Digital loan platforms can be a perfect alternative for these types of companies since they offer agile credit, with flexible amounts and are easy to use, and the entire process can be done digitally.

Fintechs

Financial technology companies, or fintech, have had significant growth in Mexico, especially during the last two years.

These solutions are designed to serve a market underserved by traditional financial institutions.

Thanks to their technology, these applications can evaluate other aspects of clients to assess risk and know how much can be loaned.

It should be noted that fintech companies not only offer loans, but also other products such as digital cards, corporate accounts or savings products.

Learn more: How to raise capital as an entrepreneur? This expert teaches you how to get financing for your startup

SOFOM

Multiple Purpose Financial Companies, or SOFOM, for its acronym, are one of the main alternatives to obtain a loan. These companies offer services such as credit granting, financial leasing, and factoring.

One of the main advantages of this model in relation to traditional financial institutions is that its requirements for granting loans are less rigid than those of a bank.