E-commerce store opening and growth require money, so sound planning around your finances matters. You need to find sustainable funding options for advertising, shipping, website development, or inventory. Surviving in the current fast-paced online environment can be challenging without sufficient finances. Fortunately, numerous funding alternatives exist for entrepreneurs who want to open a successful store. For example, partnering with an Amazon PPC agency can help streamline advertising efforts and maximize return on ad spend—making it even more critical to secure the right funding from the start. Here are six methods to fund your e-commerce store adequately.
1. Personal Savings
Most startups are initiated by entrepreneurs who fund them out of their funds, holding complete ownership and debt freedom. If you already have saved-up funds, then this can be an excellent source of business capital with no conditions attached from outsiders or shareholders. Besides, self-financing permits you to experiment with business plans without worrying about future repayment schedules.
However, personal finance is not without risks. If your business does not yield expected revenues, you may spend all your cash without getting anything in return. You must have an emergency fund and not immediately put all your money into business. Divide your money into portions and put some of it into business while keeping emergency funds.
2. Business Loans
Alternative and conventional business loans can be used to provide your e-commerce business with the financing it requires to grow. Banks and credit unions offer term loans and lines of credit as loan options. The funds can finance inventory, advertising, or business growth. Banks may require a good credit history and business plan before lending money to your business.
For individuals who cannot access bank loans, there’s an alternative to using online lenders. Online money marketplaces like fintech institutions include business loans with adjustable terms and quicker approvals. It is very convenient for startups and small businesses with pressing funding needs and the need to escape lengthy bank loan processes. If this avenue appeals to you, compare the rates among multiple lenders to get favorable interest and repayment terms based on your finances.
3. Short-term Payday Loans
Short-term payday loans are suitable for short-term business financing requirements since they facilitate quick access to capital. Payday loans are immediate needs, and they may be helpful in case unavoidable expenses arise, such as inventory stocking or prompt website repairs. Payday loans are different from other loans in that they are quickly approved. E-commerce business owners may view them as a viable alternative as a result.
While payday loans are short-term financial options, they buffer your long-term financial health. Picking the same has to be done by having a robust repayment plan. You can visit https://www.mycanadapayday.com/ to learn more about payday loans and the steps you need to take when applying. Budgeting and planning in advance will prevent short-term loans from becoming long-term money burdeners.
4. Credit Cards
Credit cards enable you to manage cash flow, buy stocks, and finance short-term expenses. Business credit cards also come with rewards such as cash back or travel miles, which are advantageous to your business. Using credit cards wisely also enhances the creditworthiness of your business, which can qualify for large loans in the future. A card with low interest and good terms also maximizes your finance strategy.
Interest on credit balance can be high, which can risk debt accumulation without proper planning on the payment. Paying your balance in full every month or making smart use of credit to cover most business expenses minimizes fees to the absolute levels.
5. Crowdfunding
Crowdfunding presents a secondary option for funding your online store. Kickstarter, Indiegogo, and GoFundMe are only a few of the platforms where businesspersons post their company plans and make contributions from fellow enthusiasts. Besides raising the capital, it also proves your product idea by ascertaining whether customers are willing to pay before launching in the market.
Strategic planning must be the key to a successful crowdfunding campaign. To obtain backers, make a good pitch, provide potential rewards, and market your campaigns effectively to others. Crowdfunding can also become a great solution for product-based e-commerce websites that wish to pre-sell a product prior to manufacturing it in bulk.
6. Angel Investors and Venture Capital
If you require plenty of funds don’t mind forfeiting some of your firm‘s equity, venture capital or angel investors are your choice. Venture capitalists or angel investors use their money to invest in startups in exchange for equity.
You’ll require a decent business plan, an operating revenue model, and a decent growth strategy to finance your business with investors. After all, they will have to be repaid, so you’ll need to show them how your ecommerce business will make actual profits. While this source of financing can bring in plenty of cash, it does involve ceding some control of your business strategy.
What Is EcomBalance?
EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, eBay, Etsy, WooCommerce, & other eCommerce channels.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
- Monthly Finance Meeting Agenda
- 9 Steps to Master Your Ecommerce Bookkeeping Checklist
- The Ultimate Guide on Finding an Ecommerce Virtual Bookkeeping Service
- What Is a Profit and Loss Statement?
- How to Read & Interpret a Cash Flow Statement
- How to Read a Balance Sheet & Truly Understand It
Endnote
Financing an ecommerce business involves proper consideration of access funds. With or without personal funding, borrowing loans, utilizing cards, borrowing cash advances, financing through crowdsource, or provision from shareholders, you should ensure that you adopt the right methodology for your finance resources as well as for business purposes. By researching the correct type of finance, you can confidently establish and construct a viable ecommerce business.
