How to fund your eCommerce business fast?

In a cutthroat digital marketplace, eCommerce funding is the strategic advantage you need to stay ahead when cash flow becomes a critical issue.

With the global eCommerce market set to top revenues of $6.5 trillion in 2024, it would be easy to think businesses in the sector are enjoying year-round success, with founders and managers giving little thought to cashflow problems.

While that might be the case for some of the industry’s bigger players, it’s simply not true for many hard-working entrepreneurs whose ventures rely on spikes in the sales calendar to see them through tougher trading periods.

If this is the case at your company, the chances are that any seasonal revenue peaks are matched by times when financing your operations is a distinct challenge.

And irregular income isn’t the only headache that can blow a hole in your business plan; eCommerce companies face a range of common issues that might leave you needing to repair your bottom line.

Let’s examine some of the events that could cause you problems, and consider what you can do if they’re making you worry about your finances.

What is eCommerce funding?

eCommerce funding is the financial support that online businesses use to grow, manage cash flow, and overcome challenges.

It includes options like loans, lines of credit, and revenue-based financing, tailored to meet the unique needs of eCommerce sellers. 

Picture this: you've got a killer product and a slick website, but the cash flow's tighter than skinny jeans.

That's where eCommerce funding swoops in. It's not your grandpa's business loan - it's financing tailored for the digital hustle.

Seasonal spikes?

No sweat. Need to stock up before Black Friday? Covered.

The best part?

No stuffy banker giving you a side-eye over your hoodie. These lenders get it. They speak your language and move at internet speed.

Read more: 7 reasons why every business owner should embrace cash flow forecasting.

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Why does eCommerce funding matter?

Cash is king, but in eCommerce, it's the whole royal family.

Here's why eCommerce business funding matters:

• Inventory domination: stock up without emptying your piggy bank. More inventory = more sales = more profit. It's not rocket science, but it is sweet, sweet math.
• Marketing muscle: ads ain't cheap, but they're a necessary evil. Funding lets you play with the big boys without selling your kidney.
• Seasonal smarts: holiday rushes are great unless you're caught with your pants down. Funding helps you gear up when it counts.
• Tech upgrades: because running an online store on Windows 95 is like bringing a knife to a gunfight. Stay sharp, stay funded.
• Scaling without face-planting: growth is good, but it's also expensive. Funding lets you dream big without waking up in a cold sweat.
• Competitive edge: while others are pinching pennies, you're out there making it rain. Funding turns you from David into Goliath.

eCommerce seller financing options: pros and cons

1. Revenue-based funding

You get cash now, and you pay it back as a percentage of your future revenue.

It's like having a silent partner who's only interested in your success.

✔️ Pros:

• Flexible repayments: when sales are slow, you pay less. When you're raking it in, you pay more.
• No collateral required: keep your car and your firstborn. Your revenue is your collateral.
• Quick access to funds: none of that "waiting for paint to dry" bank loan nonsense.
• No equity dilution: your business stays yours. No pesky shareholders telling you how to run your show.

‍❌ Cons:

• Can be pricey: convenience comes at a cost. 
• Revenue share can pinch: giving up a slice of every sale might hurt – it won’t kill you though.
• Potentially shorter repayment terms: this isn't a "kick the can down the road" situation. Be ready to pay up sooner rather than later.

2. Merchant cash advance

Think of this as the loan's rebellious cousin.

You get a lump sum upfront, and the lender takes a cut of your daily credit card sales until it's paid back.

✔️ Pros:

• Easy to qualify: bad credit? No problem. They care more about your sales than your FICO score.
• Fast funding: you could have cash in hand faster than you can say "cha-ching."
• Flexible repayments: like revenue-based funding, you pay more when you earn more.

❌ Cons:

• High costs: the convenience comes with a price tag that might make you wince.
• Daily repayments: kiss a chunk of your daily sales goodbye. Hope you weren't too attached.
• Potential debt cycle: it's easy to get hooked on these. Before you know it, you're taking out advances to pay off advances.

3. Lines of credit

Imagine a financial safety net that's there when you need it.

That's a line of credit. Borrow, repay, repeat.

✔️ Pros:

• Flexibility: use it for inventory, marketing, or that life-size cardboard cutout of yourself. We don't judge.
• Pay interest only on what you use: no need to borrow more than you need.
• Revolving credit: pay it back, and it's there to use again. Like a boomerang, but useful.

❌ Cons:

• Can be hard to qualify: banks might want to see a solid credit score and business history.
• Potential for overspending: it's tempting to treat it like free money. Spoiler: It's not.
• Variable interest rates: the cost of borrowing might go up faster than your blood pressure during a site crash.

4. Bank loan

The OG of business financing. It's like asking your rich uncle for money, if your uncle was a soulless corporation.

✔️ Pros:

• Lower interest rates: if you qualify, you might score rates that don't make you want to cry.
• Builds business credit: paying off a bank loan is like CrossFit for your credit score.
• Larger amounts are available: when you need serious cash, banks can deliver.

❌ Cons:

• Tough qualification process: hope you like paperwork and answering invasive questions about your business.
• Slow approval process: by the time you get approved, that hot deal might have gone cold.
• Collateral often required: are you too attached to your assets? They’re (not so) sorry to hear that.

5. Bank overdraft

It's like a mini line of credit attached to your business checking account.

For when you need a little extra oomph in your spending power.

✔️ Pros:

• Convenient: it's right there, linked to your account. No need to apply separately.
• Pay interest only on overdrawn amounts: keep more money in your pocket.
• Helps manage cash flow: smooth out those bumpy patches when expenses and income don't quite line up.

❌ Cons:

• High fees: those overdraft fees can add up faster than likes on a viral post.
• Can mask cash flow problems: it's easy to ignore the real issue when you've got this cushion.
• Limited amount: it's not going to fund your expansion into a new continent.

6. Equity financing

Selling a piece of your business pie in exchange for capital.

Hope you're ready for some new opinions in the boardroom.

✔️ Pros:

• No debt to repay: you get the cash without the stress of monthly payments.
• Potential for expertise and connections: yhe right investors bring more than just money to the table.
• Larger amounts of capital are available: when you need serious dough, equity can deliver.

❌ Cons:

• Loss of full control: do you like compromising? Because you've got new partners now.
• Profit sharing: your success means you'll be sharing those sweet, sweet profits.
• Time-consuming process: finding the right investor can take longer than perfecting your avocado toast recipe.

7. Crowdfunding

It's like passing the hat around, but the hat is the internet, and it's filled with strangers who believe in your dream.

✔️ Pros:

• Validates your idea: if people fund you, you know you're onto something good.
• Marketing built-in: your campaign doubles as advertising. Two birds, one stone.
• No debt or equity is given up: in reward-based crowdfunding, you keep full ownership.

❌ Cons:

• All-or-nothing pressure: many platforms are all-or-nothing. No partial funding here.
• Public failure risk: if you don't hit your goal, everyone knows. Ouch.
• Fulfillment challenges: you need to be ready to deliver on those promises, or you’ll face the wrath of the internet.

8. Grants

Free money, sort of.

It's like winning a contest, but instead of a giant check, you get funds for your business.

✔️ Pros:

• No repayment required: it's the closest thing to free money in the business world.
• Credibility boost: winning a grant is like a gold star for your business.
• Specific programs for eCommerce: some grants are tailored for online businesses.

❌ Cons:

• Highly competitive: you're not the only one with your hand out.
• Time-consuming application process: long hours writing essays and filling out forms.
• Restrictive use of funds: that money often comes with strings attached.

9. Invoice factoring

Sell your unpaid invoices to a third party for quick cash.

Because waiting for customers to pay is so last century.

✔️ Pros:

• Immediate cash flow: turn those ious into cold, hard cash.
• No debt on your books: it's not a loan, it's an asset sale. Your accountant will thank you.
• Credit checks on your customers, not you: your personal credit score can take a breather.

❌ Cons:

• Dependent on customers' creditworthiness: your funding is only as good as your customers' credit.
• Potential impact on customer relationships: some individuals might not like dealing with a factoring company.

Stop looking for eCommerce startup loans. Dig deeper into invoice financing in this short video:

https://www.youtube.com/watch?time_continue=2&v=gp3ikks0FyI

10. Asset-based lending

Use your inventory, equipment, or accounts receivable as collateral for a loan.

It's like pawning, but for businesses.

✔️ Pros:

• Higher borrowing amounts: more assets = more money available.
• Lower interest rates than unsecured loans: your stuff brings down the risk, and the cost.
• Flexible use of funds: unlike some options, you can use this cash for almost anything.

❌ Cons:

• Risk of losing assets: Default, and say goodbye to that collateral.
• Regular audits and monitoring: Lenders like to keep a close eye on their collateral. Hope you like the company.
• Not ideal for businesses light on assets: If your biggest asset is your brain, this might not be for you.

There you have it, eCommerce warriors.

Each option has its perks and its pitfalls. The trick is finding the one that fits your business like a glove – a glove made of money, preferably.

How to choose the right eCommerce funding for your business

Choosing the right funding for your eCommerce gig isn't like picking your favorite flavor of ramen noodles. It's more like selecting which weapon you'd want in a zombie apocalypse.

Pick wrong, and you're toast.

So let's break this down into bite-sized chunks that even your sleep-deprived, caffeine-addled brain can handle.

1. Know your numbers (or get ready for a financial beatdown)

First things first, hotshot.

Before you even think about eCommerce funding, you better know your numbers inside and out.

We're talking:

• Monthly revenue
• Profit margins
• Cash flow projections
• Customer acquisition costs

If these terms make you break out in a cold sweat, it's time to cozy up with your spreadsheets or hire someone who doesn't think Excel is a command to be awesome.

2. Figure out why you need the dough

"Because I want a gold-plated hoverboard" isn't gonna cut it, chief.

You need a real reason:

• Stocking up on inventory?
• Launching a marketing blitz?
• Upgrading your janky website?

Your funding purpose will narrow down your options faster than a clearance sale empties your inventory.

3. Calculate how much you actually need

Don't pull a number out of thin air like it's a magic trick.

Be precise. Add up all the costs, then add a buffer.

Why?

Because stuff happens, and that stuff usually costs money.

4. Assess your qualifications (and be honest)

Time for a reality check. Different funding options have different requirements:

• Credit score look like a golf score? Traditional loans might be out.
• Business still wearing diapers? Forget about some of the fancy options.
• Are sales as predictable as a caffeinated squirrel? Revenue-based funding might raise an eyebrow.

Know where you stand, or you'll waste more time than a cat video marathon.

5. Consider the strings attached

Every funding option comes with strings. Some are like dental floss; others are like heavy-duty chains.

Think about:

• How fast do you need to repay?
• Are you cool with daily repayments?
• Want to keep full ownership, or are you ready to share your sandbox?

Choose wisely, or you might find yourself in a financial straightjacket.

6. Speed vs. cost: pick your poison

Want money fast? Be ready to pay for it. Want the cheapest option?

Hope you're patient.

Sure, you need cash now. But think about the future, Einstein.

Will this funding option scale with your business, or will you be back here in six months, begging for more?

Choose a funding partner that can grow with you, not hold you back.

7. Get real about the risks

Every funding option has risks. Ignoring them is like playing chicken with a freight train.

Spoiler alert: the train always wins.

Understand what you're getting into:

Personal guarantees

• Collateral requirements
• What happens if (when) things go sideways

If you can't handle the worst-case scenario, keep looking.

8. Shop around

Don't jump at the first offer like it's the last slice of pizza.

Shop around. Compare terms, rates, and fine print.

Yes, reading the fine print sucks, but so does getting blindsided by hidden fees.

9. Trust your gut

At the end of the day, trust your instincts.

If a deal feels off, it probably is.

But don't confuse your gut with indigestion from that questionable food truck lunch. Back up your feelings with facts, then make the call.

Four common cashflow gaps in eCommerce

1. Fluctuations in demand

Many eCommerce businesses set up shop knowing that they are likely to have peak periods but also seasonal slumps.

That’s easy enough to foresee even if it still requires some financial magic to manage leaner times.

But what if unseen factors hit your sales?

Rising inflation across global markets remains an issue, with the result that a section of your customer base might not have as much disposable income to spend with your business for some time.

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Is the tide shifting? Learn how to sail smoothly: Inflation-proof your business: 4 strategies to maintain profitability in a global economy.

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2. Getting caught in a cyber attack

Sadly, cybercrime is a growing threat to online businesses and eCommerce is no exception.

According to estimates cyber attacks such as phishing scams and other forms of online payment fraud were set to cost the industry $48bn in 2023.

While shoring up your company’s defenses is one issue, the failure it can cause in your systems, alongside financial and reputational damage, can take a big bite out of your cash reserves.

3. When the bandwagon moves on

eCommerce trends come and go faster perhaps than in any other industry.

The latest craze today can be easily forgotten by consumers tomorrow, especially when social media influencers and other celebrities push products that might be made or sold by your direct rivals.

Fierce competition means the focus can move away from your business fast, potentially leaving your revenues high and dry.

4. Taking a hit from supply chain disruption

eCommerce businesses rely heavily on efficient supply chains.

They can span locations in several parts of the world, with each link in the chain a critical component of your overall offer to customers.

So if there’s unrest in any part of the world or other unexpected events – your key products and your revenues could suddenly be put at risk.

Close the gap with revenue-based financing

In most of the cases outlined above there will be little prior warning of trouble and your finances could be knocked off course in short order.

As such, eCommerce business owners must consider how best to access emergency finances should the worst happen.

After all, having funds to tide you over can give you certainty – and your business resilience – when you need it most.

That’s why revenue-based financing (RBF) could be the perfect fit.

RBF offers a unique, attractive alternative for eCommerce companies that are seeking a fast injection of capital to get them through a crisis.

With RBF, you receive capital in exchange for a percentage of your future revenue. You retain ownership of your business and control of your operations without the oversight of investors.

Repayments are made based on weekly income.

If your business has no sales activity by the end of a week, you won’t need to make a repayment that week.

At the other end of the scale, we do cap the maximum you’ll need to pay us back; so if you have especially high sales one week you’ll still only need to pay back a fixed amount.

What’s more, the investor’s goals mirror your own.

If your revenues grow well with their support their returns are higher too.

Even better, the application and approval process with Stenn is simple, streamlined, and swift:

• Up to 150% of monthly revenue
• Flexible terms
• Fixed fee of 6% - 9.5% per transaction
• Fast approval and funding within 24 hours
• No personal guarantee required
• Easy application process
• Secure data handling

Enough struggling to get eCommerce lending or grants. Get funded today. It’s that simple.