The online entrepreneurship democratization and lowering of entry barriers have undoubtedly seen more entrepreneurs set up eCommerce businesses. However, lack of funding has stood out as a major barrier to eCommerce growth.
Nearly 50% of all eCommerce startups don’t survive past the initial five years, and only about a third get through their first decade due to inadequate financing, planning, and flexibility. Although most eCommerce business owners usually face a wide array of funding options, most don’t know where to start looking.
This article will provide you with the top ten remarkable eCommerce financing tips to help you easily navigate through and tap into the rapidly increasing eCommerce revenues.
Leverage Online Marketplaces
The best thing about using online marketplaces is that you spend so little money to launch your e-store successfully and secure your first customer. They also make it easy to start marketing and selling products. Even so, selecting a reliable and tested eCommerce platform is crucial to avoid any risks when you start acquiring clients.
For instance, you can start selling on Mercari by simply downloading its app from Google Play or App store, setting up your account, and you are good to go. If you effectively stage your products, you will receive customers quickly. Through that, you will get more finances to invest in additional features for your e-store.
Consider Getting a Business Loan
A business loan will be ideal if you are a new eCommerce owner needing fast and effective financial relief. You can borrow a specific amount of money from a creditor to use as capital and repay it with interest after an agreed time.
Most eCommerce businesses often opt for fixed-term business loans. With this loan type, you can borrow a lump sum with an interest rate that remains the same during the entire loan term.
But if you only need a small sum to fix regular expenses, like stock and salaries, you can use a flex loan. The best thing with flex loans is selecting a repayment schedule matching your unique business needs.
Work Hand-in-hand with Reliable Investors
Many investors are seeking to partner with profitable and innovative business minds. However, it would help if you offered something captivating to stand out from thousands of other lookalike businesses and win the investor to strike a deal with you.
Instead of offering the obvious, use your skills and ideas to develop original and authentic product ideas to raise the investor’s interest in the business. Besides, it would be best to learn how to present your concepts to an investor.
Clearly capture your business ideas in your eCommerce business plan and how you are planning to formulate these ideas. Your negotiation skills will determine how much each party will get from the joint eCommerce effort.
Utilize Personal Savings
Most budding eCommerce owners are often reluctant to fund their new business operations with personal savings because of the uncertainties involved. However, this bootstrapping approach can benefit you in many ways.
It safeguards your personal credit score since you will not need to make any monthly loan payments. It also lowers your business’ debt exposure, freeing up vital cash flow.
Establish a Profitable Price
Your prices should attract more consumers to purchase your products while allowing you to make some profits. A wrong price decision can be the cause of your eCommerce downfall. Therefore, ensure you conduct adequate market research and evaluate factors, such as market conditions, cost of production, inflation, and competitors’ strategies, before adopting a pricing strategy.
In the event of products with price-sensitive demand, you can lower the prices slightly to generate higher sales volumes. However, you should not fluctuate the prices too frequently to stimulate sales. The bottom line is to establish the right level of pricing that will create a good impression about your business and products.
Finance Your Business with Credit Cards
Credit cards can go a long way in financing your initial eCommerce business investments. The rule of thumb is to separate your business and personal cards when using credit cards. This will enable you to manage your private and business accounts more effectively and efficiently.
Start by contacting several banks to find out their credit card conditions and terms for new business owners. Also, inquire about their interest rates and bonuses and compare to select the one you can adhere to and return the invested money via sales.
You can raise funds for your eCommerce business by engaging large groups of people, including family, friends, and customers. Businesses mostly render their pitches on dedicated crowdfunding platforms online to win communities interested in supporting them.
Crowdfunding campaigns can benefit your online business in many ways, which include providing you with no-strings-attached capital. This gives you full control over your business. Besides, it is the perfect way to spread the word about your eCommerce store and let your target audience notice your brand.
Think About Invoice Financing
Late payments can frustrate every business and interrupt its cash flow. Again, tracking late invoices can eat up your money, time, and resources. You can receive payments quicker through invoice financing by untying the capital held in invoices.
Most lenders can grant you up to 90% of the amount you are owed upfront. Besides, there is no wait-around time as this financing option enables you to access funds immediately.
You can use invoice financing to fast-track payments and eliminates the need to badger distributors, enabling you to maintain healthy professional relationships.
Secure an SBA Loan
The Small Business Administration offers financing guarantees to enable budding entrepreneurs to keep their business operations up and running. With SBA loans, you can access high borrowing amounts, reasonable interest rates, and comfortable repayment terms.
The good thing is that the lender doesn’t need you to provide a personal guarantee, as the government accepts liability in the event of a default.
Apply for Ecommerce Grants
Through E-commerce grants, your online business can obtain funds to invest in its future. Since you don’t need to repay them back, grants will help your business attain stability while avoiding hefty payments in the near future.
Due to their benefits, most eCommerce grants are labor-intensive and time-consuming. But if you are patient enough and meet all the requirements, you stand a better chance of securing this funding for your business.
As experts project immense growth in eCommerce markets, you might want to ensure that you are getting the necessary funding to keep your online business afloat and raise its revenues. Conduct adequate market research to identify a financing option that will work for you. In addition, be proactive in your marketing and pricing and leverage the free online marketplaces.