About eCommerce financing
eCommerce businesses sell products online, often through platforms including Amazon and Shopify. Due to their online nature, they have access to a wide customer base. This gives entrepreneurs and small to medium eCommerce businesses the ability to be immensely profitable. However, running an eCommerce store comes with a number of expenses that can be tough to pay out of pocket. Online sellers all too often find themselves in a cash flow crunch, unable to stock up on the inventory they need to continue to make sales. Many therefore turn to eCommerce financing for help.
Maintaining sufficient cash flow is vital to the continued health of an eCommerce business. However, with supply chain costs due before you receive sales revenue, marketing expenses, and the inevitable unexpected costs that pop up from time to time, keeping working capital on hand is challenging. Without enough cash, many online sellers end up running out of stock, which can seriously harm their businesses. eCommerce financing gives them the cash flow to avoid this outcome and grow their businesses.
eCommerce financing opportunities
While traditional lenders aren’t often experienced with funding eCommerce sellers, there are many financing options that are available to assist online businesses. Before selecting one, however, it’s wise to consider your unique business needs and priorities. Determine how much funding you need, as well as your ability to pay the funds back according to different schedules and criteria. Keep in mind that you likely won’t be eligible for certain financing options, so do some research to find one that suits you. Here are some of the most popular eCommerce financing options available.
Bank loan
A bank loan provides businesses with a lump sum of capital to cover business expenses. You’ll borrow money from a bank, and repay it with a fixed monthly payment that includes interest. It’s a great option for those who meet the strict eligibility requirements and can afford the fixed monthly bill.
Since banks thoroughly vet your financials before approving you for a loan, you’ll be considered low risk and thus be able to enjoy a relatively low interest rate. This makes bank loans less expensive than many other types of funding. Collateral usually isn’t required, but it depends on the lender and the type of business loan you’re asking for. However, bank loans are often difficult to obtain, particularly if you’re a new business. Banks require high credit scores, long trading histories, and sometimes valuable collateral from businesses. It’s a long and tedious application and approval process, so make sure you have a good approval chance before spending all your time on it.
Revolving line of credit
A revolving line of credit is similar to a credit card. You have access to funding up to a certain limit, and can take out cash as you please. When you repay the money you borrow, you gain access to more funds. With a line of credit, you only pay interest on the money you use. However, the credit limit is often relatively low, so a line of credit likely isn’t the solution for businesses looking to make large purchases or expand operations.
This type of funding has more lenient eligibility requirements than a bank loan, so you’re more likely to succeed in securing one. You may need to undergo a credit check, though, so this can be an obstacle to some businesses. With a line of credit, you can use the funds on any business-related expense, as the lender doesn’t control your spending schedule. It does tend to have higher interest rates than some other types of loans, though.
Inventory financing
If you’re looking to fund your inventory, then this could be the type of financing for you. You’ll secure inventory financing with the inventory itself, which will serve as your collateral. Inventory financing can only be used to fund inventory, however, so if you’re looking for funding for other purposes, you’ll have to look elsewhere.
Inventory financing is fairly easy to obtain. New businesses can use this funding to stock their warehouse and mature companies can prepare for new product lines. Without the worry of stockouts, you can strategize with confidence—which means more money in your pocket. On the other hand, the lender may perform regular evaluations on your inventory, so keep accurate records of your goods. Some funders will have a minimum loan amount that you have to meet in order to obtain funding, which might be too high for some businesses to meet.
Equity financing
Equity financing involves selling shares of your company to investors in exchange for the funding you need to grow your business. Angel investors and venture capitalists seek out businesses they believe have the potential to bring in big profits in the future. They then give out large sums of capital with the promise of receiving a share of those future profits.
Securing equity financing entails pitching your business idea and goals to relevant investors. If they do choose to fund your idea, you can gain access to the funds you need quickly. You also won’t have to repay the funding in the traditional sense, instead giving your investors a say in your business and a share in future profits. Equity investors are usually knowledgeable and experienced in the field in which they invest, so you’ll get to take advantage of their expertise to help you improve your business. Remember, you’ll have to give up ownership in your business if you choose equity financing. If you wish to keep full control in your business, equity financing isn’t for you.
Business grant
Private firms and government organizations give out business grants in order to further goals or causes. They are usually available to certain types of businesses or business owners, so not everyone is eligible. If you do succeed in obtaining a business grant, you won’t have to repay it, but they will control your spending schedule and what you spend the money on. For those who can’t afford to repay their eCommerce financing, this may be the funding for you.
Grants give businesses credibility, and if you secure one, the chances of securing another increases. However, the application process tends to be tedious and it’s usually quite competitive. Be sure to do thorough research to find a grant that is a good fit for your business before applying. If you do obtain a grant, it’s only a short-term solution, as it won’t provide the consistent funding that the vast majority of businesses require.
Revenue-based financing
Revenue-based financing is often a great alternative for those who don’t qualify for regular loans. Instead of credit checks and a deep dive into your personal finances, revenue-based financing providers base your eligibility on your business’s sales revenue. This is because you repay revenue-based financing with a percentage of your future sales.
This option is ideal for many eCommerce businesses with seasonal sales or those with fluctuations in their revenue, because they won’t have to make high monthly payments in a month with low sales. This frees up their cash flow and helps them stay out of debt. However, in exchange for this flexibility, the cost of capital is often higher than other types of financing. With revenue-based financing, you can get quick access to capital and retain full ownership in your business.
Merchant cash advance
A merchant cash advance is similar to revenue-based financing in that you’ll repay it with a percentage of your future revenue. However, in this case, your repayments will come out of your credit and debit card sales. Therefore, in order to qualify, you’ll have to show that you have regular revenue coming in from credit and debit card transactions.
ECommerce businesses can secure a merchant cash advance quickly and easily, and credit scores and business histories aren’t always a factor when it comes to eligibility. Collateral isn’t required to secure this type of funding, so you won’t have to risk your business assets, either. Plus, you won’t have to give up any equity in your business. On the other hand, due to the lenient requirements and flexibility, the cost of capital is often higher than other types of funding. Read your contract carefully, too, because the lender may have the right to remove money from your account regardless of sales volume.
8fig: An alternative for eCommerce financing
ECommerce businesses have unique needs. Therefore, the traditional methods of financing aren’t always well suited for your business structure and cash flow. 8fig is a funding solution made specifically for eCommerce sellers. Its continuous and flexible design optimizes your cash flow, giving you the ability to streamline your supply chain and grow your business with confidence. The entire platform serves as an all-in-one eCommerce operating system, giving you all you need to plan, fund, and manage your eCommerce store.
Why use 8fig for eCommerce financing
Consistent cash flow is the key to eCommerce growth, especially for companies that rely on keeping inventory in stock. Borrowing large lump sums of capital isn’t ideal for cash flow and can be difficult to repay. 8fig’s alternative eCommerce financing solution provides sellers with continuous injections of capital aligned to your supply chain needs. What’s more, 8fig allows customers to adjust their funding plan in real time to reflect the ever changing reality of their business.
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 eCommerce financing
8fig offers eCommerce business owners more than a great funding solution, providing you with a platform for growth. With your funding, tools, and resources in one place, you can optimize your cash flow, plan for the future, predict trends, and track sales. This gives you all you need for real, long-term growth.
The 8fig platform includes supply chain mapping software, sales analytics, freight booking opportunities, benchmarks, demand predictions, and more. You’ll finally be able to strategize with ease and scale to your full potential.
Who is eligible for eCommerce financing from 8fig
If you operate an eCommerce store that has sold a product online for at least 12 months, bring in an annual revenue of $100,000 or more, and have made an average of $8,000 in revenue per month for the past three months, you’re likely eligible for funding from 8fig.
The application process is quick and simple, and you’ll receive your funding faster than you would with other lenders. That means you can start growing faster. If approved, you can get up to 90% of your supply chain costs covered.
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!