3 of the Best Financing Options for Ecommerce

Financing ecommerce business

If the only option you can think of is taking a loan from a bank then read on because there are many different ways to finance your business nowadays that provide unique advantages to banks.

Microloans

A microloan simply means that the amount being loaned is under $50,000.  Many small businesses take these loans out to pay for office supplies, inventory, and equipment.

These are short-term loans that can also be taken out from banks, government programs, credit unions, and some non-government organizations.

How to use Microloans

There’s no doubt that these loans are very attractive to small business loans, even better is that when you’re approved there are very few restrictions on how to use these funds. Interest loans are also fairly low just like other SBA loans.

But, there are bound to be some downsides with all these benefits. Applying for a microloan takes a lot of patience, thoroughness, good credit, and good personal history. You have to dig up lots of detailed information on your business that will take days and even weeks to be processed and approved or declined.

Overall, if you don’t need the loan immediately, need under $50,000, and you have great credit history then this SBA microloan is a surefire choice.

Business Lines of Credit

For those that have experience with credit cards, you will most likely know how credit works. This means that there is no lump sum of cash you simply open a line of credit that is paid for as you need it, this balance gets carried month after month. 

Interest will vary based on the agreement but it will relate to the amount you ended up drawing. Once you start paying this amount back it will become available as credit up to a certain limit. 

How to Get a Business Line of Credit

It should go without saying that the stronger your finances are then the easier it will be to get approved for lines of credit. It’s generally a good idea to apply for a line of credit before you actually need it. 

Where you go to apply will depend a lot on the amount of time you want to wait. If you apply at a major bank then the processing will take quite a while.

Financing E-Commerce Business with Credit card

A/R Factoring

This stands for accounts receivable factoring, a popular choice for budding Ecommerce businesses. There are many different terms you might hear such as A/R financing, receivable factoring, or A/R factoring. 

This option lets a third party company buy part of your receivables for cash. The amount of money you get will be just a fraction of the receivables you pledge.

Fees for this option will vary a lot depending on your factoring agreement and situation. A majority of factoring companies will advance between 50 and 90 percent of the total amount of outstanding invoices while they hold the rest in reserve.

Why choose A/R Factoring?

While this choice is definitely not the cheapest option due to processing, monthly minimum, and origination fees, it is a very fast way to get money in your hands and credit score matters very little. when compared with the other loan types

The Takeaway

There’s no reason not to get started with your Ecommerce business with so many financing options available to you. The only question you need to answer in terms of your finances is which option is best for your business structure?

  • October 9, 2019