E-commerce financing solutions provide funds for everything from inventory and payroll to website design and technology. In this post, we will go over how you can get and use an e-commerce business loan to grow your company.
Start with Your Financing Requirements
There are different kinds of e-commerce business loans. They differ by loan amount, loan structure, type of lender, repayment terms, cost and other conditions and terms.
Start your search by determining what financing requirements you have because there are many different types of e-commerce loans. You will be able to focus your search on the options that work best for you. You should specify the following:
- Your preferred loan term and amount
- How you will spend the funds
- The maximum monthly payment you can afford
- Whether you’re willing to put collateral and provide a personal guarantee
Explore Different E-Commerce Business Lenders
E-commerce small business loans are available from alternative lenders, traditional banks and credit unions, and SBA lenders. Regardless of who you obtain the loan from, the loan itself will function similarly. You’ll receive funding that you can spend on business expenses in exchange for periodic payments of principal and interest rates.
However, the costs, application processes, requirements, funding times, and service varies greatly among different types of lenders.
This is why we recommend that borrowers educate themselves about the different types of loans before applying.
How to Get an E-Commerce Loan
Once you have outlined your financing requirements and lender options, you will need to collect, organize, and submit personal business information.
Create your business plan
It is smart to create a business plan that explains how you will use and repay your loan. It helps you see your ideas and test your assumptions. Along with your business plan, include information such as your previous year’s revenue, monthly sales volume, cost of goods sold and more.
Gather personal information and business documents
Different lenders have different requirements, but the following are common requirements:
- Personal credit reports
- Criminal record
- Previous addresses and names
Other types of documents you should have on hand are the following:
- Schedule C’s
- Articles of incorporation
- Anything that proves you own the business
Organize Your Financial Statements
Part of your loan application will likely require financial statements including, but not limited to the following:
- Profit and loss statements
- Tax returns
- Bank statements
- Balance sheet
- Accounts receivable
You should contact one of the major credit bureaus for your personal and business credit scores. Since many lenders have minimum credit score requirements, a low score may take some lender options off your list.
Similarly, many lenders have predetermined debt-to-income ratio requirements. Therefore, it can save you a lot of time to outline any debts you may have. You can do this by creating a debt schedule with details such as:
- Outstanding debts
- Remaining balance
- Monthly payments
Complete the Loan Application Process
You can get the forms you need to apply online from your prospective lenders. It is a simple matter of answering the application’s questions and providing the supplemental information requested.
As you’re filling out your application, make sure you’re answering honestly and completely. The lender will double-check the information you submitted with background checks, credit reports, and public record requests. So, if you provide any false information, your application will get rejected.
When your application gets accepted, all you can do is wait for their decision. If your application is approved, you’ll need to evaluate the loan offer. Assuming you accept, your lender should walk you through their closing process.