About financing for eCommerce loans
In the competitive world of eCommerce, access to capital is the lifeblood of your online business. Unlike traditional stores, eCommerce businesses face unique financial challenges. eCommerce loans are specifically designed to address these needs, providing essential resources to fuel your growth. Imagine strategically investing in expanding your inventory to meet customer demand, streamlining operations as your business scales, or adapting to sudden market shifts. These loans empower you to seize these opportunities with confidence.
The key to success lies in a steady cash flow. Replenishing hot-selling inventory, meeting payment deadlines, and covering warehouse expenses are only some of the things for which business owners need available capital.Â
eCommerce loans ensure a smooth operation by bridging the gap between accounts receivable and accounts payable when they don’t exactly line up. This allows you to focus on what matters most–keeping your customers happy and your business thriving. A reliable cash flow is the backbone that allows you to maintain growth momentum and stay ahead of the curve in the competitive online landscape.
Ensuring a steady cash flow with eCommerce loans is more than just a solution for immediate needs. By leveraging these financing solutions strategically, you’re also laying the groundwork for long-term success. eCommerce loans can help you build an agile business, able to adapt to changing market trends and weather economic downturns. Most importantly, they position you to capitalize on new opportunities, grow your business, and keep it moving ever forward.
eCommerce loans and financing opportunities
eCommerce financing offers a vast array of options, but navigating them can be a challenge. From traditional lenders and loans to innovative alternative solutions, finding the perfect fit requires careful consideration of your business goals and budget.
Before diving into applications, take a step back and assess your financial reality. Can you comfortably manage a large monthly payment, or are you seeking a more consistent cash flow stream with leaner monthly payments? Make sure to research each financing option to fully understand its terms, repayment structures, and potential implications.
Another important factor is eligibility, so make sure you qualify for each financing option before diving into the process. The key is to choose a financing option that empowers your business, not hinders it. Luckily, there are plenty of funding opportunities for eCommerce to choose from.
Bank loan
Bank loans are a traditional method of obtaining significant funding for business expenses. Unlike newer alternative lending options, banks have strict requirements that must be met to secure financing, particularly for startups. Regardless of sales volume, a credit check, substantial monthly payments, and collateral are often required. It’s also important to note that the process involves a thorough evaluation of the borrower’s financial situation and business plan. While not the easiest way to obtain capital, bank loans can be beneficial for those who meet the necessary criteria. If you’re planning to scale your business, large loan amounts can support that, and lower interest rates can help manage monthly commitments.
eCommerce loan approval hinges on several factors. Can the lender provide the funding amount you require? Will the funding arrive in time to meet your business needs? Your credit score plays a significant role, so assess it beforehand. Whatever provider you choose, it’s important that you explore the different lending options to find which one best fits your needs and financial abilities.
Pros
- Large sums of capital available
- Fairly low interest rates
- Interest rates are tax-deductible
Cons
- Strict requirements for qualifying
- Low approval rates
- Application process can be tedious
- You may need to provide collateral
Line of credit
Lines of credit is another viable financing option for eCommerce businesses. A line of credit establishes a maximum borrowing limit, typically set by a bank or financial institution, and businesses can withdraw funds as needed up to this limit.
Similar to a traditional bank loan, securing a line of credit involves an application process with a financial institution. Upon approval, the institution sets the credit limit, or how much can be withdrawn at a given time, the interest rate, and the repayment terms. One of the main advantages of a line of credit is that interest is only charged on the amount withdrawn, not on the entire credit limit.
Pros
- Typically lower interest rates
- Interest is based solely on the amount borrowed
- Flexibility on how to utilize the funds
Cons
- Challenging to obtain without a substantial trading history
- Credit limits may be lower than needed
- Increasing credit limits can be difficult without significant turnover
Crowdfunding
Crowdfunding has emerged as a compelling financing option for eCommerce businesses, involving a large number of individuals each contributing small amounts of capital. Platforms like Kickstarter, GoFundMe, and Indiegogo enable entrepreneurs to showcase their concepts and ask for funding from a community of backers.
The main advantage of crowdfunding is that you don’t have to pay the money back, unlike traditional funding methods that require repayment. Instead, backers receive rewards or incentives based on how much they’ve contributed. However, launching a successful crowdfunding campaign demands significant time and resources, without guarantee that you’ll meet the funding target.
Pros
- No obligation to repay funds
- No need for credit checks or collateral
- If campaign is successful, you might get a significant boost
Cons
- Creating an effective campaign can be challenging
- Success highly depends on networking and the novelty of your business idea
Equity financing
Another common method for eCommerce businesses to secure capital is through equity financing. This type of financing involves an outside investor, such as angel investors or venture capitalists, who invest money in your businesses in exchange for shares, or partial ownership.
Angel investors are individuals who invest their personal funds into businesses in order to help them grow and enjoy their part of the profits. Venture capitalists are capital firms that can usually invest larger sums of money in companies.
Unlike debt financing options like bank loans or lines of credit, equity financing entails exchanging funding for ownership shares in the company, often including a share of future profits. This means investors will have a financial stake in helping your business grow.
Drawing investors to your business isn’t easy, as it requires networking and a solid business plan they can get behind, but it can certainly be worthwhile.
Pros
- Funds don’t need to be repaid as they’re exchanged for ownership
- Access to substantial capital amounts
- Investors are usually experienced in helping businesses grow
Cons
- Acquiring equity financing can be challenging
- Giving up ownership stake in the company
- Loss of control over decision-making and sharing of profits
Grant
Grants also offer eCommerce businesses a way to secure financing without having to pay it back. However, obtaining grants can pose a challenge. Government-backed grants are the most popular way to go, though other institutions may also extend grants based on the specific eCommerce business you have.
If you want to obtain a business grant you’ll first need to perform thorough research. Identify grants that align with your eCommerce business or your entrepreneurial goals. Grant applications vary in length and detail, so keep in mind you’ll need to invest some time and effort into the process. Due to high competition, it’s best to apply for more than just one grant in order to increase your chances of success.
Pros
- No repayment required
- Opportunities available for minority entrepreneurs
- No need to share equity or profits
Cons
- Grants can be highly competitive
- Application processes are often time-consuming
- Not every eCommerce business may find grants applicable
Revenue-based financing
Revenue-based financing has gained popularity among eCommerce businesses in recent years. It operates similarly to traditional debt financing options such as bank loans or lines of credit, where borrowers repay the lender for the funds received plus an additional fee.
However, repayment terms for revenue-based financing are different from those of conventional loans. Instead of a fixed monthly repayment amount, it involves a fixed cost, typically a percentage of the loan amount. That is, repayments are made as a percentage of future sales, typically calculated monthly.
Pros
- Simple and quick application process
- Funding without requiring a credit check or personal guarantee
- Repayment based on sales revenue
Cons
- Funding amount depends on your sales performance
- Generally more costly compared to traditional financing options
- Businesses with minimal or no revenue may not qualify
Merchant cash advance
An eCommerce cash advance, also known as an ECA, operates similarly to revenue-based financing, except its repayment method is tied to credit card sales. Instead of a fixed repayment schedule, you repay an eCommerce cash advance as a percentage of each credit card transaction. Each time a customer makes a credit card purchase, a portion of that sale is allocated toward paying off the eCommerce cash advance.
Just like revenue-based financing, an eCommerce cash advance involves a cost of capital, typically ranging from 6% to 12% of the borrowed amount, depending on risk and other factors.
Pros
- Simple and fast application process
- No equity requirement, credit check, or personal guarantee needed
- Repayment based on credit card sales revenue
Cons
- Funding depends on your sales volume
- Usually more expensive than alternative financing options
- Businesses with limited or no revenue may not qualify
Invoice factoring
One problem many eCommerce businesses encounter is the delay between making a sale and receiving the revenue in their bank account. Invoice factoring offers a solution by accelerating your cash flow.
With invoice factoring, eCommerce businesses sell their invoices to a factoring company, which gives them an advance of up to 90% of the invoice’s value. Rather than waiting for a third party to release the funds, invoice factoring allows business owners to get immediate access to cash and spend it wherever needed.
The factoring company then takes responsibility for collecting payment on the invoice. Once the full payment is received, the factoring company remits the remaining amount to the business, deducting a service fee.
Pros
- Lower risk compared to other financing options
- Quick access to working capital
- Allows smoother cash flow management
Cons
- High fees can reduce net profit
- Businesses are liable if the platform fails to pay an invoice
- Primarily for businesses with delayed invoice payments
8fig: An alternative to eCommerce loans
Another financing option available for eCommerce businesses is 8fig. Unlike traditional funding methods, 8fig doesn’t just provide a funding solution, but acts as a growth partner.
8fig is specifically designed to empower eCommerce businesses by offering flexible, continuous capital alongside tools that help your decision-making. Our funding plans are customized to meet the unique needs of your eCommerce business, ensuring stable cash flow and maximizing your growth potential.
There are many advantages to choosing 8fig financing. We offer a unique solution designed to encourage the growth and success of eCommerce businesses.
Why choose 8fig financing for eCommerce businesses
Choosing 8fig financing comes with many advantages. We provide a distinctive solution aimed at encouraging the growth and success of eCommerce ventures.
How 8fig works
Apply
The application process is quick and easy. Simply answer questions about your eCommerce business, sales, and provide basic information regarding your supply chain and expenses.
Connect your store and bank account
In order to give you an optimized Growth Plan, 8fig requires you to link your online store and bank account to our platform.
Get funded
With 8fig, funding can be approved in a matter of days. Since our financing is continuous, you receive capital injections into your business precisely when needed.
Make adjustments
Should your circumstances change, 8fig will offer flexibility to make necessary adjustments to payments, remittance schedules, or funding amounts, in order to accommodate your evolving needs.
Grow your business
Once funded, you’ll be able to focus on scaling your eCommerce store. With 8fig, businesses’ ability to scale is increased by 4X.
What 8fig offers in addition to financing for online retailers
The 8fig platform is designed to assist eCommerce business owners across various operational needs, from supply chain optimization to cash flow management, and sales analytics.
Our approach is geared towards enabling sellers to achieve their growth goals, fostering a collaborative partnership unlike the zero-sum game often associated with traditional funding solutions.
Who is eligible for 8fig’s online retail financing
To qualify for eCommerce financing from 8fig, some minimal requirements apply. Your eCommerce business must sell products online, have at least one year of trading history on your chosen platform, and have generated $100,000 in revenue over the past year, with an average of $12,000 in monthly sales during the past three months.
8fig does not conduct credit checks, nor do we take equity in your business. Our decisions are solely based on your business’s performance.
If you meet these criteria, 8fig might be happy to provide you with continuous, flexible funding covering up to 90% of your supply chain costs.
How to apply for 8fig financing
Applying for 8fig financing is easy and only takes a few minutes. Simply answer the questions, follow the prompts, and you’ll be on your way to securing funding in no time.