eCommerce businesses are booming, but despite trends they may still struggle to obtain financing. From obstacles such as length in business to no physical office location, there are many reasons why eCommerce funding can be hard to secure. On top of that, if you do qualify it can be more costly than beneficial. So, the key is not only to find eCommerce funding you qualify for but that’s affordable too.
How funding helps ecommerce business
Having access to funding in the form of financing, venture capital, or even crowdfunding can mean the difference between getting your business off the ground and closing up shop. While eCommerce businesses don't have to pay for the expense of a physical storefront, they still have their fair share of operating costs.
eCommerce businesses can use funding for a variety of business expenses including staffing, marketing, web hosting, equipment purchases, and inventory costs.
Financing can help you keep your inventory well-stocked even when funds are low, expand into new product lines, and purchase the equipment needed to manufacture even more products.
There are a variety of ways to fund an e-commerce business, which we’ll cover in more detail.
What are the best ways to fund an eCommerce business?
The best way to fund your eCommerce business will ultimately come down to your individual situation. As a business owner, understanding the options available can help you make educated business decisions. Let’s take a look at some of the best ways to fund eCommerce businesses.
- Crowdfunding: Crowdfunding uses small amounts of capital from numerous sources to raise money for business expenses. Crowdfunding can be difficult to obtain but often does not need to be paid back, making it a common solution for startup business costs. Being featured on a crowdfunding platform also offers increased exposure to new businesses.
- Grants: Small business grants are available from various sources including government agencies, state organizations and private corporations. The major advantage of business grants is that they do not need to be paid back. However, not all businesses are eligible, and they can be difficult to obtain, often requiring a great deal of paperwork.
- Inventory Financing: Inventory financing is a specialized form of funding that can only be used for one purpose. Inventory financing is most often set up as a short-term loan or a revolving line of credit that allows a company to purchase products for resale. Both types of funding are secured by the value of your inventory as collateral. Since it’s a secured form of financing, it can be easier to obtain than many other options.
- Equity Financing: Equity financing allows companies to raise capital through the sale of shares. It can be used for both short-term and long-term needs required for business growth. With equity financing, there is no loan balance to repay, but you must share a portion of your profits with investors. The thought of having to share ownership and control of the company makes equity financing an unattractive option for many business owners.
- Friends and Family: Whether you are just getting started or hoping to expand your business with new opportunities, sometimes asking friends and family to invest in your company can pay off. This option is best for minimal expenses that have a proven value to your business such as your initial equipment purchases or first inventory order.
- Personal Savings: One of the best ways to fund any business is to pay for all of the costs up front in cash. Although not many people are able to utilize this option, using your own personal savings is the most affordable way to grow your business without the need to pay back a loan balance or shell out extra money for interest.
- Business Credit Cards: Business credit cards have an average credit limit of just over $56,000, making them a viable option for many expenses. Having access to a revolving line of credit is a very convenient and common way to finance recurring costs such as inventory needs or to pay for a large upfront purchase such as new equipment. Look for a card that has a low introductory interest rate offer with rates as low as 0% APR.
- PO Financing: Purchase order financing functions as a cash advance for business owners to be able to fulfill customer orders. It’s different from a loan in that your suppliers are paid directly from your lender for the goods that you are reselling. Business owners do not have to worry about a monthly repayment since all fees are taken out upfront. While purchase order financing is very easy and convenient, the disadvantages include high fees and increased risk if your customer doesn’t pay.
- Revolving Line of Credit: A line of credit works much the same way as a credit card, allowing applicants to borrow up to a certain amount. All credit cards are tied to a line of credit, but not all lines of credit are credit cards. Interest rates are typically lower on a line of credit than on a credit card and may offer higher credit limits to borrowers.
- Business Loans: One of the most common ways to finance eligible business expenses is to take out a business loan. Business loans offer some of the best possible deals on financing, with loan amounts reaching upwards of $500,000 and competitive interest rates. However, they can be difficult to qualify for, and can take many years to pay back.
For many forms of financing, you will need to provide the lender with documentation about your business and its solvency, including a business plan and financial statements. You may also need to demonstrate a minimum annual income from your business or meet a minimum personal credit score. In addition, the underwriting process can take several days or even weeks to reach a final loan decision. By turning to alternative forms of eCommerce funding you may be able to secure working capital faster and at a reduced cost. So where can you find alternative forms of eCommerce funding? At Kickfurther you can access working capital up to 30% cheaper than other options. Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources.
How can Kickfurther help grow your business?
With Kickfurther you can fund millions of dollars worth of inventory at costs of up to 30% lower than the competition. It gets better though - you don’t pay until you start making sales. You’ll truly have the opportunity to create a payment schedule that works for your business. You’ll outline expected sales periods to create customized payment terms. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours.
Interested in getting funded on Kickfurther? Create a free business account, complete the online application, review deals, and get funded in as little as minutes!