Collaborative Endeavors: Private Equity and Alternative Financing Synergy
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Collaborative Endeavors: Private Equity and Alternative Financing Synergy
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Most businesses rely on traditional investments, such as bonds, stocks and cash, to grow their enterprise. While these liquid assets are more accessible, they are also significantly impacted by global inflation. Alternative investments offer businesses more power to navigate the fluctuating market. By enabling companies to diversify their portfolios and stabilize their returns, these investment options prime businesses for success.
Learn more about alternative investment strategies and how to use them to benefit your business.
What Are Alternative Investment Solutions?
Alternative investments enable businesses to generate returns through accredited yet unconventional means. Some examples of popular alternative investment options include real estate, commodities and private equity.
In comparison to conventional investments, alternative solutions generally have higher fees. The U.S. Securities and Exchange Commission (SEC) still controls these assets, but they are less regulated than traditional investments. This makes them an ideal option for high-net-worth business owners, as they provide more freedom to boost their returns.
There are also unique tax requirements that come with alternative investments. While collectibles may not be eligible for the same tax deductions as traditional investments, other alternative solutions, such as real estate or renewable energy projects, may be tax-free.
Businesses also need to consider that non-traditional investments are less liquid. As these assets are more scarce, it’s more challenging to value these investments. This may impact cash flow for businesses investing in alternative assets.
Types of Alternative Investments
Alternative investments come in many forms, each with its own risks and gains. Here are seven unconventional assets that businesses use to achieve long-term growth:
Commodities are typically natural resources, such as gold, oil and agricultural products. They offer a hedge against inflation, so purchasing commodities before prices rise is an effective alternative investment strategy. The supply and demand for a specific commodity will influence the value of these assets.
2. Art and Collectibles
There’s no limit to what investors collect — antique furniture, porcelain dolls and sports memorabilia are just some of the many valuable collectibles. If collectibles are rare, they’re likely to offer higher returns over time. For example, a one-of-a-kind Mickey Mantle baseball card in mint condition recently sold for $12.6 million. Artworks are also another worthwhile alternative investment as their value can increase significantly. Investors will need to know how to store collectibles correctly to retain their value.
The first cryptocurrency launched in 2009, making it one of the newest alternative investment solutions. However, it is a favorable option for business owners as it creates a stream of passive income. These investments may also generate capital appreciation over time.
4. Private Equity
Private equity refers to capital investments in companies not listed on public exchanges. By investing in private equity, businesses diversify their portfolios, but they will need to analyze projected growth carefully to ensure a positive return. There are three types of private equity strategies:
Venture capital: A private equity investment for startups.
Growth capital: A capital investment that assists established companies in growing or restructuring.
Buyouts: An investment transaction that results in company ownership.
5. Peer-to-Peer Lending
Peer-to-peer lending is an alternative investment option in which businesses fund personal loans to other companies and individuals. Unlike accredited financial institutions, they use online platforms to make these transactions. While this strategy has the potential to offer favorable returns, it also has higher risks.
Farmland is a unique combination of two investment solutions — commodities and real estate. By purchasing farmland, investors gain the tangible value of the land as well as any existing agricultural products. Working farms will also generate an income. For example, farms that grow crops like sunflowers can produce oils, seeds and flowers for resale. These commodities generate further financial benefits.
7. Real Estate
Property makes up the lion’s share of alternative investments. It’s a favorable choice, as investors can incur a continuous passive income from this investment. In addition, it provides a constant cash flow to fund other business operations. Within this category, there are several types of real estate options, including:
Direct property: This involves purchasing real estate to acquire capital appreciation.
Property-based securities: With this option, businesses gain shares in a property, such as a shopping mall, apartment or office block.
Real Estate Investment Trusts (REITs): These associations own and manage real estate, intending to generate returns for stakeholders.
How Businesses Benefit From Alternative Investments
Regardless of your industry, your primary goal is to increase your bottom line. Here are three ways in which alternative investments help businesses do this.
1. More Opportunities for Long-Term Growth
Alternative investments offer a more personalized approach compared to public markets. With a funding solutions partner at the helm, your business could learn and profit from new growth opportunities.
2. Portfolio Diversification
As alternative investments have fewer links to bond and stock markets, they are more likely to remain unaffected during market fluctuations. By diversifying your portfolio with unconventional investments, you can bolster your assets against inflation.
3. Attractive Yield Generation
Some alternative investments carry more risk, but they also offer higher rewards. For instance, purchasing bottles of high-quality wine set to increase in value over time puts your business in a position to gain lucrative gains.
How to Choose the Best Alternative Investment
There’s no one-size-fits-all solution to alternative investments. Instead, businesses need to analyze their investment goals to determine the best solution for their needs.
In their analysis, they need to consider how soon they will need to see rewards. Some investments require more time to reach fruition, so businesses will need to factor this into their investment strategy. Similarly, certain alternative investments require more upfront capital, making this another important consideration.
Consulting with a knowledgeable expert helps your business gain a comprehensive understanding of the tax requirements, fees and investment periods. This helps you ensure you make a decision that aligns with your objectives.
Find the Best Alternative Investment Solutions With Porter Capital
Porter Capital makes accessing financial information and services easy for startups and established businesses. This enables business owners to capitalize on the options available to them and reach new levels of success. In addition, we partner with a diverse range of investment companies, such as venture capital and private equity firms, to provide alternative financing solutions. These collaborative efforts enable these firms to offer their clients working capital lines of credit for greater growth.
The Porter Capital team is ready to help your firm maximize its returns and incur long-term gains. If you’re considering leveraging alternative investments for your business, reach out to our team online or call 1-888-865-7678.