BlogFinance
ecommerce-business-loans
January 8, 2023
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7
min read
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Written by: 
Nikolaus Hilgenfeldt
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Category:
Finance

The Only Ecommerce Business Loan Guide You Need in 2023

The growth of online shopping has been steadily increasing in recent years. 

Millions of people now buy goods and services online regularly, thanks to the convenience and support businesses can provide.

In addition, it results in the number of new features and services businesses continue to add for online shoppers to provide them with an equivalent in-person experience.

As a result, shopping online is rapidly becoming more like shopping in person than it ever was before.

So, what can you do to make your ecommerce business stand out?

Whether you're just starting or looking to scale up, it's important to have a solid financial foundation. 

Ecommerce business loans are one of the most popular types of loans available today because they offer a fast and easy way to access capital. 

In this article, we'll outline the most common types of ecommerce business loans and provide tips on how to get the best deal for your business.

If you're interested in discovering more about this topic, keep reading!

What Is an Ecommerce Business Loan?

Ecommerce loans can help you cover any costs associated with running an online store, like costly inventory or marketing expenses. 

Unlike other types of business loans, ecommerce business loans don't require you to relinquish any equity in your company.

However, you may need to use personal assets as collateral. 

These loans are a great way to finance business growth and expansion, secure new customers, and purchase new inventory. 

Loan repayment periods vary by lender, but they typically expire within a set time. Therefore, scheduling a repayment plan that works for your business is vital to ensure a successful outcome.

If you need quick and efficient financial help, business loans can be your best source of capital. However, you must repay the loan with interest after a predetermined period.

Who Participates In Ecommerce Financing?

Ecommerce financing involves the following four parties:

  • The Supplier or Seller. Typically, the applicant is the one who asks to use the financing service. 
  • The Ecommerce marketplace platform that serves as a warehouse to store the goods. For example, Alibaba, Amazon, or eBay.
  • The financing platform or a lender. Its job is to act as a source of liquidity by giving the seller a cash advance. 
  • The buyer or the end user that buys products or services from the seller using the ecommerce marketplace platform.
ecommerce-business-loans-guide

Types of Ecommerce Business Loans

1. Term loans

For ecommerce companies, fixed-term business loans are a popular financing option. Companies can receive a lump sum with this sort of loan, with a fixed interest rate for the duration of the loan.

The interest rate depends on how long you've been on the market. Thus if you are just starting your business, the interest rate can be higher. 

Depending on your loan provider, the average APR for fixed-term loans can range from 7% to over 30%.

Also, for this type of ecommerce business loan, you should have a personal guarantee and a good credit score.

They are especially beneficial for companies that invest in specialized areas, such as new inventory or online marketing.

Alternatively, flex loans can be the ideal option for your company if you require smaller amounts to handle frequent cash flow issues. Like credit cards or overdrafts, flex loans let you draw down lesser sums of money as needed. 

You get to choose how long you want to pay back your flex loan over when you withdraw from it. 

The most important thing to keep in mind is that you only pay for the money you really use, and with each repayment, your available amount is replenished. 

That implies that you may withdraw more than once.

In addition, they allow you to select a repayment schedule that suits the particular requirements of your business, unlike fixed-term loans.

Flex loans are best suited for ecommerce companies that want additional assistance with ongoing costs like salaries, stock, or rent. 

Or any other everyday situations, like filling in the gap between delayed invoices, managing an ample supply of products, or paying office bills.

There are also other types of ecommerce business loans, such as:

2. SBA loans 

SBA loans are only applicable to the USA. 

They are offered by affiliate banks, credit unions, and even some online lenders.

SBA loans still have stringent requirements, including the possibility of a personal guarantee or collateral. 

Additionally, some lenders can demand a down payment and impose extra fees that would raise your overall loan costs.

Since these loans require a more involved application process and strong credit history to be eligible, it might take a lot of work to get approved for one.

SBA loans are excellent for companies with good credit and long-term needs.

3. Equipment financing

When a lender gives you the money you need to buy new equipment, they do so through a process known as equipment financing. They then use the latest equipment as security for the loan you are repaying. 

Only businesses requiring equipment purchases to produce the products they sell can use this financing because the loan can't be used for other purposes.

4. Inventory financing

When you employ inventory financing, your lender gives you a loan to buy inventory and uses that inventory as collateral to either lower your interest rate or increase your chances of getting the loan.

Businesses that want to buy stock in bulk before a busy selling season or get a great bargain on inventory may consider inventory finance loans.

ecommerce-business-loans-graph

Do You Need An Ecommerce Business Loan?

The number of ecommerce websites worldwide has doubled since 2021, owing to the COVID-19 epidemic. 

And not only that. How we shop has changed, and it is possible that more and more people will rely on online shopping.

Ecommerce companies must meet consumer demands. So retailers should advance alongside one another in order to succeed in the increasingly dynamic ecommerce market.

Simply put, a will to succeed is not enough. 

An ecommerce business loan can help you to cover numerous costs – from dropshipping, manufacturing products, managing salaries, marketing costs, etc.

Is an Ecommerce business loan the right thing for you?

Take a look at the checklist below, and if you can check more than one box, consider taking the loan:

  • More cash flow is needed to cover basic operating expenses.
  • You don't have enough money for pricey equipment that aids product production.
  • Meeting advertising costs, especially during peak season, such as major holidays, is necessary.
  • Managing and expanding your business team for added efficiency and profitability.
  • Emergency resources for various unexpected situations, like natural catastrophes.

Before deciding on taking an ecommerce business loan, consider the following:

  • Find a loan option that fits your needs. 
  • Figure out the amount of money you need and can expect from the lender.
  • Make sure that you are comfortable with the repaying schedule and the interest rate. It's better if you could find a flexible paying plan so you don't have to worry about the low-income months.
  • Consider the time it takes for the ecommerce business loan application - from start to finish.
  • Ensure that customer service is available for any of your questions.
ideal-ecommerce-business-loans-graph

Each ecommerce loan has a unique set of repayment terms, interest rates, and financial criteria. So it's necessary to do your research and comprehend everything you agree to.

You'll have the best chance of choosing the ideal ecommerce loan if you have a clear idea of how much money you need and how you'll spend it.

Also, prepare your credit report, financial accounts, and other assets you may have on hand to use as collateral, if necessary, before applying for an ecommerce business loan. 

Benefits of Using Ecommerce Loans

Let's summarize the key points of ecommerce loans that you can benefit from:

  • Additional cash flow for marketing and inventory, especially during high season.
  • To cover ongoing costs, such as salaries, software, or rent.
  • Keep track of platform and processing costs.
  • Expand your team.
  • To pay off existing debts.
  • Fast and easy loan application without unnecessary paperwork.

Wrapping it up

There is no one perfect choice for ecommerce business loans. The best option depends on how much money you require, how quickly, and how much it will cost.

But one thing is sure – no one has time for extensive paperwork and lengthy application processes with uncertain outcomes when running a business.

So, why not give Myos asset funding a go?

With this ecommerce business loan, you can get between 10,000 and 2,500,000 euros for your online store. Asset-based working capital financing has different advantages:

  • No fixed expenses,
  • No personal guarantees,
  • Flexible payback at any moment.
  • Free usage.

Myos allows you to place more orders and expand quickly while keeping your customers satisfied and coming back. 

With our help, vendors can place larger orders, introduce new items, or spend money on marketing, boosting their revenue and earnings. 

With goods as collateral, no risks are involved, and no assurances are made. In addition, the payback schedule is flexible.

For example, if you generate sales, you only pay when you need the money.

Depending on your needs, you can choose among three plans:

  • Purchase finance for financing your future orders.
  • Stock finance that uses your inventory as collateral.
  • Cross-finance for immediate cash while waiting for a delayed payment from customers.

There are three steps in the financing process:

1. Apply – Send a financing request based on one or more best-selling products.

2. Get paid – While Myos pays you or the supplier the financing money, negotiate with the supplier or use his goods.

3. Sell - A portion of the items is put up for sale immediately. You have the freedom to repay the initial installment and purchase more things when you have the first revenue.

process-of-financing-business-loans-myos

We offer working capital loans ranging from £100,000 to £2,500,000 with a monthly cost of 1% to 3% of the total amount borrowed.

Our method, based on AI and machine learning, enables us to assess the product data and calculate the financing volume without needing further credit checks from you.

example-of-a-financing-process-myos

And lastly, Myos offers transparent pricing, so you can immediately see what your ecommerce business loan looks like, with no hidden fees!

Has it got you interested?

Then, join Myos today and start growing your business fast, secure, and trouble-free.

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