A Definitive Guide to Funding Your eCommerce Business

 

In
this
article: 

The
eCommerce
industry
has
seen
unprecedented
growth
over
the
last
few
years.
And
as
experienced
during
the
COVID-19
pandemic,
more
and
more
consumers
now
prefer
the
convenience
of
shopping
from
home
compared
to
brick-and-mortar
stores. 

While
this
is
generally
a
good
thing
for
eCommerce
business
owners,
it
also
presents
some
challenges.  

Rapid
growth
in
an
industry
attracts
competitors,
which
means
entrepreneurs
must
either
cut
prices
or
improve
services
to
stay
in
business.  

Both
options
are
expensive:
Cutting
prices
lowers
profit
margins
and
typically
requires
sellers
to
do
things
like
buying
inventory
in
bulk,
which
reduces
unit
costs,
but
requires
more
capital
at
the
front
end.  

Adding
services
in
the
eCommerce
world
usually
means
free
shipping
or
no-questions-asked
returns,
and/or
hiring
more
customer
service
staff,
which
is
not
cheap. 

So,
how
can
you
take
advantage
of
the
enormous
growth
happening
right
now
by
running
an
eCommerce
business
that
actually
has
a
chance
of
succeeding? 
 

Chances
are,
you’ll
need
capital.  

In
this
definitive
guide,
we’ll
walk
you
through
various


funding
products

to
take
your
eCommerce
business
to
the
next
level. 

How
the
ECommerce
Business
Model
Works 

The
eCommerce
business
model
involves
listing
products
for
sale
on
a
user-friendly
website–your
own,
or
a
platform
like
Amazon
or
Etsy.
In
the
online
marketplace,
costs
like
brick-and-mortar
storefronts
and
sometimes
even
warehousing
are
reduced,
while
the
potential
customer
base
is
expanded
globally.
At
the
same
time,
competition
is
increased
globally,
and
what
it
takes
to
win
isn’t
that
different
from
what
it
takes
to
win
in
traditional
stores:
who
has
the
best
or
lowest
priced
products,
has
invested
the
most
in
their
marketing
and
advertising,
or
has
the
best
customer
experience. 

Entrepreneurs
who
want
to
grow
their
businesses
beyond
being
a
side
hustle
in
their
garage
are
likely
going
to
need
funding
for
this,
so
let’s
look
at
the
options
for
both
debt
and
equity
financing: 

Debt
Financing
Options
for
ECommerce
Businesses

1.
Small
Business
Loans

If
you
prefer
a
more
conventional
approach,


small
business
loans

are
a
reliable
option.
Banks
and
financial
institutions
offer
loans
to
eCommerce
businesses
based
on
factors
such
as
creditworthiness,
business
plans,
and
financial
stability.  

While
this
method
involves
paying
back
the
loan
with
interest,
it
provides
the
advantage
of
maintaining
complete
ownership
and
control
over
your
business. 

Before
applying
for
a
small
business
loan,
thoroughly
assess
your
financial
situation
and
ensure
you
have
a
solid


business
plan.
Banks
are
more
likely
to
lend
to
businesses
with
a
proven
track
record
and
a
clear
plan
for
utilizing
the
funds.

2.
Small
Business
Administration
(SBA)
Loans

A
subset
of
traditional
loans,


SBA
loans

are
backed
by
the
U.S.
Small
Business
Administration
and
are
designed
to
support
small
businesses.
These
loans
offer
competitive
interest
rates
and
favorable
terms,
but
are
more
limited
in
scope
and
the
approval
and
funding
process
takes
significantly
longer
than
non-SBA
loans.  

Several
SBA
loan
options
are
available,
including
the
SBA
microloan
and
SBA
504
loans.
The


SBA
7(a)
loan

however
would
be
great
for
covering
huge
capital
investments
and
other
eCommerce
funding
needs.  

Alternative
Financing
Options 

1.
Invoice
Financing 

If
your
eCommerce
business
operates
on
a
business-to-business
(B2B)
model
and
deals
with
invoicing,
invoice
financing
can
be
a
viable
option.  

This
involves
selling
your
outstanding
invoices
to
a
third
party
at
a
discount
in
exchange
for
immediate
cash
flow. 

2.
Merchant
Cash
Advances

For
eCommerce
businesses
with
consistent
revenue
flow,


merchant
cash
advances

offer
a
lump
sum
in
exchange
for
a
percentage
of
future
credit
card
sales.
While
convenient,
with
revenue-based
financing
like
this
it’s
crucial
to
carefully
evaluate
the
terms
and
understand
the
impact
on
your
cash
flow. 

 

Equity
Financing
Options
for
ECommerce
Businesses

1.
Bootstrapping

Bootstrapping
involves


using
your
savings

or
revenue
generated
by
the
business
to
fuel
its
growth.
It
might
require
a
bit
of
patience,
but
it
allows
you
to
maintain
control
over
your
business
without
incurring
debt,
plus,
since
you
are
self-funding,
you
also
maintain
100%
of
the
equity. 

Start
small
and
reinvest
profits
into
your
business.
This
not
only
helps
you
keep
a
tight
rein
on
your
finances
but
also
instills
discipline
in
spending.
As
your
business
gains
traction,
you
can
explore
other
funding
options
without
compromising
your
equity.

2.
Angel
Investors

Angel
investors
are
affluent
individuals
who
provide
capital
for
a
business
startup,
usually
in
exchange
for
convertible
debt
or
ownership
equity.
These
investors
often
bring
not
just
money
but
valuable
expertise
and
connections
to
the
table. 

When
looking
for
an
angel
investor,
focus
on
finding
someone
who
aligns
with
your
vision
and
industry.
Networking
events,
pitch
competitions,
and
online
platforms
can
be
excellent
avenues
to
connect
with
potential
angel
investors.

3.
Venture
Capital

Venture
capital
(VC)
is
a
popular
funding
option
for
eCommerce
businesses
aiming
for
rapid
growth.
VC
firms
invest
in
startups
and
small
businesses
in
exchange
for


equity.
These
firms
are
looking
for
companies
with
high
growth
potential,
scalability,
and
a
solid
business
plan. 

Before
seeking
venture
capital,
ensure
your
business
is
ready
for
the
scrutiny
it
will
face.
VC
firms
will
thoroughly
evaluate
your
business
model,
market
potential,
and
team.  

If
you
can
demonstrate
a
compelling
case
for
rapid
growth
and
profitability,
venture
capital
could
be
the
rocket
fuel
your
eCommerce
business
needs. 

Biz2Credit
—
Helping
ECommerce
Brands
Get
Funding 

Biz2Credit
streamlines
small
business
financing
by
connecting
entrepreneurs
with
funding
through
its
online
platform.  

By
simplifying
the
application
process
and
leveraging
technology,
Biz2Credit


accelerates
access
to
funds,
assisting
eCommerce
businesses
in
securing
the
capital
needed
for
growth,
inventory
management,
and
adapting
to
market
demands. 

Take
Your
ECommerce
Business
to
the
Next
Level 

Ultimately,


securing
financing

is
essential
for
the
success
of
your
eCommerce
venture.
Whether
you
choose
traditional
financing
or
alternative
methods,
Biz2Credit
can
help
you
secure
the
funding
you
need
to
grow
your
business. 

For
a
deeper
dive
into
financing,
explore


additional
resources

to
empower
your
business
journey.
If
you
would
like
a
personalized
consultations
with
a
Biz2Credit
funding
specialist,


get
in
touch

with
us
today.
Your
journey
to
financial
empowerment
starts
here.