Best eCommerce financing options for your business growth
If you are an e-commerce business owner, you are an essential contributor to an ultra-booming economy. But one reason that is holding you back could be a low cash flow. You may not have to pay rent as physical shops do, but you still have to pay e-commerce hosting fees and domain name charges.
Additionally, you also have to pay for other key operations such as payment processing costs, production costs, and salaries (if any). This could leave you in an unending paradox: You need to sell goods, earn money and maintain the cash flow, but you also need money to manufacture those goods in the first place.
This is where a good e-commerce financing solution can help you bridge the gap between production and sales, and maintain operational cash flow simultaneously.
Pre-production, post-sales, and everything in between incur operational expenses. These expenses help you stock your inventory, maintain a stable workforce, market and promote your business. E-commerce financing is a lending solution that provides working capital or operational cash flow to web-based merchants.
An e-commerce startup loan can help buoy daily business functions and drive production and sale efforts. These types of eCommerce business loans are essential financial support for your online business. Broadly there are 4 eCommerce financing options that are popular.
Technically speaking, they are not a loan, but business credit cards are the go-to option for most e-commerce businesses. They are revolving credit, and their frequency and value depend on how much you have borrowed and how quickly and consistently you have repaid, with the latter being a major assessment factor. With business credit cards, you make monthly repayments for the credit you owe, and any amount left unpaid is charged exorbitantly high late fees that can be up to 30%.
These charges are significantly higher than other kinds of eCommerce business loans and carelessness here can land into a debt trap situation. Business credit cards do have some perks which include cash back, travel miles, reward points, and more, but the sky-high late fees eclipse these marginal perks.
Following the same revolving credit system like business credit cards, a small business line of credit allows you to take a line of credit according to your needs and draw only that amount that you require for your daily, short-term needs. The best part?
You only have to pay interest on the amount of credit you have drawn, and once it’s paid back in full along with the interest, you can draw from the line again and again. For short-term expenses, establishing a line of credit for business is a great way to safeguard your operational expenses.
Also known as your standard business loan, a term loan is a fixed capital received in a lump sum, that you pay back with interest over a while to your lender. They have a fixed interest rate, usually lesser than other eCommerce financing options that you can pay back with a regular repayment plan. These options are more suitable for big projects or tasks that require a large investment.
However, for operational expenses, term loans are not ideal, since you will be charged on the whole amount loaned, even if you use a small portion of it at a time. For small businesses and startups, they are hard to get, and if your business credit score is less than satisfactory, you might get it at a higher interest rate.
Small Business Administration (SBA) loans offer small businesses an e-commerce startup loan which is long-term, low-cost, and government-funded, ranging from $500 - $5.5 million. While these competitive eCommerce business loans come with guaranteed coverage of a portion of it in case you default, they are also extremely time-consuming, and cake takes up to 60-90 days to get the loan approved, not to mention the tsunami of paperwork it entails.
For a budding online business like yours, you need an eCommerce financing solution that’s adaptable to your growing needs and extends credit with flexibility and low-interest rates. And that’s exactly what a line of credit for business can offer you.
With a credit line, you don’t have to wait around to access your working capital. Cash outflow becomes easier to maintain and stay consistent with. While other financing options need longer verification and approval processes, some business credit lines like those offered by Volopay can be approved in less than 48-72 hours, so you are always ready to spend on the go.
One of the most sought-after features of a business credit line is its flexibility. Instead of deciding the spending pattern for you, a business credit line puts you in the driver’s seat and allows you to control the frequency and the amount of credit you draw from your line. Having a flexible credit line allows you to map out your operational expenses effortlessly, without feeling restricted by a fixed credit amount that must be used up in its entirety.
The secret to maintaining a good business credit score is to access credit and repay it consistently. For you to do that, you need to be able to have a credit pool big enough to match your estimated expenses yet customizable enough to be used as much or as little you’d like depending on the expense. With a business credit line, you get to do both. Unlike term loans that are provided lump sum with no room for variety in its usage, a flexible line of credit for business gives you the control to manage your business credit score by only paying for what you owe.
A business credit line is quickly becoming the go-to financing solution for eCommerce businesses, owing to its quick approval policy. Loans can not only be accessed without providing any collateral or sporting high credit scores, but they also remove the hurdles that traditional loan providers create, such as the necessity of being an established business of at least 2 years.
Just like a credit line is flexible in its spending range, it is equally flexible in its spending categories, giving you the complete control you need to manage the various expenses of your business. Unlike a traditional business loan that must be used in its entirety for the purpose it was lent, a business credit line allows you to use the money for any expense categories, as long as it pertains directly to your business spend.
This type of financing solution is a sign of trust that the lender has put in your business and most importantly, the way you manage your business expenses. Timely repayments then can open up doors of opportunity for you to show your worthiness and can lead to a larger credit line with lower interest rates and increased flexibility.
A business credit line is a sign of trust that the lender has put in your business management skills, therefore it is of paramount importance that the credit is used wisely to drive the maximum benefit you can from the money loaned to you.
With a flexible credit line, you can invest in building an online presence and generating leads through digital marketing. Actively investing in various online and offline marketing channels can set you a class apart from your competition. Investing not just in your sales and outbound efforts, doubling down on implementing marketing strategies, and promoting new launches to keep your target audience interested in your business can create lead generation funnels to ensure a consistent supply of customers.
As a small business owner, when access to money is dependent on sales, you have to make some hard choices in terms of priority. This can result in using outdated technology or equipment to create products that can impact your sales significantly. A business credit line counters this problem by giving you a new stream of money that you can utilize to upgrade your tools and equipment along with other equally important expenses. This ensures that your quality neve suffers and the sales keep on flowing in.
Managing inventory is one of the most difficult and costly obstacles in a business. You not only lose out on sales with improper inventory management but also put your business at risk of losing long-time customers and thereby diminishing your customer lifetime value. Building up your inventory is a fine balance between ensuring that you do not run out of goods, and at the same time prevent yourself from stocking too much of goods that have a short shelf life (perishable items such as food products) or those goods that are created for a niche market (such as hardware parts custom made for a particular item).
A fluid credit line promotes a smoother cash flow, ensuring that you can pay your suppliers on time, every time. This not only strengthens your Accounts Payable processes, but also builds strong relationships with your vendors which can lead to special discounts, bulk discounts, and exclusive access to time-sensitive deals.
Last but not least, paying your employees on time is the same kind of respect and trust your business credit line lender has extended towards you. Employees who are paid timely perform more efficiently and energetically than those who aren’t. Your employees are a crucial part of your business and a flexible credit line ensures that you can put your employees first and pay their remuneration on time.
Rent and daily operational expenses are some of the routine expenses you can automate through your business credit line. From paying your staff to purchasing office supplies and general office/factory/warehouse maintenance, a business credit line is flexible enough to be used for any purpose. This also gives you a healthy estimate of your regular operational expenses that you can take into account when the repayment time is near.
While a credit line opens your business to a lot of opportunities, lacking a systematic plan can land you in a financial quicksand! Therefore, before applying for a business credit line, ensure that you have a definite answer to these questions:
Create a year-long projection of your business goals to ascertain whether these goals require a higher credit line or lower. If you have more short-term goals than long-term ones, it is advisable to opt for a business credit line that can get started within a few weeks. Some alternatives may even be able to provide you with a credit line within 48-72 hours.
Identifying these periods can help you decide the amount of credit line you’d want to open with your lender. Although banks and other financial institutions provide loans with higher borrowing limits, these might not always be affordable or even available to small eCommerce businesses. That’s why a flexible credit line like Volopay’s offers easy funding up to $100k.
Before applying for a credit line, ensure that you have worked out a repayment structure with your lender that you are comfortable with. Failure to do so can put you under pressure and defaults can quickly add up to a few thousand dollars penalty. Therefore, ensure that you have a repayment plan that is sustainable and timely to ensure a good business credit score throughout.
At Volopay, eCommerce businesses can get a super fast and flexible line of credit for business expenses. Unlike banks, Volopay does not take weeks to approve your credit line and allocates it within two working days. Not only this: get a high credit limit of up to $500k without any personal guarantee and with minimum documentation. Volopay is the perfect solution for eCommerce business owners.
With our fast approval process, build your business to new heights and watch your credit limit grow as fast as your business grows. Worried about repayment cycles set in stone by traditional banks? At Volopay, our team offers customized repayment cycles catered according to your business needs.
So much to do but have only one lousy business credit card? Swap it out with a business credit line at Volopay, and get corporate cards loaded with your credit limit. You can now create individual physical and unlimited virtual cards for your employees with real-time reporting and approval, so you can keep track of every single dollar that leaves your company. Create limits, block or freeze cards whenever you wish.
FX transactions making a dent in your capital? Get assured cashback on all your FX transactions, up to 5%! Seamlessly sync all these transactions to the accounting software of your choice with our hassle-free integrations.
Flexible credit, customizable repayment cycle, cashback, and complete control over your spending — embark on the best eCommerce financing solution for your business.
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