3 ECommerce Financing Options to Grow Your Business

3 ECommerce Financing Options to Grow Your Business

Why Are ECommerce Financing Options Useful?

When you began thinking about opening your own business, eCommerce seemed like a low-cost approach, and eCommerce financing options may not have been top of mind. After all, with an online store, 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. 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 consider 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. There are costs involved in growing your brand, of course, and part of your planning should include researching eCommerce financing options to support you in scaling.

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. Studies show that 55% of startups fail due to a lack of understanding and a correct approach to finances.

Couple this with the loan terms from traditional banking institutions, and it’s easy to start on the wrong foot. The unique needs of the 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 brand is built. The growth and longevity of your company are dependent upon your having a good grasp on cash flow.

Start by clearing up a common misconception: Cash flow and profit are two very different concepts. 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 crucial aspects of running an eCommerce business and require appropriate management.

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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 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 cover costs using loans.

ECommerce Financing Options

No matter how established your business is or how well your inventory turnover is going, you'll likely need financial support if you want to keep growing. Many eCommerce financing options are available to help you build and grow your company. Let’s outline three of them.

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 easily. Credit cards are relatively easy to come by, as you can often fill out applications online with a quick approval turnaround.

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

With all of the expenses of running a business, there’s a decent chance you’ll be unable to make minimum payments every month, meaning the interest will add up quickly. 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 negatively affect 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 credit card balance. Credit cards requiring a monthly payment aren’t synchronized with the shorter sales cycles of eCommerce businesses, leaving you without the necessary cash to pay the balance and forcing additional interest expenses, overdraft fees, or late fees.

Related: How to Sell Through Multiple ECommerce Platforms

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 to approval can be pretty steep.

These loans can suit many small businesses but can be challenging for eCommerce sellers. The company's unique selling structure 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 small business world, 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 stocking inventory at just the proper 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 as you sell products. 

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 that 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 loads of documents and many bank employees to touch the underwriting and approval process.

Banks support businesses in every industry and of all sizes, and they have significant overhead. This situation increases the hurdles your eCommerce business needs to gain their attention.  Although bank loans can be an essential part of your capital stack, these entities simply don’t understand the nuances of the emerging eCommerce industry, and their products aren’t ideal for shorter-term working capital.

Outside-the-Box Options

The best eCommerce financing option comes from organizations that 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 have minimum payments, origination fees, credit limits, and other cumbersome requirements, new eCommerce financing providers are emerging to eliminate many of these challenges. This alternative offers some relief to eCommerce companies focused on reinvesting their cash to keep inventory on hand and grow their business.

These 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. You can have cash accessible within days. 

ECommerce Financing Options: Use Cases

While eCommerce businesses have many traditional operating expenses, don’t underestimate the potential cash outflows. ECommerce 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 inconvenient and 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 essential costs to expect in your eCommerce business to understand better 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 site. 

Whether you’re planning to sell your products directly or go through a third-party reseller, you’ll need a professional presence online, one that is easy for the searcher to navigate and purchase products. You’ll want to optimize it for eCommerce to create the best user experience. 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 having to create and market your website, but there is a tradeoff. These platforms will often charge a flat monthly fee and a percentage of the sale price to sell your products. Some platforms also charge referral fees.

When setting up your business, you must know what fees you may incur. These charges can range from a few dollars to 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. Indeed, you don’t have to worry about paperwork for zoning and licensing issues as you may with a physical 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 your industry. You may also need to consider professional trade licenses and health inspection and safety licenses if you offer 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 fees and penalties if you’re not set up legally.

Related: Financing ECommerce Tips for Small Businesses

Inventory, Insurance, and Storage

An often-underestimated cost of doing business is related to inventory. You’ll have stock on hand and sell through it without it aging on the shelf in a perfect world. 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, which becomes more evident over time. Looking at your sales records and adjusting procurement will help you 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. It’s imperative to consider your inventory turnover 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 jeopardize the business 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 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, counting on the cost is unpredictable. Small businesses don’t have the luxury of negotiating volume deals with shipping partners, and to stay competitive, you’ll likely want to keep the rates low. You can mitigate this expense through eCommerce platforms if you sell through third-party sites. Amazon offers Fulfillment by Amazon (FBA) to take the logistics burden from sellers, but it, too, comes at a cost.

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 prominent vendors like Amazon, but you’ll likely foot 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.” You can relate this adage to marketing and advertising costs. The world of online shopping is expansive, and the breadth of available products is seemingly endless. 

Investing in comprehensive marketing strategies will help you reach more of the right customers and increase your sales. Investing well in outreach strategies will pay off, 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 team. Hiring a marketing agency means you have professional support in navigating SEO and outreach strategies and executing the work for you until you have your team. They’ll help you build out a long-term plan to 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. You’ll likely find yourself experimenting with inventory levels and products themselves when you're starting 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 market's attention can take a bit of time.

To thrive and invest in your business without over-committing yourself, you’ll want a financing partner who can help you with the working capital you need to fund inventory, marketing efforts, and other shorter-term initiatives. There’s a financier that understands what it means to have an eCommerce business at all stages – from startup to the growth path. They designed an eCommerce financing option specifically with your needs in mind. Learn more and get pre-approved in minutes.