Yield-Generating Alternative Assets as Bank Deposits Decline in Q1 of 2023
The recent decline in bank deposits in the first quarter of 2023 has signaled a shift in the financial landscape, with people investing less and sitting on cash. In response to this emerging trend, investors are considering yield-generating alternative assets to ensure that inflation doesn’t eat away at their hard-earned capital.
A CNBC report highlights that 45% of American adults regret not investing more and sooner, which underscores the importance of seizing opportunities in the market when you can.
Yield Generating Opportunities
Alternative assets can be a strong suit in an investor’s overall investment strategy, especially during market contractions. One such alternative asset opportunity lies in the Merchant Cash Advance (MCA) space. As traditional banks reduce lending in the current economic environment, MCAs offer unique benefits for both investors and businesses seeking financing.
So, what exactly is a Merchant Cash Advance?
We have covered this in granular detail here but as a quick refresher: An MCA is a financing option for businesses that need quick access to funds. Instead of a traditional loan, the MCA provider advances cash to the business in exchange for a percentage of its future revenue. This arrangement allows businesses to secure funding without the lengthy approval process and strict requirements of traditional bank loans.
Investing in MCAs presents several potential advantages during an economic landscape where traditional banks are reducing lending:
Higher yields:
MCAs generally offer higher yields than traditional fixed-income investments like bonds or certificates of deposit (CDs). As investors look for ways to grow their wealth, the higher potential returns on MCAs can make them an attractive alternative asset.
Diversification:
Diversification is the superpower behind many successful portfolios. Including alternatives like MCAs in your investment portfolio can provide diversification, reducing overall risk. This is particularly important in a volatile economic environment, as diversification helps protect your investments from market fluctuations.
Support for small businesses:
Investing in MCAs allows you to support small and medium-sized businesses that struggle to secure financing from traditional banks. This not only helps the businesses grow but also contributes to the overall health of the economy. A win-win.
Shorter investment horizon:
MCAs usually have shorter repayment terms than traditional loans, which means investors can potentially realize returns more quickly. This can be especially appealing for those looking to generate income or build wealth over a shorter time frame. In response to growing demand, we now offer both a short-term note and a mid-term note.
Growth opportunities in the MCA space:
As banks tighten their lending practices, businesses may increasingly turn to alternative financing options like MCAs. This shift creates growth opportunities in the MCA market, making it a promising area for investors to explore.
Mitigating risk
If you’re considering investing in MCAs, it’s essential to do your research and understand the risks involved. While the potential for higher yields is attractive, MCAs are not without risks. For instance, the repayment of an MCA depends on the business’s credit card sales, which can be unpredictable.
To mitigate these risks, consider working with a reputable investment platform that offers due diligence, underwriting, and ongoing monitoring of the investments. This can help ensure that you’re making informed decisions and managing risk effectively.
To sum up
In conclusion, the decline in bank deposits and reduced lending in Q1 2023 presents a unique opportunity for investors to explore yield-generating alternative assets like MCAs.
So, rather than sitting on cash, you might want to consider seeking out alternative assets that can help you build wealth and support the growth of your main street small businesses.
We would love to give you a free demo of the Supervest platform. Get in touch with any questions, we will always be pleased to hear from you.
