Flexible capital structures can help eCommerce businesses lower inventory carrying costs by aligning funding with sales performance. Carry costs - expenses like storage, insurance, and inventory risks - can account for 20%-30% of a business's inventory value, significantly impacting profitability. Traditional loans with fixed payments often strain cash flow, especially during slow sales periods. Flexible options, like revenue-based financing and revolving credit lines, adjust repayments based on revenue, offering businesses more financial breathing room.
Key Takeaways:
- What are Carry Costs? Expenses tied to storing inventory, including capital costs, warehouse fees, insurance, and risks of unsold stock.
- Why They Matter: High carry costs reduce profits and tie up funds that could be used for growth.
- Flexible Financing Benefits:
- Payments adjust with sales, easing cash flow pressure.
- Early repayment reduces fees, saving money.
- Funds are quickly accessible for inventory needs.
- Example Savings: Reducing inventory value and holding time can lower carry costs by up to 65%.
Flexible financing solutions like Onramp Funds simplify funding processes, offering quick access to capital without fixed monthly payments or collateral requirements. This approach helps businesses manage inventory more efficiently, reduce storage costs, and free up cash for growth.
How Flexible Capital Structures Help eCommerce Businesses
Traditional Loans vs Flexible Financing for eCommerce Inventory
Traditional bank loans often come with fixed monthly payments, which can put a strain on cash flow during slower sales periods. Flexible capital structures offer a solution by tying repayments to actual revenue, ensuring businesses can access the funds they need to grow - even when sales dip. This shift from rigid to more adaptable financing provides a foundation for understanding how these structures operate.
What Are Flexible Capital Structures?
Flexible capital structures are financing options that adjust based on how your business performs. Two popular examples are revenue-based financing (RBF) and revolving credit lines.
With revenue-based financing, repayments are a set percentage of your daily or weekly sales. When sales slow down, your repayment amount decreases automatically. Many flexible funding providers integrate with platforms like Shopify, WooCommerce, and Amazon to determine funding limits, which can range from $20,000 to several million dollars, depending on your sales turnover [3]. Revolving credit lines, on the other hand, work like a credit card. You can withdraw funds as needed and repay them at your own pace.
Unlike traditional loans that often require personal guarantees or collateral, flexible financing evaluates your business's sales performance to assess risk. Plus, instead of compounding interest, these models charge a single flat fee. For instance, if you take a $1,000,000 advance with a $50,000 fee over six months but repay it in three months, you only pay $25,000 in fees [5]. This adaptable repayment model is especially helpful during periods of fluctuating revenue.
Why Flexible Financing Works Better
The biggest advantage of flexible financing is its ability to align with your sales cycles. eCommerce businesses often experience natural ups and downs - like Black Friday spikes or slower post-holiday periods. When repayments adjust automatically to these shifts, you can avoid the financial pressure that comes with fixed payment schedules. This flexibility also allows for timely inventory purchases, helping to lower storage costs and reduce the time capital is tied up in unsold stock.
Take the case of Larroudé, a shoe brand that leveraged flexible funding to design and launch new products in just 10 days. By using adaptable capital to manage their supply chain, they minimized the time inventory sat in storage, cutting holding costs significantly. Marina Larroudé, the company’s CCO, highlighted the impact:
"That kind of speed is only possible because we have the capital to scale it." [4]
Additionally, flexible financing enables businesses to prepay suppliers for bulk discounts, reducing overall costs without draining cash reserves. Instead of letting funds sit idle while interest accrues on a fixed loan, businesses can deploy capital exactly when it’s needed - for ad campaigns, supplier payments, or technology upgrades.
| Feature | Fixed-Term Loans | Revenue-Based Financing |
|---|---|---|
| Repayment | Fixed monthly amounts | Percentage of sales that adjusts with revenue |
| Interest/Fee | May include compounding interest | Single flat fee, no compounding |
| Guarantee | Often requires collateral | Typically none; based on sales performance |
| Flexibility | Rigid and channel-specific | Integrates with platforms like Shopify, WooCommerce, and Amazon |
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How Onramp Funds Reduces Carry Costs
Onramp Funds is designed specifically for small-to-medium eCommerce sellers who constantly juggle inventory purchases with unpredictable cash flow. The platform integrates directly with your Amazon, Shopify, Walmart, or TikTok Shop store to analyze sales history and margins - no lengthy applications or credit checks required. Funds are deposited into your business bank account within 24 hours, enabling you to quickly pay suppliers, take advantage of bulk discounts, and stock up for seasonal demand [6]. Here's how Onramp Funds helps reduce carry costs with its flexible solutions.
Revenue-Based Financing: Pay as You Earn
Onramp Funds uses revenue-based financing to help lower inventory holding expenses. With this approach, repayments are tied to your daily sales, often as low as 1% per day. If sales slow down, the repayment amount decreases automatically, keeping your cash flow intact during quieter periods. When sales pick up, you repay faster, freeing up funds for your next inventory cycle. Onramp charges a flat fee - typically between 2% and 8% of the funded amount - with no compounding interest or hidden fees. Plus, if you repay early, you stop accruing fees, further reducing your overall cost of capital.
Revolving Credit Lines for Smarter Inventory Management
Onramp’s revolving credit lines work like a credit card tailored for inventory purchases. You’re given a credit limit and can draw funds as needed for specific inventory orders, paying fees only on the amount used. As you repay through sales, your credit line is replenished for future use. This system allows you to align inventory purchases with actual demand. For instance, an Amazon FBA seller might use a revolving draw to place a just-in-time order ahead of Q4, repaying it as units sell to avoid long-term storage fees. Similarly, a Shopify direct-to-consumer brand can finance product drops one at a time, minimizing the time inventory sits unsold and reducing per-unit holding costs.
Fixed-Term Loans vs. Flexible Financing
| Feature | Traditional Fixed-Term Loans | Onramp Flexible Financing |
|---|---|---|
| Repayment Flexibility | Fixed monthly payments, regardless of sales volume | Variable daily payments that adjust with revenue |
| Cost Predictability | Interest rates may fluctuate and compound | Flat fee (2–8%), no compounding |
| Impact on Carry Costs | Fixed payments strain cash flow during slow sales periods | Payments decrease during slow sales, preserving cash for inventory needs |
| Collateral | Often requires personal guarantees or business assets | No collateral or personal guarantee needed |
| Funding Speed | Lengthy application and approval process | Funds available in under 24 hours |
How to Get Started With Onramp Funds
Getting started with Onramp Funds is quick and straightforward. Here’s how you can begin:
Step 1: Connect Your Store and Review Your Sales
The setup process takes less than 10 minutes. Start by answering a few basic questions to receive a funding estimate, then securely link your eCommerce store through a read-only connection[7]. Onramp supports all major platforms, making integration easy.
To qualify, your business must meet these three criteria: it should be eCommerce-focused, registered as a legal U.S. business entity (such as an LLC, C-Corp, or S-Corp), and generate at least $3,000 in average monthly sales[7]. Onramp evaluates your sales history and cash flow to make funding decisions, skipping personal credit checks entirely. Everything is based on your business’s performance.
"Onramp's process is straightforward. I had funds in my account within a day of final approval."
- Adam B., The Full Spectrum Company[8]
Step 2: Calculate Your Funding Amount
Onramp uses your sales data to create a tailored funding offer[8]. The platform looks at your revenue trends, cash flow needs, and any existing debt to determine how much capital you qualify for. If you sell across multiple platforms, connecting all accounts can increase your funding potential by factoring in your total sales volume.
A built-in calculator displays your funding options under different repayment models. Compare revenue-based financing - where payments are a percentage of daily sales - with fixed-fee plans to find the best fit for your business’s inventory cycles and seasonal demands.
Once you’ve reviewed your funding options, you can proceed to finalize your approval.
Step 3: Apply and Deploy Your Funds
After receiving your pre-qualified offer, link your business bank account to complete the approval process[8]. There’s no obligation until you accept the offer. Once approved, funds are typically deposited within 24 hours - or even sooner[7].
"Applied, got our offer, and had cash in our bank account within 24 hours. Their Austin, TX based team was very professional and helped me deploy the cash to effectively grow our business."
- Nick James, CEO, Rockless Table[7]
Once the funds are in your account, you can use them immediately for inventory purchases, supplier payments, marketing, shipping, or securing discounts. Repayments are automated and synced with your sales, adjusting as your revenue fluctuates. This eliminates the hassle of manual payments or fixed monthly bills[7]. The process is designed to keep your cash flow flexible while minimizing carrying costs.
Measuring Your Carry Cost Savings
How to Calculate Carry Cost Reductions
To figure out your carry costs, use this formula: Inventory Value × Holding Duration × Cost Rate. The cost rate typically includes factors like storage costs (rent, utilities), service fees (insurance, taxes), and inventory risks (shrinkage or items becoming outdated). For most eCommerce businesses, carrying costs usually range between 20% and 30% of their total inventory value [2].
To measure your savings, compare the carry costs before and after using flexible financing. First, calculate your original carry costs using the formula. Then, adjust the calculation with your updated inventory value and holding duration. The difference between the two results is your savings.
Two primary factors drive these savings: the cost of capital (interest and financing fees) and the opportunity cost (having cash available for other investments like marketing or business growth). Traditional fixed loans can strain your cash flow with rigid monthly payments, regardless of how your sales perform. On the other hand, flexible financing options like those from Onramp align repayments with your revenue, giving you more financial flexibility when you need it.
Let’s break this down further with a real-world example.
Example: Cutting Carry Costs With Onramp Funds
Here’s how flexible financing can lead to major savings: Imagine an eCommerce business holding $100,000 worth of inventory for six months, with an annual cost rate of 25%. Using the formula, the carry cost would be:
- $100,000 × 0.5 × 25% = $12,500
Now, with flexible financing, the business improves its inventory turnover by reducing the inventory value to $70,000 and shortening the holding period to three months. The new carry cost is:
- $70,000 × 0.25 × 25% = $4,375
This change results in a savings of $8,125, which is a 65% reduction [1].
Traditional loans often require fixed payments, which drain cash flow during slower sales periods and may force you to hold onto excess inventory longer than necessary. In contrast, Onramp’s revenue-based financing model ties repayments to your sales, easing the financial pressure of unsold inventory and safeguarding your margins.
"Onramp offered the perfect solution with revenue-based financing to secure the capital we needed to invest in inventory and pay it back at a reasonable time frame once we made sales."
- Jeremy, Founder and Owner, Kindfolk Yoga [9]
Conclusion: Lower Carry Costs, Grow Your Business
Carry costs can quietly chip away at your eCommerce profits. But when you align your funding with your actual sales cycles, you stop wasting money on idle inventory and free up cash to fuel growth. Revenue-based financing and revolving credit options allow you to repay in sync with your earnings - slowing down during quiet months and picking up when sales surge. This approach transforms financing from a rigid expense into a flexible tool that works with your business.
Traditional fixed-term loans, with their unchanging repayment schedules, can strain your cash flow, especially during seasonal dips. Flexible funding options address this by tying repayments to a percentage of your daily or weekly revenue. This means you’re only paying for capital when you truly need it. Plus, the ability to repay early and reuse funds as inventory cycles reset reduces interest costs and minimizes the time products sit in storage. The result? Lower per-unit carrying costs and a more efficient inventory system. Solutions like Onramp Funds are designed to adapt to your sales rhythm, offering practical support for growing businesses.
Onramp Funds simplifies the funding process by analyzing your real-time sales data. With quick approvals and fast access to funds, you won’t miss out on supplier discounts or crucial product launch windows. Their clear, flexible terms help you protect your cash flow and retain ownership as your business scales.
Flexible capital isn’t about borrowing more - it’s about borrowing smarter. By aligning repayments with your revenue, you can consistently lower your holding costs per unit. This strategy reduces the financial burden of carrying inventory, improves turnover, and allows you to reinvest in growth - whether it’s marketing, expanding your product line, or entering new marketplaces. This kind of adaptability helps growing brands thrive in unpredictable markets without stretching their finances too thin.
Ready to make your inventory work for you? Connect your store to Onramp Funds, analyze your sales, and see how much you can save. With the right funding approach, you can turn inventory from a cost center into a growth driver - and keep more of every dollar you earn.
FAQs
What makes revenue-based financing a better option than traditional loans for managing carry costs?
Revenue-based financing (RBF) provides a repayment model that adjusts based on your sales. Payments are tied to a percentage of your daily or monthly revenue, meaning they increase when sales are high and decrease during slower periods. This approach helps eCommerce businesses maintain cash flow during off-seasons, making it easier to manage expenses like inventory, storage, and other operational needs without unnecessary financial stress.
On the other hand, traditional loans come with fixed monthly payments, regardless of how your business is performing. This can put significant pressure on cash flow during slower sales periods, especially if inventory isn’t selling. Plus, traditional loans often involve longer approval processes, collateral requirements, and additional interest, driving up overall costs.
With RBF, repayments align with your revenue, enabling eCommerce businesses to scale inventory more efficiently, minimize overhead, and avoid the rigid financial burden that comes with fixed-payment loans. It’s a solution designed to adapt to the ups and downs of running an eCommerce business.
How can flexible capital structures help eCommerce businesses manage costs during slow sales periods?
Flexible capital structures, such as revenue-based financing or revolving credit lines, give eCommerce businesses a way to secure funding without committing to fixed loan payments. Since repayments are tied to sales or account balances, the costs automatically adjust when revenue dips, helping businesses conserve cash for essential needs.
This adaptability can be especially helpful during slower sales periods. Payments shrink when sales decline, businesses can quickly tap into funds to cover critical expenses, and there’s no requirement for collateral or giving up equity. These features make it easier for eCommerce sellers to maintain inventory, meet supplier deadlines, and keep marketing efforts running - all while easing the strain on cash flow.
How can eCommerce businesses calculate savings from flexible financing options?
To figure out potential savings from flexible financing, start by breaking down your current carrying costs. These include things like inventory storage fees (e.g., warehousing and insurance) and any interest tied to loans or credit used to fund inventory. For instance, if your inventory is valued at $100,000 and you’re paying a 5% holding cost, that’s $5,000 annually. Add in financing costs, like a 10% APR on a $100,000 loan, which totals $10,000 per year. Altogether, your carrying costs would be $15,000.
Now, let’s look at how a flexible financing option, such as revenue-based financing, stacks up. Say you borrow $100,000 with a 5% fee and a repayment cap of 1.3x. This means the total repayment would be $130,000. The key difference? Payments are tied to your revenue. During slower months, your payments shrink, easing the strain on your cash flow. When you compare this structure to your fixed carrying costs, you'll see how flexible financing can reduce financial pressure. By syncing repayments with your revenue and avoiding steep, fixed interest payments, this approach can free up cash to reinvest and grow your business.
