About Cosmetics Financing
Businesses that specialize in cosmetics and beauty products are in high demand. Although demand for such items remains high, trends and techniques fluctuate constantly. Forecasting and adapting to changes in the market are essential to every cosmetics business. However, stocking up for the latest trends takes capital. This is where cosmetics financing comes in.
Cosmetics financing gives you the ability to purchase that new popular product on the market. It ensures that you’re prepared if a shipment arrives damaged or a shortage causes a delay in your supply chain. You can stock up on hair colors that are trending or put it towards your marketing costs. There are a ton of influencers who partner with cosmetics brands, and you can use funding to market your product line with these people. Financing is a great tool that can help entrepreneurs take their businesses to the next level.
Cosmetics Financing Opportunities
The financing choices available to cosmetics brands are varied and often overwhelming. Every bank and lender has unique guidelines, so you may not qualify with everyone. It’s important to research the different types of loans and funding, as you may not be able to afford or manage some. However, there are many that you can utilize, and your business will be better for it. Let’s take a look at the best options for cosmetics financing.
Bank loan
A bank loan is a lump sum of money that a bank lends to your business. This type of loan can be used for day-to-day expenses, such as rent, payroll, inventory, and utilities or for expanding your brand with a larger marketing budget and increased warehouse space. However, banks have strict requirements when it comes to loaning money to brands. Your credit score, monthly revenue, and business history are a large factor. You may even need to provide collateral in order to secure a bank loan, depending on the level of risk involved.
One of the main reasons that businesses apply for traditional bank loans is for the low interest rates. Due to the strict guidelines, they offer lower interest rates to those who pass their evaluations. The interest you pay on the loan is also tax deductible. If you’re a startup, this may not be the type of loan for you, as most banks require that you’ve been in business for at least three years before approaching them.
Revolving line of credit
A revolving line of credit is provided by a bank or another form of lender. The amount that your business qualifies for will depend on your business history, needs, and the funding institution you work with. This type of cosmetics financing is useful for those who want a consistent source of funds to draw from for day-to-day expenses. This isn’t meant for large purchases or expansion, as the loan limit is often on the lower side. However, similar to a credit card, more funds become available to you as you pay off the sum they provide you. A line of credit can boost your cash flow significantly.
When debating between lenders, keep the interest rate in mind. Lines of credit have lenient requirements compared to other types of loans, but they make up for it with fees and interest. You pay more to have access to these funds 24/7. You can transfer or withdraw cash when you have an emergency or during product launches. Beauty and cosmetics products tend to sell out fast, especially if you have a strong marketing strategy, so always having extra funding on hand can help you keep up with demand.
Equipment financing
Equipment financing is when a lender provides funds to a business specifically to purchase equipment. Often, the equipment itself is used as collateral to secure the loan. This can help businesses that want to expand or those who are slowly building their brand. However, be aware that you can’t use the loan for anything other than the equipment. If you’re looking for funds for marketing, then an alternative loan should be considered. The eligibility requirements also vary, depending on the lender you approach and your business history.
When you put up collateral for a loan, it usually means lower interest rates. On the other hand, if you fail to meet your repayment requirements, you’re in danger of having your equipment seized by the lender. If you don’t want to put up any collateral or you might struggle with high monthly payments, this may not be the best option for you. Review your budget carefully before committing to the loan, as you may be able to find more versatile funding.
Inventory financing
Similar to equipment financing, inventory financing is using the goods you have in stock as collateral to secure a loan for your inventory. If you sell cosmetics and beauty products, then inventory has to be consistent. Inventory financing will help you launch new product lines and keep up with demand. This type of funding is known for its quick and easy application process, although it does depend on the lender you work with. Every company will have different guidelines when it comes to eligibility. Keep in mind that they’ll complete routine evaluations of your inventory, as well.
The best part about this type of financing is that the interest rates are often on the low side due to the collateral involved. You don’t have to use business assets, such as property, equipment, or vehicles in order to secure the money. The only thing you’re risking is your inventory, so if you’re confident in your ability to meet the monthly payments, then this option is worth considering.
Revenue-based financing
If you have regular revenue, then you may want to explore revenue-based financing. You’ll repay this type of funding with a percentage of your future sales. There’s no time limit on the payment process, as it completely relies on your sales volume and revenue. Your business ownership isn’t diluted either, but you can take advantage of the investor’s experience in order to improve your business operations. Unlike other types of funding, a credit check isn’t needed for approval, which is something every business owner can appreciate.
With quick and flexible funding comes consistent cash flow, however, the cost of revenue-based financing may be higher than interest on a regular loan. If you don’t qualify for traditional loans, revenue-based financing can be a great solution, but do consider it carefully before signing on the dotted line.
Merchant cash advance
If you’re searching for quick cash for your cosmetics business, a merchant cash advance might be right for you. A funder will provide your business with a lump sum that you’ll repay with a percentage of future debit and credit card sales. It’s easier to get approved for than many other types of loans due to the lenient requirements. Even startups have good luck with this loan type, as most lenders only require that you be in business for three months before approaching them. If you have poor credit history, don’t worry, as they don’t always use this as a factor in their decision. As long as you have regular revenue from credit and debit card sales, you’ll likely qualify.
There are some drawbacks to a merchant cash advance, too. This type of funding doesn’t build business credit history, so it’s not going to help you get a better loan down the line. The lenient requirements are traded for a high cost of capital, so pay attention to the contract before agreeing to their high fees. Do your research before making a final decision.
Equity financing
Equity financing is the process of selling shares of your company to one or more investors. These can include family and friends if you’re just getting started, angel investors, venture capitalists, or even an IPO (initial public offering) if you’re maturing. Your ownership is diluted with every investor, but the insight and cash they provide can be worth your while. The money you receive can be used on any aspect of the business, such as marketing, inventory, and day-to-day operations.
If you opt for equity financing, your investors have a right to a portion of your business and its earnings. You don’t have to pay the investment back if your business fails, as it was their risk to take, but they do receive a profit share. This can be more costly compared to paying interest on a traditional loan. The insights they provide can be well worth the tradeoff, too. However, pick your investors wisely, as you will be working closely with them.
8fig: An Alternative to Cosmetics Financing
Online businesses that are in need of cosmetics financing often need more than capital – they need the tools to plan, manage, and optimize their cash flow, supply chain, and logistics. 8fig understands this and offers a funding and growth plan built to help eCommerce sellers truly succeed. It’s easy and fast to get started, and you can receive funds in as little as days.
Why use 8fig financing for your business
When you’re managing a business in the cosmetics industry, you want to focus on maintaining steady cash flow. Large lump sums aren’t ideal, as they eat into the monthly budget and lead to a higher cost of capital. 8fig provides you with continuous capital as well as the chance to customize your funding. Once you’ve been approved, the payment schedule and funding amount is flexible enough for you to manage. You can even change the details as you go.
How 8fig works
1. Apply
The application process is fast and easy. Answer some questions about your business and sales, and then provide basic information about your supply chain stages and expenses.
2. Connect your store and bank account
In order to provide you with an optimized Growth Plan, 8fig requires that you connect your store and bank account to the 8fig platform.
3. Get funded
With 8fig, you can get funded in just days. Since 8fig funding is continuous, you receive capital infusions into your business right when you need it.
4. Make adjustments
If something changes and you need to adjust your payments, remittance schedules, or even funding amount, you can always do so thanks to 8fig’s flexibility.
5. Grow your business
All that’s left to do is sell, sell, sell. With 8fig, businesses are able to scale 2.5x as fast.
What 8fig offers in addition to financing
8fig offers brands more than just cosmetics financing. We want you to succeed, and that means using tools that optimize cash flow, forecast trends, and increase revenue. We’re your growth partner, providing you with the means to plan, fund, and manage your eCommerce business.
Supply chain mapping, sales analytics, and forecasting software are tools that can help you optimize your business and grow. 8fig provides these resources and more to help you manage your business every step of the way. Our unique funding method is designed specifically for eCommerce brands, and has helped hundreds of sellers grow faster and reach their goals.
Who is eligible for 8fig cosmetics financing
Compared to traditional banks and other lenders, 8fig has lenient requirements. Our eligibility is determined by your revenue and trading history. If you have an active online store that’s been in business for at least 12 months, over $100,000 in annual revenue, and have made an average of $8,000 per month for the last three months, you can qualify for cosmetics financing from 8fig. We don’t even need to check your credit history, so don’t worry about your lack thereof or past financial choices.
Meeting these requirements, you can receive up to 90% of supply chain costs. That boost will help you manage your inventory, equipment, and day-to-day operations. You’ll finally have the capital you need to grow your business and reach your goals. You won’t have to worry about having enough cash to cover new costs, as you’ll have easy and quick access to funding when you need it.
How to apply for 8fig financing
It’s easy to apply for 8fig financing, and it only takes a few minutes. Simply answer the questions and follow the prompts and you’ll get funded in no time!