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Innovation contradicted the classic: business are borrowing from other places


Search for financing is a task of every smaller or bigger business. Although for a long time businesses have preferred the most popular solutions, such as banks, credit unions, interest and utilization of alternative financing methods have become more popular, say experts.

Such businesses practices can be seen globally because with more financing sources being available, with increasing competition, it becomes more challenging to retain clients and suggest the best conditions. Secondly, developing technologies and innovative solutions allowed to create a strong and reliable image as well as suggest effective or even better services than competitors in a short time.

Ministry of economics and innovation correspond to such a tendency and noticed that for a few years crowdfunding platforms in Lithuania have been becoming more and more popular because businesses have more flexibility. For example, when loans from banks or private and risk funds are unsatisfactory, people, that have extra savings, can become loan lenders. 

The tendency in the market is, that today majority of businesses in Lithuania borrow from commercial banks, whose prices can reach up to 6%. Then smaller banks and credit unions suggest loans from 6-8%. As it is noticed globally, a part of the clients turned to innovative solutions suggested by crowdfunding platforms. Although they only have been operating for a few years in Lithuania, they already lend money only with 7-10% of the price. The most expensive in the market remain the same - the quick loan businesses that lend money with 24-26%.

'Indeed, one of the most important aspects for businesses is the loan price. However, flexible borrowing conditions, rate of financing, communication of the lender and innovation are becoming more important' - notices crowdfunding expert, Profitus chief risk officer, Tomas Paliulis.

He also names a few evident benefits of crowdfunding financing: flexibility - the most significant and established by both sides financial solution that is supported by collaboration. Most of the businesses are surprised about the pace of financing - while traditional banks evaluate risks, and complete other standard actions, crowdfunding platforms can raise the needed money just in 24 hours.

The Survey of Lithuanian Bank, notice that majority introduced stricter requirements for lending during the peak of COVID-19. As the overall economic situation got worse, all the banks restricted lending for hotels, restaurants, more than half for real estate and transport, a third for construction businesses. While some hampered the conditions, others, alternative financiers, introduced new solutions for businesses. According to Profitus spokesperson, T. Paliulis, construction businesses were allowed to borrow in parts, creating an opportunity not to pay for that part of the money that was not used practically in the project. 'Our clients we, primarily, regard as partners, and the given example allowed the business to save money in a complicated period, us - to guarantee a long-term cooperation.' 

Crowdfunding platform Profitus raised money in the market in 2020 was over 11 million euros or more than 30% compared to money raised in 2019. At this moment the company has united over 13 500 investors into one community. Over the whole operation period, since 2018, Profitus paid back over 880 thousand of interest.

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