Updated March 26, 2025

Running a financially healthy eCommerce business requires discipline, smart planning, and strong financial management. In uncertain economic environments—whether due to inflation, shifting consumer behavior, or global supply chain issues—it's especially important for entrepreneurs to be strategic about how they borrow and spend.

Rather than overextending on large capital expenditures or unnecessary inventory, successful eCommerce brands focus on maintaining positive cash flows, streamlining operations, and investing only in areas that support sustainable growth. This means adopting sound cash flow management practices, using accounting software to simplify bookkeeping and financial reporting, automating tasks such as invoicing, and staying lean with real-time financial data to guide decision-making.

Borrowing can still play a vital role in growing your business—but only when done with intention. In this article, we’ll explore the benefits of borrowing and spending only what you need, and how doing so protects your financial health while positioning your business for long-term success.

How Does a Recession Impact eCommerce Businesses and Business Owners?

Before we dive into the benefits of prudent borrowing and spending for eCommerce businesses, let's look at the recession's impact on online stores. Explaining the impacts will help you understand why you shouldn't take unnecessary risks during uncertain times by overspending.

Decreased Consumer Spending

During a recession, consumers spend less to save money and protect themselves from economic uncertainty. They delay big purchases, focus more on basics and household items, and cut down on luxury goods. Even when purchasing essentials, they become more price-sensitive and look for cheaper alternatives. This shift affects eCommerce businesses, as they have to adjust their revenue expectations accordingly.

Increased Prices by Suppliers

eCommerce businesses are reliant on suppliers for the products they sell. When a recession hits, suppliers tend to increase their prices to compensate for inflation. As a retailer, you may need to increase your prices to maintain profit margins. However, higher prices could lead customers to seek more affordable alternatives, resulting in decreased sales and lower ROI.

Increased Competition in the Online Marketplace

When a recession hits, many eCommerce businesses increase their marketing efforts to maintain sales, leading to increased competition. Advertising costs on platforms like social media and PPC rise as brands compete for the same audience. These higher costs can eat into profits.

Difficulty Borrowing Money

During a recession, lenders become more cautious and increase borrowing requirements. It becomes harder for small businesses to access loans, making it more important to have strong business finances and good cash flow management.

Should You Borrow During Recessionary Times?

Even during a recession, you may need extra capital to keep your business running. Whether to cover operating costs or purchase inventory, choosing the right eCommerce financing options is critical.

You might be tempted to give up equity instead of taking on debt, but this means giving away a part of your business. Taking an eCommerce loan keeps ownership in your hands. The ROI on using borrowed funds may be higher than the cost of interest, especially when financing necessary expenses like inventory or sales tax.

Borrowing also provides working capital to manage operations, process refunds, or pay taxes. During high-demand periods like the holidays, responsible borrowing ensures you can maintain optimum inventory levels, avoid overstocking, and meet customer demand without hitting "out of stock" messages.

The Benefits of Borrowing and Spending Only What You Need: eCommerce Finance 101

Positive Cashflows

Spending only on what adds value helps maintain positive cash flow and reduces financial stress. You'll have enough cash to cover expenses, pay vendors, and keep your bank account balanced.

Increasing the Chances of Survival

Cash flow problems are the reason why 82% of small businesses fail. Staying disciplined helps you manage resources, create a budget, and allocate funds to necessary areas. This increases your chance of long-term success.

Maintaining Optimum Inventory

Effective inventory management helps prevent overstocking, storage costs, and markdowns. Responsible borrowing and spending enable you to maintain just the right inventory levels to meet customer demand without excessive surplus.

Achieving Targets Easily

With smart budgeting and disciplined use of funds, your business can achieve growth targets more easily. Every dollar you spend will be aligned with a measurable goal.

Improving Efficiency

When you borrow the right amount and allocate funds wisely, you ensure that every dollar contributes to operational efficiency. From inventory purchases to marketing efforts, responsible spending keeps you focused on ROI-driven activities.

Improving Negotiation Skills

Knowing your exact budget helps you negotiate better deals with suppliers, secure bulk discounts, and manage relationships more effectively. You'll also gain vendor trust, which can lead to improved payment terms and service.

Accelerating Wealth Creation

Smart borrowing, strong forecasting, and responsible spending pave the way for better investments. You avoid unnecessary debt and focus on strategies that grow your business and wealth.

eCommerce Accounting and Financial Health

Maintaining proper eCommerce accounting is essential to track your spending and borrowing. Strong financial management helps ensure you're making informed decisions based on your current liabilities, cash flow, and balance sheet. With accurate tracking, you can better manage COGS (Cost of Goods Sold), and calculate customer acquisition cost (CAC) to optimize marketing expenses.

Liabilities and Audits

It's critical to regularly audit your financial records to ensure you have a clear understanding of your liabilities. Regular audits will help you spot any discrepancies in your spending, identify areas to cut costs, and improve financial performance. Being proactive in audits allows you to make data-driven decisions that help preserve your business’s financial health.

Financial Data and Analysis

Utilizing real-time financial data can guide your decision-making process, allowing you to adjust quickly to changes in the market. Tracking your financial data allows you to predict potential financial issues, enabling you to respond before problems arise. Regular analysis helps you identify trends and adjust strategies to stay on track.

Tips to Ensure You Borrow and Spend Responsibly

• Borrow only when necessary: Assess your business needs before taking on debt. Can your current cash flow cover the cost? Is there a long-term goal tied to the loan?
• Invest in research and data: Make informed decisions by analyzing customer behavior, sales trends, and market opportunities.
• Set clear goals: Define what the borrowed money will accomplish. Set metrics to measure success and hold yourself accountable.
• Develop a budget: Create a budget aligned with your goals and stick to it to avoid unnecessary expenses.
• Track progress: Monitor where your money is going and whether it's yielding the desired results. Use automation to simplify tracking and keep tabs on your bank account activity.
• Use financial tools to track your cash flow: Leverage software for an accounting system like QuickBooks to monitor your cash flow statement and ensure that all transactions are accounted for. This helps identify areas of overspending, ensures tax compliance, and keeps you on track toward your financial goals - a crucial tool for eCommerce bookkeeping.

• Get expert advice: Consult financial advisors or experienced business owners for guidance on managing loans, forecasting needs, and investing wisely.

Onramp Funding Will Keep Your Business Afloat

Borrowing and spending responsibly is essential for eCommerce businesses, especially during an economic downturn. Whether you're financing inventory, handling invoicing, managing business finances, or covering sales tax, make every dollar count.

Do you need an eCommerce loan to power your business through the recession? Onramp provides flexible funding solutions for Shopify stores, Amazon stores, and more. With the right financial partner and a smart borrowing strategy, you can streamline operations, avoid overstocking, and keep driving business growth — no matter the economic climate.