The Best eCommerce Financing Methods

To find the right financing method for your eCommerce business, you need to have a clear end goal. Your end goal will ultimately dictate the best eCommerce financing method for you. 

It’s important to outline a clear goal that is specific to your needs. What result are you hoping to achieve through your financing?

Consider whether you’re looking for a large financing stream to help to scale your business or financial backing to bridge gaps between marketplace payment dates. 

For instance, if you’re looking to secure finance to help purchase more inventory and drive sales, you might need a smaller amount than if you’re aiming to make large business investments. Therefore, the amount of funding that you need will help to guide your financing decision.

Some of the most common eCommerce financing options include loans, credit cards, and investments, but it’s important to ask yourself if these approaches are best for you and your eCommerce business. Here’s our guide to financing options for online sellers.

Revenue-Based Financing

Revenue-based financing is still a relatively innovative approach to eCommerce lending. It operates similarly to equity-based financing, but avoids diluting ownership share. 

In revenue-based financing, investors provide large sums of capital to drive your business. In return, they gain a percentage of the business’s ongoing revenue as repayment. Typically, the investor sets a predetermined repayment amount, but this will depend on your contract. Without a predetermined amount, as the business grows, so does the investors’ revenue.


  • The founder retains their ownership share. Therefore, they can make their own business decisions, and continue to invest capital as they see fit.
  • Investors can provide large amounts of capital. Therefore, eCommerce businesses have more room to scale.
  • If an investor chooses to back your business, it’s a good indicator that you have a successful business idea.
  • Interest (if any) is predetermined. Your repayments are managed by a percentage amount that you can negotiate with your investor.


  • Investors’ decisions are data-driven. Therefore, you need to prove that your business is viable and successful, to guarantee their return on investment
  • Similarly, it can be hard to secure outside investment like this. Your business needs to have quality data, and prove to be growing over time. Without these insights, it is challenging to gain investment.

Cash Advances

Capital advances can be offered by both financiers and merchants. For instance, marketplace Shopify offers cash advances to its users. Traditional cash advances involve a lender or loan provider offering capital based on your existing or future sales and revenue. The total finance amount is offered based on sales data.

Repayments are set at a percentage of your future revenue. Shopify, for example, takes a percentage of your weekly sales until the amount is repaid. Importantly not all cash advances are the same. Yardline offers a much more flexible cash advance that doesn’t have the limitations that Shopify has.


  • Applications and payout are often quite efficient. If you need money quickly to fund a gap in payments, for example, this solution could be ideal.
  • Finance amounts are calculated based on your sales, so ideally, the amount should be more affordable for your business.


  • Some cash advances set strict rules on where funding should be spent. For example, Shopify capital advances must be spent on the platform. Therefore, they aren’t ideal for real eCommerce growth. Meanwhile, Yardline doesn’t have restrictions on how you can use your funding, offering you more freedom and autonomy to grow your business how you see fit.


Factoring involves “selling” your incoming invoices to third-party lenders. The financier provides a sum of money, essentially advancing your incoming revenue. 

Your “accounts receivable” are sold to the factoring company at a discounted rate. For instance, if you sold your next month’s invoices at 90% of the amount they are worth, the factoring company makes a 10% profit on those invoices.


  • Factoring is a simple way to get your incoming payments early. The eCommerce lending method is relatively low risk, as you are only borrowing an amount equivalent to invoices to be paid. You could have access to these funds anyway, further down the line.
  • Unlike many other traditional funding streams, factoring doesn’t risk personal collateral which makes them useful for startups.


  • The capital available is entirely based on your incoming payments. If you’re having a slow sales period and you need investment, this method isn’t ideal. 
  • Factoring serves as a way to “bridge the gap” between incoming sales revenue and outgoing inventory purchases. Therefore, it’s not the best method for a scaling business.
  • Factoring can impact your relationship with customers. The factoring company will chase up your invoices and your customers need to pay that third party. This can make consumers feel disconnected from your business.
  • Factoring is more common in the B2B space where businesses are used to paying invoices to 3rd parties. It doesn’t work as well with the B2C space and online marketplaces.

Inventory Loan Financing

This eCommerce financing method involves borrowing a sum of money to secure inventory for your business. The inventory could be a new product line or existing popular products. That inventory is used as a type of collateral. Should you not be successful in selling the inventory, the inventory repays the capital.

Depending on your choice of lender, the lender may take back the inventory themselves, or you will have to return the inventory to make your payment.


  • With the right lender, you can get funds quickly. Some inventory lenders are experienced in the eCommerce space. This helps to build an effective relationship for further capital.
  • This method is useful to even out gaps in your cash flow. Inventory means more sales, but you cannot secure inventory without sales revenue. 
  • Inventory loan financing is relatively low risk, as the inventory serves as the collateral.


  • It’s important that you can shift your inventory. If you don’t make your sales, you might have trouble repaying your finance. This could impact your ability to get finance in the future.
  • The benefits of inventory loan financing depend on your financing goals. Inventory loans can’t provide enough funds to scale and grow your eCommerce business. You will need to consider larger funding options to accomplish this.

Debt Financing

Debt financing is one of the most commonly used forms of financing. It refers to the use of debt finance to fund your eCommerce business. This might include personal loans, small business loans, credit cards, a short-term loan, and more. 

Typically, an eCommerce business owner will secure financing themselves and use that capital to grow the business. 

Business finance can be challenging to secure for online sellers. These traditional lenders don’t always understand the eCommerce space and deem eCommerce businesses to be too risky for finance. 

Either way, the owner or the business must take on some debt to obtain this form of eCommerce lending.


  • There are many kinds of finance options available for this method. Therefore, depending on your choice of finance and your credit score, you can access large amounts of capital. This is a great way to grow your business.
  • The business can continue to operate autonomously. Finance is secured by the owner or the business, so the founder can retain ownership.


  • There may be risks to your business, or your personal finances, depending on your choice of lender. If you have taken out personal finance, your assets may be secured against the borrowed amount. Therefore, you are putting assets like your house and car at risk.
  • Repayments are strict. You must meet the requirements of your finance, or there are serious consequences. Missed payments also impact your ability to get finance in the future.

The key to finding the best eCommerce financing options is a clear understanding of the risks and benefits, and knowledge of your goal. Some financing methods work best to supplement revenue gaps in your business, while others are tailored to drive a growth period for your business. 

A scaling eCommerce business needs a financing method that combines the benefits of the best funding streams, while providing large amounts of capital to fund impactful growth.

Yardline’s Capital-as-a-Service solution can provide up to $1million in flexible funding for your eCommerce business. Our Seller Success Team can help you to learn where to invest your capital for maximum growth. Get in touch with us today to see how we can help you to drive real growth.

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