About warehouse financing
Warehousing is a vital piece of the supply chain. It allows your eCommerce business to optimize inventory investments and save on shipping costs. It speeds up the processing time, so that your customer receives their order in a timely and efficient manner, as well. This is something that all businesses can appreciate. As the costs involved add up, however, many businesses turn to warehouse financing for help.
With a warehouse full of inventory, you have an opportunity to receive funding. That inventory can be used as collateral when you need a boost in cash flow. Lenders will provide you with the necessary funds after reviewing your accounting system and evaluating the value of your inventory. You can use warehouse financing to cover day-to-day operations, such as rent, utilities, payroll, and even more inventory. However, expect that the lender will monitor your inventory regularly, as their interest and money is tied up in your inventory.
Warehouse financing opportunities
Inventory costs are high and storage fees and fulfillment can get expensive. These costs are usually paid before you receive revenue from sales, too. This can create a big challenge when it comes to managing your cash flow and ensuring you have the working capital you need for inventory procurement and growth. Fortunately, there are plenty of financing opportunities out there to help with warehouse financing.
Bank loan
A bank loan involves receiving a lump sum from a bank for business-related purchases. In comparison to newer alternative lenders, banks have strict requirements that must be met in order to obtain funding, especially for startups. A credit check, high monthly payments and collateral are often necessary, regardless of your sales volume. In short, it’s not the easiest route to obtain funding, but it can be a beneficial choice for those who meet the requirements. If you’re planning on expanding, then the high loan amount can help you get there, and the lower interest rates can help you maintain monthly payments.
Pros
- High loan limit
- Lower interest rates
- Tax-deductible interest rates
Cons
- Strict eligibility requirements
- Long application process
- Low approval rates
- Collateral requirements, depending on the type of loan
When choosing between loans, you should consider a few things before making your final decision. Can they supply you with the amount you need? Can they get it to you in time? Is your credit score going to harm your approval chances? Do you have the necessary assets in order to meet their requirements? It’s a good idea to make sure a loan suits your needs before applying.
Business line of credit
A business line of credit is similar to a credit card, due to the fact that money becomes available to you as you pay off the loan. It’s a revolving credit that you can utilize for day-to-day expenses, such as payroll, rent, utilities, and inventory. You’ll only pay interest on the amount you’re currently using, as well. You’ll have an established credit limit, and the amount will depend on your business history. Every bank and lender has different guidelines regarding eligibility. You’ll have to research to find the one that fits your needs best. Overall, it’s a good option for those who don’t need or want a large lump sum.
Pros
- Improves cash flow
- Freedom of use
- Builds business credit
- Easy accessibility
Cons
- There may be extra fees
- Low borrowing limits
- Higher interest
- Often requires credit check
Any business in need of quick cash should consider this option. However, keep in mind that many lenders require a credit check during the application process. As long as you’re not planning on expanding significantly, this low-limit choice will benefit you during the slow seasons.
Crowdfunding
Crowdfunding involves a group of people putting their money together to fund a specific project. Businesses pitch an idea to investors in hopes that they’ll choose to contribute. This funding method doesn’t involve credit checks or lengthy applications, as it’s all based on your pitch. However, building a successful campaign takes a lot of time and effort. You don’t have to pay your investors back, but you do often have to give them some sort of reward or even equity in exchange for their money. Not every crowdfunding campaign is successful, but if you do reach your goal, it’s a quick and effective way to fund your business.
Pros
- Quick funds
- You don’t have to pay the money back
- Boosts startup momentum
- Great for those who wouldn’t pass regular eligibility requirements
Cons
- Inflexible campaign
- Risk of failure
- Idea theft is a possibility
There are a variety of online platforms designed for crowdfunding. Winning investors over, however, depends on your creativity and salesmanship, so crowdfunding is often best for businesses with unique or novel ideas and products.
Equity financing
Equity financing is the process of selling equity in your company in exchange for capital. You may need the money for short-term expenses, such as inventory and payroll, or you may be looking to expand. Equity investors can come in the form of family, friends, angel investors, or venture capitalists. You can even present the shares as an IPO or initial public offering. Your choice of investor will determine your current business standing and your goals for the future.
Pros
- Startups receive funding and advice from experienced investors
- You gain a partner
- Can secure large amounts of capital
- No set repayment fees
Cons
- Profits have to be shared among the shareholders
- Ownership is weakened
- Shareholder dividends are not tax deductible
- Can be more costly than traditional loans
Shareholders earn their money from the sales you make. So, you don’t have to pay off the investment in the traditional sense. However, you should consider that their share of your profits is often higher than you would have paid in interest on a regular loan. This is due to the high risk they’re taking by investing in your company.
Grant
A grant is a sum of capital provided to you by private organizations, the state, or the federal government. The great part about securing a grant is that you don’t have to pay it back, which is something every business owner can appreciate. The trade off, however, is the strict guidelines that you have to meet in order to receive funding. You won’t have control over how you use the funds. Keep in mind that it’s highly competitive and will require a lot of paperwork. There might not be a grant available for your specific business or niche, either.
Pros
- You don’t have to repay the funding
- There is plenty of information available
- It’ll boost your company’s credibility
Cons
- Time consuming
- Difficult to obtain
- Short-term solution only
Before applying for a grant, you need to do some research to find the right one for your business. Then, the application can be a lengthy process, and some grants are quite competitive. If you do succeed in getting a grant, though, it can help your business a great deal.
Revenue-based financing
Revenue-based financing is great for businesses that regularly bring in revenue. Investors will provide you with the capital you need to maintain or grow your business operations. Instead of fixed monthly payments, you’ll pay them back with a percentage of your future sales. Your repayments therefore fluctuate along with your sales. Securing revenue-based warehouse financing is often quick and easy compared to other types of loans. There’s no traditional credit checks or business history evaluations, as your eligibility chiefly depends on your monthly revenue.
Pros
- Flexible
- Quick
- Payments fluctuate, depending on sales
- No ownership dilution
Cons
- Cost of capital is often much higher than interest from a traditional loan
- Requires steady revenue
- Not available to all businesses
If you’re a business that doesn’t qualify for traditional loans, then this may be a good solution for you. It’ll offer you cash quickly, and you don’t have to worry about high payments during slow sales months. However, the cost of revenue-based financing is often higher than traditional financing solutions.
Merchant cash advance
Merchant cash advances are great for those who need quick money to boost their cash flow. A lender will supply you with a lump sum, and you’ll pay that lump sum back with your future sales. A percentage of each credit and debit card sale will be put toward that debt. It’s also easy to get approved compared to a traditional bank, but you may need to be in business for several months and bring in a certain amount of revenue. You can use the money you receive for anything related to your business, as they won’t control how you spend it.
Pros
- Fast cash
- Flexible requirements
- Credit score isn’t a factor
- No collateral required
Cons
- High cost compared to traditional loans
- They’ll take money out of your account regardless of sales volume
- Doesn’t build credit history
If you’re looking for a quick and simple answer to your lack of funds, then this may be the route to take. Keep in mind that you won’t build any credit history with this method, which can hurt your chances of obtaining a different kind of loan in the future. Despite this, you have complete control over the funds. So long as you make the agreed-upon payments, you’re in good standing.
8fig: An alternative option for warehouse Financing
8fig is a great option for those who need warehouse financing. It’s a funding and growth platform that provides eCommerce businesses with the ability to manage their cash flow and finance their business so they can reach their full potential. We offer a fast, continuous, and flexible funding option to those who wish to grow their brand with confidence.
Why use 8fig for warehouse financing
When you approach a bank, and even some lenders, they tend to have strict eligibility requirements, high monthly payments, and aren’t suited to your unique business needs. 8fig will work to get the funding to you as soon as possible, so you can grow your business when you want to. We offer free planning and analytic tools, too, so you can make better decisions for your business’s future.
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 4X as fast.
What 8fig offers in addition to financing
Our excellent funding method aside, we have more to offer eCommerce businesses. 8fig’s built-in cash flow management ensures that you have the capital you need when you need it. Plus, our planning and analytics tools give you the information you need to succeed. When in doubt, you can count on us to get you through the slow seasons and rough patches.
When you succeed, we succeed. It’s as simple as that. We offer you ways to map your supply chain and software that helps you plan ahead. When your goal is to reach the top, we’ll provide you with a steady support system.
Who is eligible for 8fig financing
As an eCommerce business owner in search of warehouse financing, you’ve probably done your research. Banks have strict eligibility requirements when it involves funding. However, 8fig is much more flexible, and will provide you the chance to grow now rather than later.
The application process is relatively simple. You’re likely to get your funds in days rather than weeks. Remember that you’re still in control of your business; all we do is provide the necessary funding. If you have 12 months of business history and generate over $100,000 per year, with an average of $8,000 in sales per month for the last three months, then you’re eligible to receive financing.
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!