Securing ecommerce funding can be challenging for many entrepreneurs. While ecommerce businesses have been booming, they often face barriers when seeking traditional financing. Banks and traditional lenders tend to view ecommerce ventures as risky, primarily due to the unique structure and operational models these businesses follow. Fortunately, various funding options cater specifically to the needs of online retailers. This article will cover why it’s hard to get funding for ecommerce businesses and which options are available, including business credit cards, revenue-based financing, inventory financing, invoice factoring, small business loans, revolving lines of credit, and SBA loans.
Ecommerce businesses often face challenges in securing financing because they don't fit into the typical mold that traditional lenders, such as banks, expect. Ecommerce companies often lack a long operating history, and many owners don’t have a track record of financial success that banks can assess. This puts ecommerce entrepreneurs in a difficult spot, as they may not meet the traditional criteria for financing, such as years of business history or high credit scores.
Additionally, funding for ecommerce business owners from private investors or venture capitalists is also notoriously difficult to obtain. Investors usually demand a portion of the company in exchange for capital, requiring business owners to sacrifice a percentage of ownership. This isn’t ideal for all entrepreneurs, particularly those who want to retain full control over their business. Moreover, venture capital funding is highly competitive and typically reserved for businesses with rapid growth potential or unique, disruptive products.
While these hurdles are significant, the good news is that several alternative ecommerce funding options can help online business owners overcome these challenges and access the capital they need to grow.
Business credit cards are a flexible funding option that is ideal for both new and established ecommerce businesses. Using a business credit card allows you to build credit while earning rewards or benefits for recurring business expenses, such as media spending, subscription services, and inventory purchases.
Revenue-based financing or a merchant cash advance offers fast access to capital in exchange for a percentage of future sales. This is an excellent option for ecommerce businesses that have consistent revenues but need quick funding to support marketing, inventory, or operations without having a strong credit history.
Inventory financing allows ecommerce businesses to borrow money specifically to purchase inventory. This type of funding is particularly useful for businesses that need to maintain or grow their inventory but don’t have the cash flow available to do so. Inventory financing uses the purchased inventory as collateral, so businesses don’t have to offer personal or other business assets.
Invoice factoring is a financing solution for businesses that deal with clients who take time to pay their invoices. By selling unpaid invoices to a factoring company, businesses receive upfront cash while waiting for customers to pay. This allows businesses to improve cash flow and meet short-term expenses without waiting 30 to 120 days for customer payments.
Small business loans are a popular financing option for ecommerce businesses that have a proven track record and a solid credit history. These loans can provide a lump sum of capital that can be used for a variety of business purposes, such as buying inventory, launching new products, or expanding your team.
A revolving line of credit provides ecommerce businesses with flexible access to funds up to a pre-approved credit limit. This financing option allows businesses to draw funds as needed, repay them, and draw again, making it a great option for managing cash flow or covering seasonal expenses.
SBA loans are long-term, low-interest loans backed by the U.S. Small Business Administration. These loans are ideal for ecommerce businesses that have been operating for several years and are looking for capital to expand, refinance debt, or invest in technology or growth initiatives.
If you’re an ecommerce business owner searching for funding for ecommerce business growth, Yardline offers tailored solutions to meet your needs. Yardline provides the best rates and terms, allowing you to grow your business with confidence.
Apply for ecommerce funding today and get approved in as fast as 24 hours. Click here to get started and watch your business thrive!