Funding for an E-commerce Business
E-commerce businesses face the same challenges as a conventional business as well as additional challenges that are specific to the online world. Whether you have a successful online business already or are just starting off, you will likely need some additional capital to grow. Today we will discuss the ways you can find funding for your e-commerce business and set yourself up for success.
E-commerce Funding from Loans
You can get funding for your e-commerce business through traditional small business lending. Here are some options you can consider.
Business Line of Credit: this enables you to draw against a pre-approved amount of financing and you only pay interest on what you have borrowed. This type of financing is great for working capital expenses like payroll, marketing campaigns, investments and much more.
Inventory Financing: also known as purchase order financing, is helpful because a lender will advance a large portion of the cost of your production to the supplier or manufacturer. This type of financing is best suited for those companies that get a large influx of orders but do not have the resources to fulfill them.
Invoice Financing: this can help you with cash flow issues. You work with a lender who will front you up to 85% of the outstanding invoice. The customer invoice itself acts as the collateral for the lender. You receive the remainder minus lender’s fees when you collect the invoice.
SBA Loan: this loan is not easy to get and approval takes time but if you think you can qualify you should apply. This is best for well-established e-commerce businesses looking to expand. The following information is required if you decide to apply for an SBA loan: business plan, amount needed, credit history, financial projections, collateral, and industry experience. You also must meet the following requirements: at least 2 years of business history, a credit score of 640 or higher, and $100,000 in annual revenue.
Business Credit Card: this is another great option because you can use the funds as you see fit. They work like personal credit cards but have perks and rewards that are more beneficial for a business owner. Business credit cards also allow you to build up your credit score which is going to help you in the long run if you want to apply for a business loan in the future.
Besides applying for a loan, you can get funding through a business grant. The downside to this is that grants for e-commerce are scarce and you have to do extensive research to the find the right one for your business. Loans are also very costly, but grants are free money that you can use to start or grow your business. The good news is that there are some grants that are directed to women, minorities and there are others available that are not so specialized and are general.
Certain small businesses have had success getting funding through crowdfunding. The key to this is to have the right platform that focuses on launching businesses such as Kickstarter or GoFundMe. This also entails in getting donations from friends, family, and even other businesses who want to show their support.
The Bottom Line
Whether you have had an e-commerce business for awhile or are just starting out as an entrepreneur, there are many financing options available for owners to get the funding they need. Some of the questions you should ask yourself are how quickly you need the money, how much you need, and if you have a strong business financial history to present to the lender or investor. These questions will help you determine if you are ready for e-commerce funding.