BlogFinance
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4
min read
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Written by: 
Nikolaus Hilgenfeldt
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Category:
Finance

Five Ways to Use Working Capital Financing

E-commerce businesses commonly secure working capital financing as a way to take advantage of growth opportunities and scale up operations–without needing to rely on the cash flow from their own business.

No matter the financing option that an online seller secures, there are a few main ways that merchants will leverage these funds in their business.

Continue reading as we discuss the common uses of working capital financing for e-commerce stores. 

1. Order more inventory

As your store gains popularity and new customers, you will see an increase in orders. To meet the increasing demand, your first step will be to purchase more inventory to avoid running out of stock. Very often, however, sellers do not have enough cash for the initial payment on a bigger order—this is where the working capital loans come into play.

Instead of taking the money from your cash flow, you can get funding from external sources to invest in inventory purchases. Depending on your provider, they can give working capital to you as a business owner or pay for the order directly to your supplier or manufacturer. This way, you don’t have to put a strain on your business funds and still grow your store and keep your stock full.

2. Expand Product Lines & Enter New Markets

Product innovation is a great way for e-commerce businesses to grow their companies. However, performing the research and development in-house or acquiring adjacent businesses to expand product lines requires quite a bit of capital.

With external financing, online sellers can take the time to do the proper market research, testing, and development of a product that holds real potential. Then, once the new products hit the market, the merchant will be able to easily pay back the financing over time with a portion of the increased sales.

Plus, with a more diversified product line, e-commerce stores are better equipped to endure market volatility, consumer preference shifts, and supply chain headwinds. 

3. Hire Personnel

Another way that e-commerce stores can use working capital financing to grow their business is by ramping up hiring efforts.

Without external financing, it is very challenging for early-stage businesses to bring on qualified personnel that will add value to operations. However, this is a crucial part of business expansion as the owner has increasing delegation needs and can no longer accomplish all tasks effectively on their own.

Thus, working capital financing can help e-commerce stores cover payroll needs and attract talent with adequate compensation. With a larger workforce, the idea is that the business will have more manpower working to expand the business and take it to the next level.

This can also mean the company hires external consultants or experts on a particular business matter rather than making a full-time hire. Either way, working capital financing allows e-commerce stores to leverage professionals’ expertise to propel their business forward. 

4. Marketing Costs

Businesses can invest in their marketing as a way to continue growing their business and acquire new customers. 

During the earlier stages when cash flow is tight, e-commerce stores may lack the resources needed to fund marketing efforts. With a cash injection from working capital financing, online sellers can become more aggressive with their marketing efforts, including social media ads, podcast promotions, influencer marketing, and more. 

Plus, working capital financing gives them the space to test out different channels, and really refine their brand voice. The more you get your business name and products out there, you can stay top of mind with potential customers and earn future sales. 

As they say, “it takes money to make money”. 

5. Invest in Software and Technology

A key way that modern businesses identify growth opportunities and take advantage of favorable market conditions is by monitoring key business data and market insights with dedicated software programs. 

So, sometimes the difference between one e-commerce store and another, and how quickly they expand, is how easy it is for them to access business intel.

There are many ways that investing in better software and technology can help online sellers grow their stores. For one, it can help them better track inventory levels and identify when they need to re-order in time to avoid a customer favorite being out of stock.

Plus, some programs can monitor market trends and help sellers identify markets or products that have growth potential. All in all, having updated technology and software systems will help businesses over the long-term and allow them to make informed business decisions. 

Secure Asset-Based Working Capital with Myos

No matter what your small business needs cash for, a quick and low-risk way to access funds is through asset-based financing.

Many e-commerce stores don’t have the business history, official documentation, or credit to qualify for traditional financing options. Therefore, alternative funding sources like asset-based financing are growing in popularity as the global e-commerce industry continues to expand and show a demand for funding.

Plus, when working with a provider like Myos, merchants don’t have to take on the personal guarantee; rather, they’ll share the risk with Myos. So with lean document requirements, flexible repayment plans, no annuities, and minimal business history requirements, asset-based financing through Myos is a straightforward and simple solution to merchants’ working capital needs.

Buy new inventory, expand to new markets or boost your ads with asset-based financing from Myos.

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