The present world is an age of the internet where you are bombarded with a lot of information, opportunities and businesses. Within just a few clicks and swipes a lot of products are now available at our fingertips. In this digital era where even the classrooms have turned online E-commerce has become a very important and prominent term. Better financing of your E-commerce store is also equally important.
So what is E-commerce financing?
E-commerce financing is financing to pay for your online business expenses. Even though you don’t have a physical store, there will still be many costs to meet.
During the time of the pandemic when it affected every walks of life, it was just e-commerce that survived and brought the best performance track during those times. The biggest advantage of E-commerce is that they can sell their products directly to retailers and consumers. As time changes, newer systems are now ruling the digital world. Just by sitting comfortably on your couch, you will be able to manage your businesses.
There are different modes of E-commerce financing, such as either loans or lines of credit. With E-commerce financing, it allows you to pay your debts, fill the stocks, manage the business well, and pay the staff and other business expenses. In E-commerce financing, you pay back the money with interest. Here you have to apply for funding and you will get approved based on your qualifications and credit points. Let’s check at the various E-commerce financing options that could support your E-commerce store.
1. APPLY FOR A LOAN
Loans will be offered by banks also there are certain online lenders too who would give you a loan. They will give E-commerce financing at low rates. But the most challenging part is that it is a tough nut to crack, it will be really hard for some to meet the qualifications. There are certain E-commerce loans that are specifically available for online businesses and sellers, it could be more beneficial.
The loans can supplement cash with low-interest rates and monthly payments irrespective of your E-commerce sales and performances. It will be really time-consuming to obtain because it needs the approval of a lot of documents. It will be good for large-scale businesses. They will give a specific amount which should be related to specific repayment schedules. There will short term loans, intermediatory loans, and long-term loans.
2. LINE OF CREDITS
The line of credit is a better E-commerce financing option. Here you won’t be allowed to take a huge lump sum of cash all at once, but give access to a certain amount and you can borrow up to that amount at any time.
3. SMALL BUSINESS ADMINISTRATION (SBA) LOANS
SMALL BUSINESS ADMINISTRATION (SBA) LOANS Â gives loan at low rates with a long repayment period. It is also much easy to qualify.
4. EQUIPMENT FINANCING
If you need funds to buy any new equipment related to the business, such as a laptop or computer, sewing or embroidery machine then you can apply for Equipment financing. It gives capital for purchasing that equipment and that particular equipment acts as the collateral.
5. CREDIT CARD
The credit card is an early choice in E-commerce financing. It is easy to have, just by filling out the application online, there can be a quick approval. There will be reward cards that can help to redeem for cash backs and other rewards. The credit card also helps to keep a track of business expenses.
2 good credit card choices are as follows :
- Rewards + 0% APR offer: American Express Blue Business Cash™ Card
- Savings for Amazon shoppers: Amazon Business Prime American Express Card
A business credit card can help in tracking expenses and receiving excellent rewards. To qualify for a credit card you need an excellent credit point. They might ask about your credit score, your income, and questions regarding your personal finances. You might need to share the information regarding your business and Tax ID No. If you don’t pay within the stipulated time there will be interest rates charged. It needs personal credits as a guarantee. If kept unpaid it will lead to additional fees. There are high chances of theft and fraud in E-commerce financing. At moments when you are not able to pay you might have to pay more expenses till you have paid the balance.
6. INVENTORY LOANS
Another choice for E-commerce financing is inventory loans. Once you sell the inventory to a customer then you will have to repay back the debt used to purchase. If you fail to repay then the lender will take back the inventory. The funding will be quicker and cheaper. If you can manage or are unable to sell then you will be in trouble as future lenders will avoid lending you money. This method of E-commerce financing is better for those with seasonal sale patterns. It might turn out to be disadvantageous to those with unpredictable businesses.
E-commerce financing helps to give the customers more purchasing power. It allows the customers to buy their favorite items now and pay the price back over time. Let’s check some of the advantages of E-commerce.
It is really convenient, with less need to manage the business. There will be no need for helpers or intermediary personnel. It is really cost-effective due to the no maintenance cost and no place to rent. Better promotion of the site can be done on social media with advertisements. The only concerning aspect will be to have a good delivery system. A global expansion of your E-commerce business is also available which could give greater attention to your site. With no need for repair, it is just the quality of the product that matters. Irrespective of shops the online shops will be available and open every time and it can lead to an increase in orders. The feature of personal message related to special sales, special offers, request to buy, and a reminder to buy from the new collections can be done. The customer statistics could be tracked through analytics that can track the performance graph of the online store.
E-commerce financing is now booming. For good E-commerce, it is mandatory to make sure that you are investing in a highly reputable and professional web development agency. There would be a lot of relevant aspects to take care of in E-commerce. What to do in times of economic crisis or having not much capital? How to keep the stock filled when there are only low funds? How could you expand your store without enough revenue? There can be difficult times when you won’t have much or enough working capital in hand. At these moments of difficulty, it is better to rely on E-commerce financing. Here you can take a loan to purchase and can pay it later back from your profit.
The E-commerce financing will give the capital to be used for your business. The money can be used to meet the business expenses, pay the rent of the office, buy the inventory, etc. As it is online there is a payment option where monthly payments will be automatically debited from your account. But if you miss a payment then it can cause a negative credit. If you are able to pay the loan on time then it can give a slight rise in your credit points.
In E-commerce financing, credit scores play a major role. It is not the consumer credit that will be counted. If you have better credit then it will give you better financing. If you have a low credit score it would lead to a loan high-interest rate. Another important feature will be the amount of time you have been in the business. If it’s less than 2 years of online business experience then you cant qualify for the financing. Other than the above-mentioned E-commerce financing options there are new options such as crowdfunding, angel investments, and venture funding.
BENEFITS OF E-commerce financing
E-commerce financing helps the funding in a flexible way with the quick online application, it also offers consultancy for the new budding entrepreneurs. It is always significant to choose the better funding option as there can be high dangers in these finances along with rewards. So do thorough research before investing your money.
