While there are few areas of business that are growing at the rate of eCommerce, you still need plenty of capital to really stand out from the crowd. If you’ve been wondering how to fund an eCommerce business, then we have five solutions for you. Let’s take a closer look at them!
Revenue-Share Financing
This type of loan typically doesn’t require a business plan or pitch, and a bank may not even run a credit score. Instead, the lender will collect between 5% and 25% of your turnover until the loan is paid off.
Equity
Plenty of eCommerce and SaaS businesses have leveraged equity financing as a means of securing financial support. Essentially, in return for receiving an injection of cash, you give up some equity in your business. While you may gain expert insights from these investors, bare in mind that giving an equity stake to someone else may mean that you relinquish some degree of control and influence over your business. Thankfully, there are eCommerce strategists that can facilitate equity-free funding.
Bank Loan
Although a popular option, banks are often risk-averse and you may find borrowing high amounts to be a challenge. Expect to have to provide a business plan and cash flow estimates, as well as potentially use personal assets as a loan security.
Lines of Credit
Favorable lower rates and flexible payment terms aren’t the only benefits to having a secured line of credit. You also won’t have to deal with disbursements or making a monthly payment on credit that you’re not using. Just remember that the lender may use your assets as collateral, and will likely evaluate your ability to repay based on your cash flow.
Crowdfunding
Crowdfunding is a great choice for startups, especially as you’ll have greater flexibility and be able to utilize raised funds in the best way that you see fit. Often, those who invest are allocated a small shareholding or a reward to recognize their contribution.
