How the Improbability Factor has changed the face of business finance

What began with the banking crisis of 2008 and ended with Donald Trump becoming the 45th President of the USA has taken the world through a turbulent decade of high-profile world-changing events that we thought could never happen. But they did. Here at expense manager app Solo Expenses we put it down to increasing influence of the Improbability Factor, which has also changed for ever the way business finds finance; the fuel that keeps it moving.

Don’t go looking on the Internet for the improbability factor about business finance; you won’t find it, because we’ve only just made the connection.

It’s a term used in the computer industry to describe a known problem that no-one fixes because it’s unlikely ever to occur in real life.

But it might; in IT it could make a huge difference; in business finance and money management it already has.

We’re talking about the rise and rise of alternative finance here; the surge in novel and innovating places to find the money businesses need to get them moving; ways that wouldn’t have featured in any kind of conventional thinking before bad banking decisions almost brought the world crashing down around our ears.

Spur to change
The spur to change was that people had lost faith in the banking industry; an industry where individuals colluded to rig interest rates; where toxic loans involving money that should never have been lent to people who couldn’t pay it back were shuffled around the globe; where the ‘little man’, through governments, had to bail out the banks to keep national economies alive, and where banks were accused of driving small firms to the wall by changing facilities without warning.

Some say bankers should have been jailed; in some countries they were. We don’t want to get into that debate here, but prefer to look at the positives; the new thinking that emerged to show that there was, indeed, another way.

The new way was the emergence of outside-the-box mechanisms like crowdfunding and peer-to-peer lending; where small firms and private individuals could rely on their own judgement about companies seeking loans – thinking that was often out of step with mainstream lenders.

It’s mechanisms like that which have allowed the ordinary man in the street to become part of the Brabham Motor Racing team for as little as £1; and the MarketInvoice company to lend more than £2,000 a minute to UK businesses throughout 2016.

Taking control of destiny
This is hardly ‘self help’, but it comes close. It’s about ‘the little man’ taking control of his own destiny, seeing the possibilities offered by an idea close to his heart, and deciding for himself if he should support it. Why not? He can hardly make a worse job of it than the banks have done over the last decade, if you’ll pardon our cynicism.

And the outcomes are down your street and around the world. A glance at one web site alone reveals opportunities with a glamping business, a music festival, and a local radio station in the UK.

But our favourite is the Secret Sari project. Started by Fritha Vincent, pictured, its objective is to help Indian, Bangladeshi and Nepalese women saved from sex traffickers. Fritha’s dream was to raise £3,000 to give 20 young women the chance of a future. Waiting for a safe passage home in Mumbai and Bangalore, they are taught to sew second-hand saris into summer dresses.

The money raised from sales is given back to them, providing the cushion of a month’s savings to fall back on when they finally make it back home. The fundraising target was £3,000, but so far 350 backers have together weighed in with more than £11,000. That means 60 women will have a better life, and lots of other women will have a unique hand-made summer dress.

Would a simple project like that have got a loan from a High-Street bank? Probably not. Has a source of alternative finance allowed 350 investors to do business with people they could never have hoped to contact otherwise? Most certainly. How did that happen? Must be that Improbability Factor at work again…

Picture: Crowdfunder