There are a lot of funding platforms out there for ecommerce businesses. On one hand, that’s great! Variety is the spice of life (and business) after all. But this wealth of options can leave some business owners a bit overwhelmed. To help you out, here are the pros and cons of three commonly used funding methods.
Angel investors
Everyone in the ecommerce universe understands how impactful angel investors can be. The pros of angels is that they have been known to drop large amounts of cash without asking for much in return. That sounds pretty perfect, right? Well, yeah, but the major con of angel investors is that it’s not a reliable funding solution. You can’t easily find new angels whenever you need funding, so you may find yourself without cash if you center your entire plan around them. Beware.
Ecommerce funding companies
There are lots of companies out there that solely focus on funding ecommerce businesses. Some of the more common ones are Clearbanc and Kabbage. The pros of services like these are that they work quickly. Some of them can even get funds to you in just a few days (or even one day!). They also usually factor in your business’s strengths in addition to your credit score. The cons of these services are that they often are coupled with relatively high interest rates. If you need cash fast, though, they really can’t be beat.
Crowdfunding
While crowdfunding is less of a traditional method than some of the others on this list, it can be very powerful for ecommerce businesses – particularly new ones. The pros are that there aren’t any difficult metrics like there are with more traditional business loans. Crowdfunders don’t care what your credit score is – they just care whether you have a cool business idea or not. Another pro is that crowdfunding campaigns can go viral. That not only results in more funding, but it might also result in legit revenue down the line. There are some cons, though. First, funding is guaranteed. Your crowdfunding attempt might just totally flop. Second, it presents your business plan to the world. While secrecy isn’t always necessary, it can help your competitors out if all the info they need to know about you is available on your crowdfunding campaign.
