You’ve probably heard that you need money to make money. These words are true. Extra money can mean the difference between expanding your business and growing its potential or caving under the weight of financial pressures.
If you are looking for ways to grow your e-commerce business, a short-term loan or Amazon seller loan might be the answer. Here are 9 top financing options to consider as an e-commerce business in need of a financial boost.
9 Financing Options for Your E-Commerce Business
Business Credit Cards
Business credit cards are popular because they are convenient and often easier to qualify for than traditional loans.
You are likely familiar with personal credit cards. These have a predetermined credit limit that you can access to purchase goods, pay for services, and even draw cash. Interest is charged on what is spent, and the limit may be revised regularly, depending on how well the credit is managed.
Business credit cards operate in a similar way. However, they typically offer higher credit limits and include business-related perks such as building your business credit history.
A Business Line of Credit
A business line of credit is a similar financial tool to a business credit card. It allows businesses to borrow the funds they need, up to a predetermined limit. The funds may be accessed through a business banking account or a mobile app, and interest is only paid on the funds used.
An unsecured line of credit is usually not designated for a specific purpose or purchase. Therefore, it offers as much flexibility as a business credit card. However, the credit limit on a business line of credit is generally higher.
Inventory Financing
This is a short-term loan, but can also operate as a revolving line of credit, allowing you to borrow repeatedly without applying for a new loan. It is designated for use in purchasing stock, and the inventory purchase serves as collateral for the loan.
You may apply for this type of financing from traditional banks, credit unions, or even online lenders. This type of Amazon seller loan may be your best bet if you don’t qualify for other more conventional loans or a business credit card. However, be aware that interest rates can be high.
There are other risks, too. You’re counting on selling those inventory items to have sufficient funds to repay the loan. If sales are poor, you won’t be able to make the payments. And your inventory could then be repossessed to cover the costs of the loan.
Revenue-Based Financing
Revenue-based financing is also known as royalty-based financing. It is a method of raising capital from investors, who receive a predetermined percentage of ongoing gross revenue in return for their funding.
This ensures that investors receive high returns, without you paying interest on the funds. Therefore, revenue-based financing is similar to equity financing, but with one major advantage: the investors have no direct say in, or ownership rights to, the business.
If you are new to e-commerce and unable to obtain other financing, this type of Amazon seller loan may still be an option for you.
Short-Term Small Business Loans
Business financing options can be short or long-term. Short-term small business loans allow faster access to funds and are often much easier to qualify for than traditional long-term loans. These quick business financing options are available online and offer repayment terms of between three and eighteen months.
The speed and ease of application and payout are excellent advantages for borrowers who need quick cash flow for their businesses. But there’s a downside to this convenience: short-term small business loans often have higher interest rates than traditional loans.
SBA Microloan
The Small Business Administration (SBA) is a United States governmental agency. It provides entrepreneurs and small business owners with capital, contracting expertise, and financial counseling. Though provided by SBA-approved lenders, the government partially guarantees them as well.
The SBA microloan program caters specifically to smaller businesses, offering loan amounts up to $50,000. Interest rates on microloans range from 8 to 13%. You may even qualify if you have a low business credit score.
If you are an Amazon seller who does not meet the eligibility requirements for Amazon Lending, an SBA loan may be the solution.
Merchant Cash Advance
With a merchant cash advance, the lender advances your business the cash flow it needs to continue operating. This loan will be repaid with your future revenue.
Merchant cash advances can be used for inventory purchases, shipping costs, or any other expenses related to running your e-commerce business. Therefore, they are a type of working capital financing.
You won’t have stringent repayment terms or penalties for late payments on this type of Amazon seller loan. Repayments come out of your future Amazon sales until the advance is paid in full. No interest is charged on an Amazon merchant cash advance, and no personal collateral is required.
Amazon Lending
Amazon sellers can take advantage of loans exclusive to Amazon sellers using the Amazon Lending program. The program offers various options, including a line of credit., term loans, and a merchant cash advance. If you’re an eligible Amazon seller, this may seem like the obvious answer to your financial woes.
However, you can’t just initiate the application process at will. Amazon loans are accessible by invitation only. If you are new to the e-commerce platform or have not had impressive sales, you may not meet their eligibility criteria.
E-Boost
Applying for financing to grow your e-commerce business can be stressful. You need to take the time to research what’s available and understand your options. Then there are the hurdles you have to jump through to meet lenders’ eligibility requirements. It can become overwhelming.
Fortunately, there’s another option: At E-Boost Partners, we help you get that financial boost you need for better business growth. We make it easy to apply for short-term financing for your e-commerce business.
E-Boost Partners can facilitate working capital arrangements of up to 24 months, offering between $5K-$2M, with automatic daily or weekly payments. Lines of credit and affordable merchant services are also available, to cover all your e-commerce business’ financial needs.
How to Choose, and Use, Funding for Your Amazon Business
An Amazon business loan on the Amazon Lending platform, or any other type of business loan, will provide financing for your e-commerce business. But how can you know which one to choose? And how should you use it to grow your e-commerce business?
Choosing a Lender for Your Amazon Business
For small or medium-sized businesses involved in e-commerce on the Amazon platform, there are several types of Amazon seller loan to consider. If you qualify for an Amazon loan, they may extend an invitation to you. Alternatively, a traditional or alternative lender may be a better option to consider.
This means deciding between banks and credit unions on the one hand, and online lenders on the other. If you have a low credit score or are too new to e-commerce to have a credit history, the latter may be your best option. An SBA microloan could also work for you.
What if you don’t get invited to apply for a loan through Amazon lending, but are unsure of your best way forward? E-Boost Partners make it simple to apply for financing. You’ll enjoy a quick and easy application and approval process, and receive the funds you need, fast.
Using the Funds to Grow Your Amazon Business
Adequate funding is critical for your Amazon business’s success. Here are three reasons why the right financing offer can make all the difference.
Operational Expenses
You can use the funds to cover your day-to-day and operational expenses while you establish yourself as a reputable seller on the Amazon platform.
Inventory Purchases
Selling on Amazon can be lucrative, but highly competitive. The funds can be used for securing the best quality inventory and enough of it to meet demand and customers’ expectations.
Marketing
Regardless of the quality of your products, it’s difficult to stand out from the crowd on the Amazon marketplace. To succeed, you need to market yourself effectively. The funds obtained from an Amazon seller loan can cover marketing costs, giving you a competitive edge.
Conclusion
An Amazon seller loan can take many forms. If you have an e-commerce business that sells exclusively on Amazon, a loan through the Amazon Lending program may be your best bet for financing to grow your business. But if you don’t meet the criteria for Amazon’s invitation-only loans, there are other great options.
At E-Boost Partners, we make it simple for small businesses to apply for e-commerce financing options like working capital loans and lines of credit. Whether you sell on Amazon or any other e-commerce platform, we can help you get the funding you need.
Contact us to start growing your business today.
FAQs
Unfortunately, you must be invited to apply for an Amazon Lending loan, but there are other options available to you as an Amazon seller. E-boost Partners can help you access them.
Yes, you can use a personal loan as an alternative. Unfortunately, personal loans have lower finance options and higher interest rates. If your e-commerce business is new, it won’t have a credit history. However, a good personal credit score can get you approved for a business loan.
Although not technically a loan, a merchant cash advance is a popular alternative Amazon seller loan. The Amazon Lending program offers a merchant cash advance. You can also apply for it with other lenders., but will have to prove that you have enough turnover to pay it back through future sales.
