Leveraging alternative-financing during the festive season can be a smart strategy for brands looking to boost sales, manage cash flow, and meet the increased consumer demand that accompanies holiday periods

By Karun Arya

This festive season is set to be the most exciting yet. We have more brands than ever before vying for consumer attention and a share of their wallets. With the influx of hundreds of new D2C brands, the competition is tighter than ever before. As one of the largest financing platforms for SMEs in India, we’re at the frontlines of helping business owners reimagine financing their futures to take advantage of the numerous opportunities that the festive season brings them.

Leveraging alternative-financing during the festive season can be a smart strategy for brands looking to boost sales, manage cash flow, and meet the increased consumer demand that accompanies holiday periods. Whichever financing option the business chooses, it should be aligned with its specific needs, goals, and overall strategy.

What is ‘Alt-Fi’?

First, let’s understand more about modern credit and new-age financing solutions. Alt-Fi or Alternative-Financing is an innovative funding option, unlike the traditional methods of taking loans from banks, equity financing from angel investors, etc. Alternative-Financing includes various cutting-edge models like Revenue-based Financing, Recurring-Revenue Financing, or Cash-Flow-based Financing.

Alt-Fi is making waves in the startup ecosystem because of various attributes that include – being easily accessible to everyone, providing greater flexibility, being more founder-friendly, being all digital, completely data-driven, fast, and collateral-free. So being a tech-first solution means that it is void of any bias and importantly is non-dilutive in nature. One of the reasons many founders prefer this method of raising funds is that they no longer have to dilute ownership to raise funds for investment in areas like digital marketing, inventory, or product expansion.

Around the world, there’s a growing Alt-Fi or Alt-VC movement. Over just the last 3 years, upwards of 50 companies have emerged in this space globally. Entrepreneurs and small business owners now have more choices than ever when it comes to fundraising. They aren’t limited by options like Venture Capital or banks that have historically underserved the SME segment and are plagued with processes that are cumbersome, full of uncertainty, and at the cost of time and ownership.

For brands looking to ramp up their sales this festive season, it’s important to understand how you can supercharge growth by intelligently accessing and allocating working capital. When leveraging non-dilutive financing as marketing capital for festive season promotions, startups should have a well-defined marketing plan, set clear objectives, and closely monitor their financial and campaign performance to ensure that fund utilisation is optimal.

Why choose alternative-financing?

Businesses should consider leveraging quasi-equity (debt) financing during the festive season for several compelling reasons. One of the most compelling reasons is that debt is simply cheaper than equity, especially when looking at growth investments. Did you know that 40-60% of every VC dollar raised goes straight to Google and Facebook for digital marketing spends? Founders end up using the most expensive form of capital, for which they’ve sold ownership in their business, to give away half of that almost immediately to these platforms. That’s unfair and they should have better options. Alt-Fi provides just that – a better alternative! It’s why at GetVantage we like to also term ‘Alt-Fi’ as ‘Marketing Capital’ because it’s the most popular use case for 1000s of entrepreneurs we partner with.

Some of the areas where alternate-financing can be used are:

Capital for Seasonal Inventory: The festive season often brings increased demand for specific products. Alt-Fi can provide the working capital to purchase, produce, or stock up on inventory to meet this surge in demand. This ensures that startups don’t miss out on potential sales due to inventory shortages.

Brand Awareness: Effective and high-engagement marketing can significantly drive a startup’s brand recall and sales during seasonal events through more aggressive customer acquisition. Alt-Fi allows startups to double down investment in marketing campaigns and promotions, reaching a larger potential customer base and driving sales.

Cash Flow Management: Any period with more demand from consumers can strain a startup’s cash flow as it juggles increased expenses and sales on a seasonal basis. Alt-Fi can help manage short-term cash flow issues, allowing the business to operate smoothly during these seasonal periods. By leveraging the non-dilutive capital for marketing, inventory, and vendor payments, startups can not only remain competitive but can choose to operate on the front foot when demand and opportunity increase during the festive season. Business owners can take advantage of the increased consumer spending and stand out from the crowd by offering attractive promotions and well-stocked products.

Growth and Expansion: For startups looking to expand their product line, scale operations, or enter new markets during the festive season, Alt-Fi can provide the necessary funding to support strategic growth initiatives too. This can lead to long-term benefits and a smoother expansion.

A report by Redseer highlights that this year’s festive season will attract more than 140 mn online shoppers, with a 20% increase from last year’s online gross merchandise value. With the right financing solutions in place, more merchants will be better prepared for the expected uptick in demand this season. At GetVantage, we’re having our best festive period with more interest from small business owners looking for non-dilutive financing to scale up.

What’s become evident is that Alternative-Financing offers a host of advantages from multiple product structures, flexible repayment periods, and a purpose-based approach to fund utilisation. While there are compelling reasons for startups to leverage non-dilutive financing during the festive season, managing debt responsibly is critical. Responsibly managing alternative financing can help startups build a positive credit history and improve their creditworthiness. This, in turn, can make it easier to secure future financing and better terms, even from more traditional lenders.

Domestic credit to the private sector in India stood at 55% of the GDP as per a report by EY in 2020 and this was below the world average of 148%. Since then, the infrastructure around financing has improved vastly, with the enhancement of digital processes for financing businesses, ensuring financial inclusion. The increasing gap between capital demand and supply has also decreased post-2020, making way for more businesses to enter the space with financial support. A Redseer X GetVantage report highlights the vast $500 billion credit opportunity available for digitised SMEs in India, highlighting the potential for growth and investment in this sector.

Key – alignment of business with financing vertical
The suitability of a particular financing option depends on individual circumstances and business goals, along with the stage of the business. Brands and individuals should conduct due diligence and seek professional advice when fundraising to ensure strategic alignment.

One thing is clear. More and more founders are using marketing capital as a catalyst for growth as the festivities continue year round with more events that are relevant to capture attention and boost revenues!

The article was originally published in Financial Express

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