The Smartest Way to Get Financing for eCommerce Companies

The Smartest Way to Get Financing for eCommerce Companies

If you’re running an eCommerce company, we’ll start with this: Hats off to you! Building a business is never easy, and many stay in the “daydreaming” phase for one reason or another. Lack of working capital, an unclear business plan, or the simple (yet agonizing) overwhelm of entering an established market are enough to pull the brakes on many well-intentioned entrepreneurial ventures.

And yet, many manage to do it. The eCommerce industry is valuable to get into as shoppers continue to seek the ease and convenience of shopping online. The number of online shoppers continues to grow, and retailers are responding. Whether it’s brick-and-mortar shops expanding to the digital world or driven individuals wanting to establish themselves in the marketplace, eCommerce is here to stay.

Starting a business is not without its risks for all of the opportunities. One in five small businesses fails within the first year, nearly 30% close because they run out of cash. Don’t let these numbers discourage you! It’s great to know the potential challenges and even better to know in advance how to overcome them. We’ll give you some insight into available financing for eCommerce companies so you can be a success story.

Financing for eCommerce Companies

The growth of eCommerce is alluring and much more accessible than entry into traditional retail models. Historically, if you had a great idea for a retail shop, you would need to find a storefront, sign a long-term lease, fit out the space, order inventory, and hope to get enough people through the door to make purchases and keep the lights on.

Thankfully, there are quite a few fewer steps in the modern era. With the help of tools to quickly build your website and robust marketplaces like Amazon, Shopify;, Etsy, and others, the barrier to entry is much lower. Those with a great idea or product can set themselves up relatively swiftly and start trying to establish their foothold in the market.

While the retail sector has evolved and modernized, the lending industry has been slower to adapt. Financing for eCommerce companies does exist, though it’s oftentimes a matter of leveraging traditional funding options. Conventional approaches to financing are helpful for some purposes, though they don’t consider the unique needs of eCommerce businesses.

The best way to get financing for eCommerce companies is to understand the options and leverage them in their capital stack.

Related: A Key to eCommerce Success: What is Inventory Funding?

Types of Funding for Small Businesses

The need for financing for eCommerce companies arises for a variety of reasons. For some, it’s dire and urgent to keep their business afloat. For others, it’s a cushion to cover operating expenses while sales have slowed down. Yet others seek financing to expand beyond their current offering, and a cash injection helps them diversify.

No matter the need for funding, it can get overwhelming trying to determine which options are available and which approach to take. 

Credit Cards

Personal or business credit cards are among the most accessible financing for eCommerce companies. Applications are typically straightforward, and the turnaround for approval is relatively quick.

Credit cards are a great funding option to use for day-to-day expenses. They’re easy to use in various circumstances, and as a financing option for eCommerce companies, they offer a lot of freedom.

That said, businesses who use credit cards for their expenses should keep a close eye on their use. Many cards will offer an attractive introductory interest rate, making it easy to justify spending on credit. However, interest rates often rise dramatically once the introductory period is over. This rate is based on the assessment by the creditor and is related to your credit and payment history.

Credit cards also have monthly minimum payments, which can overwhelm some businesses. It’s crucial to have good practices of tracking credit card spending to stay on top of debt and payment schedules.

Bank Loans and Lines of Credit

One of the most common and recognizable forms of small business funding is the bank loan. Banks offer financing for eCommerce companies through mid-and long-term fixed loans and lines of credit.

Long-term loans tend to have lower interest rates, and the debt is repaid over 20 or 30 years. These loans are typically used by businesses making a significant investment in big-ticket items such as new factory equipment. Mid-term loans generally are around 12 months and have a higher interest rate (about 12%) than their longer-term equivalent.

For those looking for a short-term loan, your option from a traditional lending institution is often limited to a line of credit. A line of credit is a predetermined amount available for you to draw from - either all at once or a lesser amount when required. Lines of credit are an excellent option for financing eCommerce companies, though merchants should note that rates fluctuate, so it can be challenging to write into the budget.

The approval process for any lending options is lengthier than that of credit cards. First, banks will require you to submit extensive paperwork, including financial history, credit score, business operational information, and personal paperwork for review.

After submission, approval (or denial) can take two to three months as they review all of your documents, and you may be required to put up collateral to receive funding.

Investment Capital

More an option of financing for eCommerce companies in the startup phase, many businesses turn to investment capital when available. Seed capital - funds received from investors in the early stages of establishing your business - is typically enough to cover essential expenses such as inventory and payroll.

Investment capital is not meant to sustain you for the long term but rather to help you get set up and running so you can generate more funding or attract more investment. Depending on your business goals and plan, you may use the seed funding to get things moving before seeking venture capital.

Investment funds can be challenging to access and come with their downsides. If the money is coming from somewhere other than a generous friend or family member, you’re liable to lose control of a part of your company.

The exchange for investors is typically a share in your company, which means there may end up being more people in the room while making decisions than you anticipated. Even if they aren’t interested in day-to-day decisions, investors often end up entitled to a percentage of your profits.


A fancy way of saying “taking out your wallet,” bootstrapping refers to using your personal finances for your business ventures. Donations from family or friends can also be considered bootstrapping, as they’re a cash flow injection without a repayment scheme.

The bootstrapping approach often leans on cash advances and credit cards to deepen the pockets of the business. These funds tend to be used for smaller amounts and shorter-term repayments. The risk, of course, is that you’ve dipped into your savings or increased your personal debt to give your business a (hopeful) boost.

Related: Why Online Sellers Should Choose eCommerce Business Loans

A More Tailored Approach for eCommerce Companies

All of these financing options for eCommerce companies come with their upsides and drawbacks. Each has its place and can be used for a variety of needs. eCommerce business owners should explore the financing and repayment obligations and compare them to their investment to know which option is right for them.

Another common thread through the lending options above is that none have been designed with eCommerce in mind. Each is a traditional lending method, and while they have their place, they don’t consider the unique needs of eCommerce businesses. They can end up costing you more in interest and leave you strapped for working capital.

An innovative eCommerce financing option is one that gives you rapid access to cash without all of the red tape. You get approved for a dollar amount based on your sales history and repayment is synced with your sales. You don’t sell, you don’t pay. The financing company connects to your online store and your bank, so you actually never make a payment. They simply deposit cash and debit repayment automatically, taking a small percentage of your sales as their fee, as little as 1%. It’s a much less risky financing option and gets eCommerce sellers cash much faster.

Onramp has funding created with you in mind. With a quick application and approval process, you can receive funding within days. Better yet, we won’t ask for collateral and won’t go through your credit history with a fine-toothed comb before we approve your application. Repayment is attached to your inventory sales and automatically deducts a small percentage of your transactions. No more late fees or penalties for a slow sale cycle.