The Basics of Funding for Ecommerce Businesses

The Basics of Funding for Ecommerce Businesses

Whether you’re an established online seller or you’re looking to start selling online, you may be thinking about how to increase your cash flow. Financing is crucial to the success of any business venture, so decisions about funding for ecommerce businesses could make or break any expansion plans you may have.  

Read on to learn more about ecommerce loans and other financing options for online sellers.  

What Is Funding for Ecommerce Businesses?

Ideally, funding for ecommerce businesses is specialized for the industry, geared for the uniqueness of online selling. Unlike traditional bank loans or credit cards, more flexible options include on-demand loans that are integrated into online sellers’ stores. They use technology to provide funds when companies need them, without disruption, monthly payments, or late fees.

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How Does Funding for Ecommerce Businesses Work?

Lenders begin with a simple evaluation of the business’s needs before making an offer. Based on need and sales volume, it’s unique to each company and tailored toward growth.  

Getting the funds is an easy process. Lenders use read-only APIs, so the business owner only needs to sync their store so they can make payments. In keeping with the business-friendly environment, those payments aren’t monthly. Instead, the lender withdraws payment automatically every Amazon settlement period. 

What Are the Benefits of Funding for Ecommerce Businesses?

These types of ecommerce loans can play a significant role in helping improve cash flow for online businesses. They’re modern and optimized for growth, from lenders with a vested interest in the success of your business.  

Related: Capital for Ecommerce: Getting It the Easy Way

Alternative Types of Funding for Ecommerce Businesses

Although ecommerce businesses may do better with industry-specific financing, they can also choose other, more traditional sources of funds. These options include credit cards, bank loans, crowdfunding, and friends and family. 

Credit cards 

Whether you choose to use personal credit cards or business cards, this type of financing can quickly become expensive. With high-interest rates and late fees, credit cards can take a toll on small businesses when there is a lull in sales.  

Sellers often face issues in having enough credit available, forcing merchants to take out additional cards, which impacts their credit score. Because credit cards are built for 30-day payback cycles, sellers often face challenges when trying to use them as working capital, as ecommerce operates in quarterly cycles.  

On a positive note, credit cards are generally easy to obtain, use, and manage. Additionally, most people are familiar with them, making them a low-stress option. Business owners should consider both the pros and cons of credit cards when deciding whether to use them as a significant source of funds. They should be a part of a seller’s short-term capital stack. 

Bank loans and lines of credit

Traditional bank loans are also an established way to raise money for your business. They tend to have better interest rates than credit cards, which can make them more attractive financially. Lines of credit typically have higher interest rates. 

However, one problem with bank loans is the need to borrow a large sum of money at one time instead of simply accessing funds when you need them most. This issue can lead to cash crunches or, alternatively, paying interest on cash before you need to borrow it, dramatically impacting your margins

With both credit cards and lines of credit, you must also make monthly minimum payments. Unless you have the cash, these minimum payments can be a burden. And if you can’t pay, the interest-only compounds. If sales decrease and you are forced to make a hefty payment, this impacts your bottom line, causing stress on you and the business.

In addition, banks may not be well-versed in funding for ecommerce businesses. Your business may not be eligible for financing with attractive terms because the lender doesn’t fully understand the business model and shy away from less established online sellers.       


As an exciting and unique way of financing a business, crowdfunding has an understandable draw. If you’re one of the lucky few that manage to go viral and get fully funded, this option can do double duty by providing cash and marketing exposure.That said, most crowdfunding projects aren’t successful. So it’s important not to depend on it as a primary source of funding. 

Friends and family 

“Never mix family and business.” Wise words, but sometimes the temptation to borrow from people we know can be hard to resist. Friends, family, and even acquaintances may be happy to help out a small business with only your good name as a reference. 

The drawback can come if you have difficulty paying the loan back on time or at all. You could lose a relationship, and a loved one could lose a nest egg. 

The same principle applies to investing your own money instead of obtaining outside funding.  

Related: Why Online Sellers Should Choose Ecommerce Business Loans 

How to Use Funding for Ecommerce Businesses

You may already have a wish list for your business, waiting until you have a bit of extra cash. But if you need inspiration for how to use ecommerce lending to help your business grow, here are a few of our favorite ideas:

Pay Off Debt 

One of the most popular ways to use ecommerce funding is to pay off more expensive debt. As mentioned earlier, credit cards can be an easy way to access quick cash, but they can rapidly become unsustainable financially. When you eliminate some of that debt, you can increase cash flow and save money for your business in the long run. 

Create a Cash Cushion

Cash flow issues can cause big headaches for business owners. When taken to extremes, they can even lead to severe financial trouble. To protect yourself and your business, the experts at Entrepreneur recommend having two months of operating expenses available as a cushion. That way, you’ll be more prepared to weather the storms of small business ownership.  

Improve Your Design

No matter the products you sell, you want them to look great to current and potential customers. In fact, you want them to stand out. Most US internet users search for images before making a purchase. You always need to put your best foot forward in terms of design. Whether you need new photos, a site redesign, or other changes, you can use the funds from ecommerce loans to improve the look and feel of your ecommerce store.  

Invest in Technology

Have you had your eye on a new computer, inventory management software, or other specialized equipment? These kinds of investments can be beneficial in the long run if they improve the management of your business. Still, you may be hesitant to take the plunge if you’re short on cash. Consider using ecommerce loans to upgrade your technology. 

Manage Inventory Better 

Stockouts are a serious issue for online sellers. Not only can you miss out on a current sale, but you can also lose both future customers and your keyword ranking. With additional cash on hand, you’ll be able to maintain your inventory at its optimum level instead of purchasing the bare minimum. You’ll also be able to buy in bulk, allowing you to take advantage of lower prices which you can pass on to your customers 

Discover Funding for Ecommerce Businesses 

When it comes to funding for ecommerce businesses, you want a company invested in your company’s growth. Onramp was founded by industry veterans that genuinely want you to succeed.  

With our unique model, you only pay us when you make a sale. Say goodbye to minimum payment and monthly fees and say hello to increased cash flow and more opportunities.  No interest, no commitments and more than half the cost of traditional lenders. Fully aligned, as it should be. At Onramp, you are in control. At Onramp, it starts with care.   

Want to learn more? Contact us today to get started on your Onramp journey.