Whether it’s an extension of your brick-and-mortar offering or a foray into the world of pure eCommerce, selling online isn’t the “passive income” story many believe it to be. There’s a lot involved in entering the world of eCommerce sales.
Selling online often feels like a boundless opportunity. You can now reach more customers than ever before, shipping your products across the country or even the world. For many online businesses, cash flow becomes a barrier. Traditional financing options are available but can prove challenging for the eCommerce business model. Thankfully, eCommerce financing solutions have your unique needs in mind.
What Are eCommerce Financing Solutions?
Traditional banks have many financing options available. These solutions, while plentiful, are often designed with a more “classical” business model in mind - meaning, brick-and-mortar shops holding inventory. Many business loans do not take into account the needs of eCommerce businesses.
Small business or term loans are available through banks and credit unions. These loans have a high barrier for approval with requirements that are often difficult to meet for eCommerce businesses, particularly those just starting out.
Once approved, loans have a monthly payment schedule that doesn’t take into account the natural ebbs and flows of an eCommerce business. Business owners tend to sign loan repayment commitments when they’re feeling most optimistic. Oftentimes, payments can stretch cash flow to or beyond its reach.
Credit cards are an option widely available and are a common go-to for small businesses. The application process is much more concise and the approval process swift, meaning a line of credit will be available relatively quickly.
Credit cards are flexible and can be used for a variety of purposes, but carry a downside. If you’re unable to pay the card in full each month, interest rates can be steep and can compound quickly. They’re also susceptible to fraud, and are often tied to personal credit history rather than the ebbs and flows of business. As an eCommerce financing solution, credit cards may work in a pinch but aren’t the most tailor-fit option.
Out-of-the-box options are now available for modern retailers. These eCommerce financing solutions take into account the unique needs and challenges of online businesses and tailor their terms to fit. These options are easier to apply for with repayment plans that think outside of the traditional, prescriptive box.
We’ll go further in depth on financing options built with eCommerce businesses in mind, but let’s first explore the challenges and needs of online retailers.
Related: The Basics of Funding for eCommerce Businesses
Unique Challenges in eCommerce
Many are drawn into the allure of eCommerce. The idea that you can run a business with lower overhead, less staff, and without traditional business hours has a strong appeal. But eCommerce businesses are not without their own unique challenges.
Keeping Up with Customers’ Rising Expectations
It’s true that you can now reach more customers than ever, making the possibilities seemingly endless for your eCommerce business. The last year and a half has also seen more services move online, introducing customers who were otherwise resistant to the ease of online shopping. That means great things for you and your business plan.
At the same time, customers’ expectations - might we even say, demands - are rising. They want low prices, high availability, and a variety of products to choose from. And that’s just the tip of the iceberg.
eCommerce businesses always need to stay one step ahead to keep customers happy, while not putting themselves in a bad place by overstocking items or bloating their catalogue with too many options.
Since customers are shopping online, they don’t have the same considerations of “designated business hours” that they do with brick-and-mortar shops. That means they’ll expect your customer service department to be available on-demand (or close to it), and depending on the size of your business, a dedicated staff member may be required.
If you’re selling through a third-party platform like Amazon, Shopify;, or Etsy, many of your needs for security and payment processing are handled. eCommerce businesses that choose to sell through their own website will need to invest in secure data collection and transmission to keep customer information safe.
Finding a Foothold in a Crowded Marketplace
Selling online opens a world of possibilities to you and your business, but you’re not the only one. The market is oversaturated with shops expanding online and full-stop eCommerce businesses opening digital storefronts.
eCommerce businesses don’t have the luxury of walk-ins and passers-by to drum up business. Since the shopping experience tends to be a bit more practical and less personal, you also don’t have the benefit of building a direct relationship with your customers which crn builds loyalty.
It’s a crowded market which means you have to find your niche and stand out. As a result, digital marketing is more important than ever in this day and age. eCommerce businesses need to devote a healthy budget to digital marketing and web presence to reach more customers and grow their business.
Part of the investment is in customer loyalty. It’s easy for a customer to be swayed by other online businesses - after all, they’re all in the same location (contained within their screen) so it’s “all the same” to them. eCommerce financing solutions can make more funds available for reinvestment in customer loyalty programs, promotions, and special offers.
Fluctuations in Demand
eCommerce businesses face the need to be “always on” in more ways than one. That includes having stock on hand and available to ship to customers when they order it. When shopping is as easy as clicking a button, not having inventory can make or break a sale.
At the same time, having too much inventory can be just as risky for your business. Holding inventory is the major overhead in an eCommerce business. While sell-through is steady, your cash flow is balanced and you have money to reinvest. In slower periods, your money gets tied up in inventory leaving you with less leftover for things like marketing and site improvements.
Related: Amazon Inventory Financing - Expand Your Vision
Meeting These Challenges
Money isn’t a magic fix to make all of these challenges disappear. It is, however, a solution that helps you meet these challenges head on and navigate the complex yet rewarding world of being an eCommerce entrepreneur.
A customized eCommerce financing solution will help you navigate these challenges without digging yourself a hole. Where the application and approval process for small business loans can be lengthy and tedious, and business credit cards can quickly compound debt with interest percentages, eCommerce lending options like those offered by OnRamp will meet you where you are.
OnRamp doesn’t force you into a traditional business model and understands that your needs are different. Our application process is clear and we give you an answer quickly. To give you peace of mind, your loan is repaid from a percentage of your inventory sold. Get money to reinvest in your business and when it pays off, you repay your loan. It’s that simple. Fully aligned; lending made for eCommerce.
