Direct lending: how to get financing quickly 

If your company suffer from a lack of liquidity, direct lending may be the solution

Some time ago, on this blog, we talked about alternative financing solutions. These instruments allow companies to obtain liquidity faster and at lower costs than bank loans (which access is not so obvious for companies).

Today we focus on one of such instruments: direct lending.

What’s direct lending?

You maybe already heard of Peer-to-Peer (or P2P) lending. This term refers to loans granted to individuals by other individuals connected through online platforms.

Direct lending is pretty much the same. This term is used to define loans granted to companies by other companies other than banks, usually holdings and asset management firms.

Direct lending allows companies to obtain financings even in just 3 days from the request. Investors and applicants are connected through Fintech platforms that digitalize the whole process with benefits in terms of time, transparency, online access to service and costs.

Direct lending involves not only the granting of medium/long-term loans but also advance on receivables. Companies can therefore choose among regular or one-off financing services according to their liquidity needs.

How direct lending work: an example

CrescitaliaLAB is the direct lending platform of the advisory company Crescitalia Holding.

CrescitaliaLAB operates in the invoice financing sector and connects companies with a shortage of liquidity with qualified investors. Through the platform, companies can sell their outstanding receivables to a lender who advances immediately 90% of the invoice amount. The remaining amount of the invoices (net of the investor’s interest rate) will be refunded to the company once the transferred invoices have been regularly collected by the lender. Thanks to the adoption of modefinance’s evaluation methodology, the entire credit assessment process is automated. The financing is remitted to the company within a few days.

How can direct lending help companies?

In Italy, companies take an average of 72 days to collect invoices. In such a context, direct lending can be a great opportunity. By raising cash against unpaid invoices, companies can increase liquidity and thus improve their economic and financial situation (and their credit score on s-peek). Besides, financings obtained through invoice trading will not be notified to the credit bureaus and do not compromise the access to traditional funding sources. Quite the opposite, by improving the company’s rating, they boost the probability of getting loans from banks.

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