One of the greatest barriers to securing financing for circular business solutions is clearing the screening and underwriting phases of the funding process. Information and asset-based financing are often prioritized in funding decisions, creating a challenge for circular businesses with minimal collateral, unconventional business models or little credit history.
Relationship-based financing is one of the three types of securities that are used when a lender screens and underwrites loans. It is based on skills, available finances, experience and network of the borrower. In relationship-based financing, financiers collect information on customers, previous investments and product portfolio profitability. This perspective is much more reflective of future value networks based on collaboration and shared value.