How to get an e-commerce Business Loan

06 Dec How to get an e-commerce Business Loan

Posted at 16:35h in Growth Capital, Seller Solutions, Technology by Sarah Kimball

Whether you’re just starting out, or you’re entering a new growth phase, your e-commerce business needs funding. It can be difficult to know the best option to get a little extra cash flow into your business and the first option you may consider is to take out a business loan. Loans can offer large sums of money, relatively quickly. You also have an extended amount of time to pay back the sum. However, it is worth noting that there are strict criteria that you must meet to obtain a business loan. It’s important to arm yourself with all the necessary information before you make any applications.

Ultimately, you are the person that they are trusting with their money. You need to demonstrate that you are trustworthy, and are worth investing in.

REQUIREMENTS

Before acquiring a loan, there is a lot of preparation required. Lenders don’t take applications at face value. It is increasingly difficult to meet lenders’ requirements. Therefore, it is key to ensure that you have a full plan, and all the information regarding your needs.

Documents

Lenders also need to know more about you. Ultimately, you are the person that they are trusting with their money. You need to demonstrate that you are trustworthy, and are worth investing in. Lenders will also need to verify your identity. Ensure you can provide the following information:

Personal credit history
Criminal Record
Previous addresses and personal information
Business licenses and other legal documents
Proof of ownership of your business

Business Plan

You will need to put together a business plan. Try to make the best case for your business, and show that it is worth the investment. Lenders are more likely to scrutinize your business if you cannot show good development. You will need to prepare the following information:

Average monthly sales
Previous revenue data
Any other information that demonstrates business performance

Loan Information

Consider the basics for your loan. Ensure that you have a clear idea of what you need to apply for. Your numbers need to be precise, as it is increasingly difficult to secure finance through a loan. You will need to prepare the following information before making an application:

What is the required loan amount and term length?
How will the funds be spent?
What is your maximum monthly payment?
Are you willing or able to provide collateral against this sum?
Are you applying to a bank or other kind of lender like a peer-to-peer lender?
How long have you been in business?

It is important to consider which lender is the best for your business. Bank loans are increasingly difficult to acquire. They typically turn down e-commerce businesses, as they are deemed too risky. Online lenders are less strict but have higher interest rates and smaller loan amounts on offer.

RISKS

Business loans are usually the go-to financing option for business owners. However, this isn’t necessarily because they are the best option. You need to be aware of the risks associated with signing up for a business loan.

Business loans, including bank loans, often have very high interest rates. This can hugely impact your repayment amounts. You will always have to pay back more than you borrowed. Ensure this is taken into account when budgeting for your business in the future.

Loans are typically secured against assets, this could include your business or your home. They also have lengthy repayment terms, so consider whether you have a contingency plan in place to avoid getting behind.

LOOK INTO OTHER OPTIONS, SHOULD A BUSINESS LOAN FAIL

Loans are not the only finance option available for e-commerce businesses. In fact, they are usually less suitable than other types of finance. Capital advances are a form of financing, but are not a loan and aren’t considered a form of borrowing. In a capital advance, a company purchases a portion of your future revenue and gives that cash to you now. Your business history is assessed by experts, and a proposed purchase figure is generated. You then repay that over an agreed period of time. You will need to make repayments. However, as the figure is generated based on your current business progress, the repayments are much more reasonable. At Yardline, we offer capital advances to businesses that are looking to expand. We also provide access to experts and tools that can help you to generate a business strategy for growth.