Ecommerce Financing Solutions to Help You Grow

Getting money to run a business is always hard, but the good news is that if you're looking for money, that means your business is growing! While starting a business, we all need money at some point. Money is at the heart of everything, from a young company trying to start up to a well-established business that wants to grow.

Without money, the consequences can be fatal. 90% of start-ups fail in their first four years, according to a study. This is mainly because there isn't enough money for growth and expansion. How does one become one of the top 10% of people?

The good news is that there are many ways to get money to pay for things. What is most necessary is to think about your options and choose the best one for your business. So, you need to think about your business and the available options before making a decision. It's not one size fits all.

What is eCommerce Financing?

It's a way to get money for businesses that sell things online (shops running on WordPress or Shopify). eCommerce lending helps online businesses grow, pay for marketing, and make more money. Online sellers use E-commerce funding to keep their cash flow stable and meet their payment obligations. These payments also cover things like advertising and affiliate programs. eCommerce sales have risen a lot in the last few years, and this is why. There was a pandemic at the time, and many stores couldn't sell their goods through normal channels.

When you want to make a new digital picture of your shop, it can take a long time and cost money. Key Opinion Leaders (KOL), also known as influencers or content creators, play a vital role in the eCommerce world. It takes a significant toll on your business growth because of your marketing costs.

Many businesses are getting money from eCommerce corporate grants to help them earn money.

When it comes to E-commerce financing, how does it all work?

In most cases, the Financing Company lends money to the Seller. The Seller pays back the lender every 15 days with the money from the sales on the e-commerce platform. The credit team at the financing company looks at how likely it is that the application will be approved. So, the team can do a thorough risk analysis. The team looks at qualitative and quantitative factors when they figure out how much money is needed. As an example:

-        Turnover for the year

-        "Cash Flow" (for example, the past 12 months)

-        Analysis of stocks (flow of goods, materials management.)

-        Sales are doing well.

Then, the eCommerce Financing Platform gives the Seller credit limits (credit allowance) from the platform.

When is the best time to get money for your eCommerce business?

If you decide to seek funds too soon, you may encounter issues of not being prepared or undervaluing your firm. You may not be able to expand if you choose to seek funds too late. This is why it is critical to respond fast.

The problematic aspect is that there is no perfect or wrong moment to begin seeking funds for your company. This is the most crucial point. You must have a crisp and precise objective in mind, as well as a strategy for how you want to spend the additional income to achieve it.

5 ways to get money for an eCommerce business

It doesn't work for every business to use the same type of funding. To grow and make more money, you need to choose the right eCommerce finance for you. It's not going to be possible for your business to get all of the money it needs from different sources. Some types of funding work better at other points in a company. We'll look at five of the best ways to get money for your eCommerce business:

1. Financing Based on Revenue

Revenue-based financing is a new and exciting way to get money to buy things on the web. In business, it is a way for companies to earn money from people who want to help them. On the other hand, investors get a share of the company's ongoing profits as a payment for the money they put in.

It is becoming very popular with eCommerce businesses because it is easy to get and doesn't have a lot of risks. Investors usually use data to make decisions about giving money based on how much money a company makes. For the investor to provide you with the money, your business must be viable and profitable. But this also means that if your business does well, you know the investor thinks it will work out.

Businesses get the money they need without giving up control of their business or taking on debt. If you invest, you get a share of the company's profits every month until a certain amount has been paid back to you.

There are 3 top good reasons to choose revenue-based financing, such as these:

-        No guarantor is needed

-        Flat fee repayments

-        Faster Approvals

These are some reasons that show how easy and cheap it is for businesses to get this kind of money. As we'll learn later in the article, other ways to earn money are more expensive (loans) or weaken your company (investors). Keep complete control of your business and get the cash you need to grow with revenue-based financing. You pay a flat fee that is determined by your revenue.

There are a lot of businesses that get money based on how much money they make and go on to make a lot of money. In our opinion, this is the best way to earn money for an eCommerce business that wants to grow.

2. Bootstrapping

People use the term "bootstrapping" to describe the process of building a company from the ground up with money from their own savings.

Bootstrapping is the most ideal and common way to start a business, but it is often liked to get money. Many people find it hard to choose this path. It can put all of the financial risks on the people who start businesses, leading to bankruptcy if they don't work out.

Having too few resources can slow down a business's growth, make it hard to market, and sometimes make a product or service less good or honest than it should be. If done correctly, bootstrapping allows the entrepreneur to keep 100% of the company and 100% of the power.

3. Grants

There are also grants for small businesses and start-ups. A Grant is "free money" given to a business by the government, a company, or a person who wants to help.

In business, grants don't have to be paid back. Often, they're given to encourage jobs, green projects, or more economic benefits for local communities. They are sometimes given to help small businesses stay competitive in the market.

Grants are often available based on where the business was started, what type of business or because it is, or who the community is.

As you might expect, the headline "free money" draws much attention from businesses. There is a lot of competition as everyone wants to get money from the government for free. So even though it's free, you'll have to do a lot of research and pitching to get this kind of money.

4. Equity-Based Financing

When you start a small business, bootstrapping and grants may be enough money to get started. But when your business grows, you may not be able to use these options anymore.

Unfortunately, as your need for more money grows, so does the amount of control you give up. There are many ways to get money through equity financing. You can sell a share of your business to someone in exchange for cash. If a business needs money to pay its bills or wants to invest in its growth, this is usually done. It's like a company is giving up some of its own in exchange for money.

There are various types of equity financing, but the most common are:

-        Angel Investors.

-        Private Equity.

-        Venture Capital.

-        Initial Public Openings.

In many businesses, this type of financing is used a lot during becoming more stable and stable.

5. Debt Financing

Debt financing is another way to get money for a business. It means taking out a loan to make money for your business. Getting a loan is the most common way of earning money to pay for things you own.

The business must pay back the principal and interest on the debt over time in exchange for the money. This method allows companies to get a lump sum of cash right away. The lender makes money when the businesses pay back the money.

It's kind of like this: debt financing is the opposite of equity financing. In one, you take on debt to get money. On the other, you sell stock to earn money. There are two main types:

-        Business credit cards

-        Loans

-        LOC (Lines of Credits)

Debt financing, like bootstrapping, can be dangerous because it puts the business in debt to grow, which can be bad for them. Your business must evolve so that you can repay the lender. Otherwise, you could go broke.

Conclusion.

Hopefully, this article has shown you how vital it is to thoroughly consider your alternatives when deciding how to finance your company. Financing might be frightening. Putting your own money at risk, going into debt, or giving up a portion of the firm you founded are all terrifying concepts.

However, if you adopt the appropriate eCommerce finance plan, your company will be financially secure. If you want your company to grow and succeed, you must begin with this. 

Author Bio: Aline Huseby is a Sales & Marketing Manager at ChargeAfter. She would like to share content on the Finance Industry like Point of Sales financing, Buy now Pay later, consumer financing & Ecommerce financing for the valuable readers.