Alternative Financing Market Rising With Growth In New Technology Trends Research By 2028

Posted by Mrudula Anil Karmarkar on August 8th, 2022

The global alternative financing market size was projected to reach USD 10.18 billion by 2028 and is expected to witness a CAGR of 6.3% from 2022 to 2028, according to a new report by Grand View Research, Inc. Easy availability of funds as compared to the traditional funding is the vital factor that drives the growth of the market. The rising use for alternative finance platforms, easy accessibility of the financing services, and the cost saved by the customers are driving the growth of the market. However, security threats related to alternative financing are the key factor restraining the growth of the market. Most of the key players working in the market are adopting the strategy of new product launches, mergers, and acquisitions to gain maximum share in the market.

The COVID-19 pandemic has positively impacted the market. Alternative financing platforms have helped the start-up companies and small businesses impacted by the COVID-19 pandemic. According to the Journal of Medical Internet Research, the overall GoFundMe campaigns related to the COVID-19 increased by 736% on the week of March 16, 2020, and another 510% in the next week. Wefunder, an equity crowdfunding platform, experienced a rise of 35% in investor volume in February-April 2020. Thus, the COVID-19 pandemic has played an important role in pushing the growth of the market.

The crowdinvesting segment contributed to the global market revenue share of around 85% in 2021. The crowdinvesting platform offers entrepreneurs a comparatively economical way to raise funds. Crowdinvesting has been developed as a useful platform for small businesses and start-ups that may find it difficult to raise initial seed funding. Therefore, the demand for crowdinvesting is more and contributed largely to the market revenue.

Asia Pacific accounted for a major market share of over 80% in 2021. In 2021, China was the major country in the world that contributed largely to the market. Across the Asia Pacific, alternative financing business funding was the ‘growth engine’ for market growth in nearly every country. Over the last couple of years, alternative financing has developed quickly and has become an established means of financing for businesspersons, particularly for SMEs across the Asia Pacific. According to The Cambridge Centre for Alternative Finance, 61% of all alternative financing volume from the Asia Pacific went to funding an SME in 2017. Thus, the above mention factor contributes to more revenue generation in the market in the Asia Pacific.

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Easy access to capital in comparison with traditional funding is the key driver for the market. Moreover, increasing acceptance of alternative finance instruments, the convenience of the financing services, and the cost saved by the consumers are driving the market. The COVID-19 outbreak positively impacted the market. All over the world, small businesses have been hit very hard by the influence of the COVID-19 pandemic. To overcome this crisis, businesspersons and investors shifted to alternative financing to pursue funding and to invest, correspondingly, while staying safe from the COVID-19.

Alternative Financing Market Report Highlights

  • North America is forecast to expand with the highest CAGR of 7.1% from 2022 to 2028. The U.S. is the leading market in this region, as well as the second-largest global market following China.
  • The crowdfunding segment is likely to register the highest CAGR of 6.7% from 2022 to 2028. Raising funds through crowdfunding has experienced increased growth for start-up companies and small businesses.
  • The crowdinvesting segment contributed a revenue share of around 85% in 2021. the segment has been developed as a useful platform for small businesses as well as start-ups that may find it difficult to increase early seed funding, as most of the entrepreneurs are financed by a mix of credit cards, individual savings, and a local network of friends and family.

Alternative financing refers to financial products and services that are mainly developed outside of the traditional, controlled banking and capital market sectors often accessible to customers using digital platforms, instruments, and systems. The market segment basically relates to online financial services for business customers. Globally, alternative financing activities have observed a largely mounting trajectory over the years, with China leading the global alternative finance market.

Alternative finance has made raising funds a lot easier as well as less time-consuming. For smaller businesses and startups looking to expand, alternative finance providers are often well aligned to their requirements not only because they can provide less strict measures than traditional lenders such as banks, but also because they can be more flexible and responsive while providing superior customer service.

The COVID-19 pandemic had a positive effect on the market. With COVID-19 effects felt all over the world, businesses all over have required help in debt relief and financial support. During the COVID-19 pandemic, alternative financing has been mostly used by small businesses and startups to increase capital for their creative projects as well as businesses. China is extrapolated due to a restriction on lending by non-banks by specialists in recent years. SME-focused P2P marketplace and balance sheet lenders stated the maximum development in terms of institutional funding volumes. According to Enventys Partners data, the number of Kickstarter campaigns from January 2020 to April 2020 observed an increase of 8.93% over the last year in spite of the COVID-19 pandemic. 

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The market is characterized by the existence of established as well as new companies. Most of the corporations working in the market have implemented several strategies that include the launch of products, R&D, collaborations, mergers & acquisitions, partnerships, and joint ventures to strengthen their place in the global market. In January 2022, GoFundMe Inc. announced that it has engaged in a definitive agreement to acquire Classily. This acquisition will make a global leader in present giving through B2C and B2B, accelerating development and forming new opportunities to reach a large number of people and organizations all over the world. In October 2020, Crowdcube Capital Ltd. and Seedrs Ltd. agreed to merge, creating a significant private equity marketplace. That has permitted numerous start-ups to raise capital without having to tap venture capital or angel investors directly.

Grand View Research has segmented the alternative financing market based on type:

Alternative Financing Type Outlook (Revenue, USD Million, 2017 - 2028)

  • Crowdinvesting
  • Crowdfunding

List of Key Players in Alternative Financing Market

  • GoFundMe, Inc.
  • Patreon, Inc.
  • Thunder Fund
  • Indiegogo, Inc.
  • Kickstarter, PBC
  • Wefunder Inc.
  • StartEngine Crowdfunding, Inc.
  • CAMPFIRE, Inc.
  • Crowdcube Capital Ltd
  • FundedByMe AB

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Mrudula Anil Karmarkar

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Mrudula Anil Karmarkar
Joined: July 2nd, 2020
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