Crypto-backed lending: A growth opportunity for crypto companies
The British tech start-up scene is going from strength to strength. According to new figures released during London Tech Week, more than a third of Europe’s fastest growing tech companies are based in Britain and the UK has also managed to produce 13 ‘unicorns’ — classed as private firms whose valuation exceeds $1 billion — in 2018, taking its total to 72.
Everyone should be proud of what has been achieved. The cumulative valuation of Monzo, Deliveroo, BrewDog and TransferWise amounts to roughly $7.5 billion, which provides one measure of the health and strength of Britain’s VC ecosystem. However, does this figure paint a realistic picture of the business landscape in the UK? What sources of funding do small and medium companies have available in order to scale?
Barrier to scaling 🚧
While the UK is strongly upping its investment in innovation and entrepreneurship, the lack of finance readily available to companies remains one of the top barriers of entry in the UK. Research has shown that just 60% of SME credit applications are successful, dropping to 50% when the business is a first-time applicant. As such, many companies find themselves suffering from cash flow problems or missing out on opportunities to purchase new equipment and support expansion.
Among those companies underserved by the traditional financial system, those operating in the crypto space are likely to be the worst off in today’s environment. Since the ICO wave in 2017–2018, British banks have been strongly shunning companies that handle cryptocurrencies. ‘The moment you mention crypto to a bank, it’s like you are a drug dealer’ were the words of Iqbal Gandham, UK head of eToro, the social trading firm that has handled billions in cryptocurrencies.
The Financial Conduct Authority (FCA), who saw a number of firms in its sandbox being refused banking services in 2017, also expressed its concern over what it described as ‘blanked refusals’ and warned that such wholesale de-risking approach was creating ‘significant barriers to entry and could lead to poor competition’.
Opening a bank account is not the only challenge for crypto companies. Traditional bank loans are typically approved based on a company’s assets, such as real estate. But as many crypto businesses have just started, rarely do they own enough “bank-accepted-assets”, preventing them once again from accessing the tools they need to grow. Even when they are eligible for funding, banks often take advantage and charge exorbitant fees that leave many fighting to remain profitable.
Lifting the barriers 🗽☀️
The good news for crypto businesses in the UK and around the world is that there is another way to access the funding they need — through crypto-backed lending.
Crypto-backed lending is the 21st century alternative to traditional banks for companies who hold Bitcoin and Ether. The value of crypto assets held by British businesses likely totals in the millions, yet unless one engages in speculative activities, there is no way of realising this value.
Mode’s crypto-backed lending solution allows businesses to leverage the value of their crypto assets to acquire fiat currency. The benefits of this are clear; businesses can finally access an appropriate and flexible form of credit and there’s no need to sacrifice equity in the organisation to secure it, finally allowing companies to focus on growing and unleashing their full potential. Further, any appreciation in the value of their crypto assets is retained.
Improving cash flow and working capital 💸
A staggering 57% of UK small business owners have suffered from problems with cash flow, costing them around £26,000 each on average. As a result, around 1 in 7 business owners have been unable to pay staff wages at one point or another, and 38% were unable to settle debts.
Cash flow issues can emanate from a variety of sources, including an unexpected decline in sales, late customer payments and lax cash management. Mode’s lending solution will allow you to stay afloat during periods of restricted cash flow; improving your levels of working capital and giving you the tools you need to take your business to the next level.
Funding your business expansion 📈
In a survey undertaken by the British Business Bank, more than 25% of firms responded that they had cancelled their expansion plans due to not being able to acquire the finance they needed.
Mode’s lending product tackles the inadequacies of the current system, providing a flexible, fast (customers’ can receive their loan funds within 24h) and transparent solution, allowing your business to grow unhindered.
More than 25% of UK firms have had to cancel their expansion plans due to not being able to acquire the finance they needed
Restructure existing debt 🔧
Over 17,000 British businesses fell into bankruptcy in 2017, reaching a 4-year high as they continued to struggle under the strain of debt.
An unexpected occurrence may force you to delay the settlement of your debts, but by restructuring your dues and agreeing on new terms of payment, you can prevent creditors from seizing your business assets. Mode’s solution can be used to rebuild your financial plan, allowing for your business to continue trading.
In conclusion, countless disruptive ideas have been lost to history due to a lack of financial support. And many will continue to die if things do not change. At Mode we’re determined to rectify this, ensuring that you have the adequate credit to match your desires. So, whatever the future holds, if you own crypto assets, Mode will help you unlock your company’s growth potential.
consumer confidence.
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