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3 eCommerce Financing Options to Grow Your Business

When you began thinking about opening your own business, eCommerce seemed like a low-cost approach, and eCommerce financing options weren’t top of mind. You don’t have to hunt for a storefront or fork out money for retrofits and rent payments. You can make your products or services available to a global marketplace of customers. To top it off, you can potentially start it all from the comfort of your home.

You have likely learned that there is still quite a bit to take into consideration when building an eCommerce business, particularly if you want to see it thrive. You certainly aren’t alone if you have run into a few surprises along the way. 

There are costs involved in growing your business of course, and part of your planning should involve researching eCommerce financing options to support you in scaling your business.

It’s true that you don’t have to invest in the same areas as brick and mortar stores, and that you won’t have the same ongoing expenses to take into account. That doesn’t mean that cash flow is irrelevant to eCommerce, however. In fact, studies show that 55% of startups fail due to a lack of understanding and a correct approach to finances.

Couple this with the terms of loans from traditional banking institutions, and it’s easy to start off on the wrong foot. The unique needs of the eCommerce industry require purpose-built solutions designed by those that truly understand the unique challenges faced by eCommerce business owners. That includes eCommerce financing options.

What is cash flow?

Understanding cash flow is a crucial aspect of running your eCommerce business. It’s the foundation upon which your business is built. Not only that, the growth and longevity of your business are dependent upon your having a good grasp on cash flow.

Let’s start by clearing up a common misconception: cash flow and profit are two very different things. Many entrepreneurs get caught in a bit of a trap, either mistakenly viewing the cash in their bank as profit available for taking, or believing that profit on business accounts represents available cash for business requirements.

The reality is that you can have cash in the bank and still be unprofitable. You can also be profitable without having the funds necessary to cover business operations. These are both crucial aspects of running an eCommerce business and require appropriate management.


Net profit is the income that remains after factoring in the cost of goods, expenses, and taxes. You can be profitable without having cash in the bank. Your net profit may have been reinvested in new inventory, leaving you profitable yet cash poor.

Cash Flow

Cash flow refers to the cash and cash equivalents that are being transferred into and out of your business. The cash you receive is called an inflow, and money spent is called an outflow. Essentially your cash flow is the cash generated through selling products or services in your eCommerce store, less the cash used to cover expenses. It’s entirely possible to have positive cash flow even when you’re operating at a loss if your payments to suppliers are delayed or you’re covering expenses using loans.

eCommerce Financing Options

No matter how established your business is or how well your turnover is going, if you want to keep growing you’ll likely need support. There are many eCommerce financing options for getting support to help you build and grow your business.

Credit Cards

Credit cards are typically the go-to financing solutions used by most early-stage businesses.  Business credit cards are flexible, allowing you to pay vendors and partners with ease. Credit cards are relatively easy to come by, as applications can often be filled out online with a quick approval turnaround.

They carry a downside, of course. Like consumer cards, business credit cards charge interest if the balance isn’t paid in full each month. This means they are often easier to get than loans, but they end up costing far more. Most business credit cards require personal guarantees and are limited based on your personal credit rather than the actual performance of your business.  

With all of the expenses of running a business, you’ll likely find yourself unable to make minimum payments every single month, meaning the interest will add up quickly. Worse, those expenses may max out your credit limits – leaving bills unpaid and generating additional overdraft fees.  There is also the question of security. 

Business credit cards are just as susceptible to fraud and theft as consumer cards and can have a detrimental effect on your ability to do business. You may need to freeze your card and wait for a new one while an investigation into the fraud occurs, meaning you may not have access to your account for some time.

Credit limits also hinder the viability of credit cards. Once you’ve used the maximum credit available on a card, you can’t pay more expenses until you’ve paid down the balance. Credit cards requiring a monthly payment aren’t synchronized with the cash flow timings of the business, leaving you without the necessary cash to pay the balance and forcing additional interest expenses, overdraft fees, or late fees.

Bank Loans

Bank loans are another eCommerce financing option many consider. Banks have departments devoted to business loans, offering opportunities to supplement your cash on hand and set up repayment options. 

Small business loans – or term loans – are available through banks and credit unions. They can offer loans at low rates, but the barrier for approval can be quite steep.

These loans can suit many types of small businesses but can be challenging for eCommerce sellers. The nature of the business is often not taken into account, and monthly payments are required irrespective of the natural ebbs and flows of your eCommerce sales performance.  

In the world of small business, eCommerce, in particular, may suit you in some months and be more challenging in others. Typically people sign commitments to loans when they’re feeling the most optimistic, which is a great space to enter into a business venture. There are moments in the journey to building a business when you need a bit more leeway, however, and banks and traditional institutions leave little space for flexibility.

For example, eCommerce businesses have the unique challenge of having to stock inventory at just the right levels while meeting fluctuating demand. The worst thing for an eCommerce seller is to run out of stock. But you need cash on demand to purchase that inventory. 

If you purchase too much and it doesn’t sell right away, cash flow dwindles. Many eCommerce businesses have so much cash tied up in inventory, they have little remaining to devote to marketing efforts, adding headcount, or investing in other initiatives.

Bank loans are also incredibly time-consuming to acquire – assuming you’re even approved. The average bank loan requires hundreds of documents and touches more than 25 bank employees as part of the underwriting and approval process. Worse, this process takes an average of more than 60 days and many, many hours of your engagement prior to learning whether you’ve been approved.  

Banks support businesses in every industry and of all sizes and they have incredible overhead. This increases the hurdles necessary for your eCommerce business to gain their attention.  While they have been optimized for traditional industries since the founding of America, banks simply don’t understand the nuances of the emerging eCommerce industry.

Outside-the-Box Options

The best eCommerce financing option comes from lenders who understand the nature of your business. By breaking the traditional mold, these financiers ensure you can have the funds you need, when you need them, without putting your business at risk. 

While credit cards, bank loans, and other traditional forms of capital access require minimum payments, origination fees, credit limits, and other cumbersome requirements, new types of financing providers are emerging that eliminate many of these challenges. This offers some relief to eCommerce companies who are focused on reinvesting their cash to keep inventory on hand and to grow their business.

These lenders and finance providers often don’t require a mountain of paperwork, nor do they expect you to wait weeks or months to be approved. Depending on the company, you may only have to give basic information, connect them with your online store so they can determine your typical sales pattern and income, and get pre-approved in just minutes. This means you can have cash accessible within days. 

eCommerce Expenses Add Up

While eCommerce businesses are spared many traditional operating expenses, don’t underestimate the potential cash outflows. eCommerce business expenses vary and are often hidden, surprising entrepreneurs who accounted for little more than their computer, internet, and products. 

Neglecting to prepare for these expenses is at best inconvenient and at worst detrimental to your business. There is a thin line between success and failure for small businesses, and surprise expenses have the possibility of tipping you over that edge. Let’s cover just a few of the key expenses to expect in your eCommerce business so you can better understand why you may need to explore eCommerce financing options.


These days it seems like a website is so easy to come by, with tools advertised as accessible and user-friendly. While that can be partially true, running a successful and secure eCommerce website requires more than a WordPress blog. 

Whether you’re planning to sell your products directly or go through a third-party reseller, you’ll need a professional presence online. It’s best to get some development and design support for creating your site and make sure you budget for upkeep and maintenance.

Platform Fees

If you decide to sell via third-party platforms such as Amazon or Shopify, the boost in traffic will cost you. There is a benefit to not creating and marketing your own website, of course, but there is a tradeoff. You’ll often find that these platforms will charge a flat monthly fee and a percentage of the sale price. Some platforms also charge referral fees.

It’s important when setting up your business that you get an idea of what fees you may incur. These charges can range from only a few dollars up into the hundreds each month. Because these fees are often in flux – particularly those based on a percentage of sales – it’s important to err on the side of caution and estimate high to ensure you’re prepared.


Don’t make the mistake of thinking you’re exempt from permits and licenses because you’re operating online. It’s true that you don’t have to worry about paperwork for zoning and licensing issues as you may with a brick and mortar store, but there are still regulations you need to be mindful of.

Your online shop will need a business permit for your operating country or city. The cost for this permit will range depending on where you live, and what industry you’re in. You may also need to consider professional trade licenses, and health inspection and safety licenses if you’re offering food products.

Hiring a professional to give you some insight into these charges may feel like an extra expense, but it’s well worth it. It’s better to invest in making sure you start on the right foot than needing to cover surprise expenses in the form of fees and penalties if you’re not set up legally.

Inventory, Insurance, and Storage

An often-underestimated cost of doing business is related to inventory. In a perfect world, you’ll have inventory on hand and sell through it without it aging on the shelf. You’ll have orders rolling in, and your outflow and inflow related to stocking products will be regularly balanced. The reality is, no matter how popular your business, that’s not always the case.

There is a learning curve involved in knowing how much inventory to keep on hand, and it becomes more clear over time. Looking at your sales records and adjusting will help you to ensure you have enough product on hand to fulfill your customer’s orders but not so much that your money is tied up in inventory that isn’t selling.

You’ll also need to factor in what’s called inventory shrinkage. There are times when you’ll lose products to incidents such as damage, theft, or loss. There are inventory management tools to help you account for the products you have, and they come at a cost to consider.

Inventory is also a taxable asset. This means it’s imperative to take into consideration your inventory turnover in order to understand the tax implications and potential tax bills due at the end of each year. This tax often surprises many eCommerce business owners and can place the business in jeopardy with the IRS and other taxing authorities.

When you’re selling products, you’ll of course need to keep them somewhere. Storage and warehousing fees are part of doing business, and as you require more space your fees will increase. You’ll also need to be sure to have insurance to cover this inventory in case of unforeseen circumstances.

Shipping, Returns, and Transaction Costs

Even if you include shipping in the purchase price, count on there being unpredictability in the cost. Small businesses don’t have the luxury of negotiating deals and costs with shipping partners, and to stay competitive you’ll likely want to keep the rates low. This expense can be mitigated through eCommerce platforms if you choose to sell through third-party sites.

Returns are another expense in doing business. With the proliferation of online shopping, customers often expect the option of free returns. Great for the consumer, this can be challenging for eCommerce businesses. 

Free returns allow you to compete with large vendors such as Amazon, but you’ll likely end up footing the bill for restocking or even scrapping the product altogether. The return rates for eCommerce are said to be 20%, so take this expense into account.

Marketing and Advertising

“You need to spend money to make money” and this adage can be directly related to marketing and advertising costs. The world of online shopping is expansive and the breadth of available products seemingly endless. 

Investing in comprehensive marketing strategies will help you to reach more of the right customers and increase your sales. Investing well in outreach strategies will pay off in the end, but factor in the cost of digital marketing, SEO, and PPC.

A marketing agency is a worthy investment for early-stage companies. While you’re building your business and finding your footing in the market, marketing efforts are crucial. Staffing an in-house marketing team is a significant investment and one you don’t necessarily have to jump into right away.

Consider hiring a marketing agency until you know your business is moving in the right direction and you can afford to hire the right marketing people. Hiring a marketing agency means you have professional support in navigating things like SEO and outreach strategies, performing the execution of the work for you until you have your own team. They’ll help you build out a long-term plan so you can be sure you’re investing in the right marketing avenues for your business.

The Importance of Being Understood

As an eCommerce business owner, you have unique needs that set you apart from more traditional paths. Particularly when you’re starting out, you’ll likely find yourself experimenting with inventory levels and products themselves until you find your niche. And because you don’t have a brick-and-mortar shop to be met with neighborhood fanfare, the process to ramp up with digital marketing and capture the attention of the market can take a bit of time.

In order to thrive and be able to invest in your business without over-committing yourself, you’ll want a financing partner who can help you with a bit of extra cash without the risk of closing your business before you have a chance to get started. Onramp understands what it means to have an eCommerce business at all stages – from startup to the growth path. That helped us to design eCommerce financing options specifically with your needs in mind. Get pre-approved in minutes.