5 Ways To Fund Your Growing Ecommerce Business

Every once in a while we veer off slightly from our focus purely on business writing to address entrepreneurs that use our resources to excel in their field, and explore the art of growing their business away from the written word! This is one of those cases.

Any good entrepreneur knows that funding a commerce business is not a one-and-done deal. Sure, there are those who hit the jackpot and start making consistent profit quickly enough to keep themselves going. But most stores require available funds long after the initial capital is used up.

The same is true for ecommerce businesses. Although ecommerce businesses do not have the same expenses as businesses that require a storefront and sales staff, they have their own expenses. These include extensive marketing as well as money to cover logistics.

Logistics are particularly expensive, as you will often have to pay upfront for the storage and transport of stock before earning that money back in sales and delivery costs. You will also have to restock, using a lump sum of money to ensure you are able to keep selling.

When you are running a growing ecommerce business, what are your options for getting further funding? The following 5 ways are some of the most common and effective.

1. Bank Loan

If you are already paying back a bank loan from your initial funding, you may struggle to get another. Banks are particularly careful in providing loans, requiring more paperwork and stronger evidence that you will succeed. This is both because they do not rely on quick loans for their profits, as well as the fact that they are subject to relatively strict government regulations.

That said, if you haven’t yet received a bank loan for your business, this is one of the best options. It may not be as quick and easy as other funding sources, but you will receive a low interest rate and can mostly rely on regulations keeping the bank from ripping you off.

2. Credit Card

Using a credit card to fund your business is not the same as getting a bank loan. On the contrary, while bank loans have strict regulations, credit cards are easier to get approved. Credit cards require little more than evidence of income. If you have a lot of income, your bank may make significant credit available.

The problem with using credit cards to fund your business is the high interest rates. The ideal way to use a credit card is to pay it off regularly, dipping into it when necessary but using your income to bring it back to zero.

In other words, credit card debt is far from ideal if you want a long term loan. If you have tried all other options, it may be worth considering. However, this should also make you ask the question of why you can’t get funding.

3. PayPal Working Capital

PayPal Working Capital is funding that PayPal provides to owners of ecommerce stores. They offer upfront funding that is then paid off from the income made by PayPal sales on your store. There is a fixed fee upfront, but they charge no interest. Of course, this also means that the amount of funding you receive might not be all you need. It is based on your current sales and history with PayPal.

You don’t need to pay instalments every month, but there is a minimum payment of up to 10% of the loan every 90 days. It is a good option for ecommerce stores that use PayPal and require a quick injection of cash.

4. Unsecured Private Loans

Private loan companies provide unsecured loans for business owners who have no assets or guarantors to back them. These loans are easily accessible and require very little paperwork. They are generally approved within a day.

Because these loans are unsecured, they come with very high interest rates and tough repayment conditions. However, if you have no assets or have bad credit, they may be one of your only options.

Be sure to do your research before choosing a private company for an unsecured loan, as there are some which use unscrupulous practices to entrap business owners in a cycle of debt.

5. Business Line of Credit

In many ways, a business line of credit is similar to a credit card. The difference is that it is designed specifically for business use. With a business line of credit, you agree on a fixed amount with the lender upfront. This will generally be an unsecured loan, and will have a somewhat high interest rate.

It differs from other unsecured loans in that you only pay back what you use. You also only pay interest on what you use. In other words, if you get approved for $10,000 and don’t use it at all, you won’t make a repayment. If you use half of it, you will only have to repay that half and will only accrue interest on what has been used.

This can provide a revolving line of credit for SMEs. It is a good option for many ecommerce companies who need funding available for logistics and restocking but are making a consistent income and can pay the money back over a short time period.

The above 5 types of funding can provide the influx of cash you need to boost your growing business. As you restock with more goods than before and have to make bigger deals with logistics companies, the above types of funding can facilitate your continued operations until you have made back the money in sales. Remember that, aside from bank loans, these are not good options for long term funding, as high interest rates will leave you struggling not to get stuck in debt.

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