February 27, 2023
min read
Written by: 
Nikolaus Hilgenfeldt

How to Finance Ecommerce Business - The Ultimate Guide

Ecommerce is a growing industry across the globe — from 2021 to 2028, online retail is expected to grow at a CAGR (compound annual growth rate) of 14.6%.

However, a lack of capital is often a limiting factor for online retailers who would like to expand their operations to meet this growing demand.

So, what are the main financing options available to ecommerce businesses?

Most importantly, how do you know which loan option is best for you and your company? 

Read on for more information about how to finance an ecommerce business, including some of the most common financing options available today.

Plus, we’ll provide you with the advantages and disadvantages of each route, helping you to decide on the right funding source.

Let’s get started!

What Is Ecommerce Financing?

Ecommerce financing provides merchants with the money they need to get started or continue growing their businesses. 

Financing is available from a number of sources, each covering ecommerce business needs based on its niche, the products it sells, and the overall growth strategy. 

Thus, you may need to use various funding strategies, depending on the company's current maturity and anticipated rate of expansion.

In particular, with the help of outside financing, ecommerce businesses can:

  • Broaden their product offerings
  • Enter new markets
  • Increase their workforce size
  • Boost their marketing and advertising efforts

How Does Financing for Ecommerce Work?

Given that there are different financing options available to ecommerce businesses, each route comes with its own terms, repayment schedule, and other financial considerations. 

Oftentimes, informal methods like receiving funding from friends and family or bootstrapping the operations yourself will not require any loss of equity or repayment. 

But still, you need to make the agreement clear to all parties involved before accepting any payments.

As we will discuss in more detail below, many financing options will require you to give up shares of your company in exchange, like crowdfunding or equity investing. 

On the other hand, revenue-based financing and bank loans will ask for repayment plus interest over a certain period of time.

Thus, it’s highly important for online sellers to weigh all the options in front of them to see what’s a good fit for both their current situation and future projections of the business. 

Let's see what terms you can expect from the various financing choices we've provided below.

How to Finance Ecommerce Business — Top 10 Options to Consider In 2023

Online sellers have a range of financing options available to them, though each route comes with its own benefits and drawbacks.

Here you can find the top 10 options on how to finance your ecommerce business.

Let’s dive in!

1. Asset-Based Lending

Asset-based lending is an appealing financing option for many ecommerce businesses, as it provides quick access to cash with minimal downside risk for merchants.

The assets you're buying will be used as collateral by the lenders.

This takes away a lot of the risk and requirements that come with other types of business financing.

So, rather than reviewing the track record of the business or monitoring its past performance, lenders can approve loans based on the assets they possess.


Different asset-based lenders may have their own qualifications and requirements for how they approve funding, but it's usually a flexible way for ecommerce businesses to get the money they need.

Pros of Asset-based Lending

✔️ Easier to access than bank loans.

✔️ Typically have lower interest rates than other methods of financing.

✔️ Secure assets like inventory without paying outright for it.

Cons of Asset-based Lending

⛔ Assets are held as collateral by the lenders.

⛔ Assets could be repossessed if you fail to make repayments.

2. Revenue-Based Financing 

One of the main options ecommerce sellers have to access working capital is through a revenue-share agreement based on a percentage

This is a very common way for merchants to get money, since they can get a lot of money in a short amount of time.

As repayment, merchants provide lenders with a predetermined percentage of their profits, typically 5-25%, until the loan is fully repaid.


Lenders may evaluate ecommerce businesses based on a number of factors like Stripe payments or Facebook Ads performance. 

However, each lender will set its own requirements, which are typically more flexible than financing options such as bank loans or venture capital. 

Pros of Revenue-based Financing

✔️ No formal pitch deck or business plan required.

✔️ No credit score requirements.

✔️ Monthly payments are proportional to business growth.

Cons of Revenue-based Financing

⛔ Slower growth leads to a longer repayment period.

3. Lines of Credit

Another financing option for online sellers is to open up a line of credit. 

This method is commonly used by ecommerce stores because it allows businesses to access cash with (typically) no limits to what you can use the funds from a line of credit on. 

Upon approval, online sellers will have access to a certain limit of funds, which can range anywhere from a few thousand dollars to upwards of $1,000,000.


Lines of credit work similarly to credit cards, in that you can draw down on the funds as needed, and will only repay the portion of the approved funds that were actually utilized.  

Pros of Lines of Credit

✔️ Interest-only payments during the draw period (~10 years).

✔️ Only pay interest on the portion of funds utilized.

Cons of Lines of Credit

⛔ Strict requirements from banks to qualify.

⛔ Difficult to increase your credit limit.

4. Merchant Cash Advance

A merchant cash advance (MCA) is a commonly used financing method in the hospitality and restaurant industry.

With this method, lenders can give you a cash advance for up to a 6 month period. Merchants are usually able to get anywhere from $5,000 to $500,000 with this kind of financing

They can use this money to keep their inventory stocked, invest in marketing, or do anything else that will help their business grow.


For repayment, MCA providers will deduct a percentage amount from every credit card payment the online store receives. 

Essentially, these lenders are purchasing your future sales from your ecommerce business.

Pros of Merchant Cash Advance

✔️ Immediate access to cash for short-term spending needs.

✔️ Repayment amounts are proportional to revenue.

✔️ Flexible qualification requirements.

Cons of Merchant Cash Advance

⛔ Repayment method could pinch cash flow levels.

⛔ May charge additional fees for origination, maintenance, etc.

⛔ Short-term solution.

5. Bank Loan

A traditional method for securing funding is to apply for a business loan from a bank. 

Thus, this may be one of the first ideas that online sellers have in mind when they’re looking for external financing.

Even still, getting a bank loan requires merchants to undergo a formal application and underwriting process. 


And even though banks are usually risk-free, they will have strict application requirements and may not be willing to lend money to startups or new businesses with a short credit history.

Furthermore, even if you are able to secure funding, the amount they’ll approve for an early-stage business may be much lower than what ecommerce businesses need to fund their operations.

Pros of Bank Loan

✔️ Flexible use of funding.

✔️ Lower interest rates than other options.

Cons of Bank Loan

⛔ Rigid application requirements.

⛔ Will require a business plan and cash flow projections.

⛔ Typically won't provide access to large sums of cash.

6. Equity Investors

Once ecommerce businesses hit a certain growth level, many will secure equity financing. 

While there are a number of different types of equity funding, in general, it is a financing option that gives merchants access to a large sum of cash

Thus, equity investing is a method that provides ecommerce stores with a sizable cash injection in exchange for business equity


Plus, the funding comes from equity investors, who are typically industry experts who have had previous success expanding businesses like yours.

So, when merchants receive funding from equity investors, they’re accessing their personal network, knowledge, expertise, and cash all in one. 

Common examples of equity financing include venture capital or angel investors

Pros of Equity Investors

✔️ Access to large sums of cash

✔️ Direct access to experienced investors

Cons of Equity Investors

⛔ Must give up some control and a portion of your business.

⛔ Investors are heavily involved in your operations.

⛔ Many will require a detailed business plan with financial metric forecasts.

7. Crowdfunding

Crowdfunding is a method of business funding that’s been growing in popularity recently. 

It is a popular option among start-ups and businesses in the earlier stages because their owners can quickly and easily raise anywhere from a few thousand to a couple million dollars.

Businesses that choose this route will get small amounts of funding from a lot of public investors who want to support businesses that interest them or that they believe in.

And because crowdfunding is a flexible financing option, businesses can decide how to use the money they receive.


Even still, crowdfunding investors will receive a small portion of your business in exchange, which is similar to equity investing. 

However, the shares of the business that these investors hold are minimal so they generally won't play a role in business decisions or how you choose to operate. 

Pros of Crowdfunding

✔️ Investors won’t influence your business.

✔️ Quick access to cash.

✔️ Can grow public awareness of your business.

Cons of Crowdfunding

⛔ Large competition among businesses seeking crowdfunding.

⛔ May need to invest in marketing to see meaningful crowdfunding results.

8. Grants

Some entrepreneurs may consider government grants as a way to access free forms of funding. However, most start-up ecommerce businesses will not qualify for these grants, and the ones that are available will be highly competitive.

What’s more, any grants do not provide very sizable funds, so it may not be worthwhile for many online retailers seeking access to large sums of cash rapidly.

Additionally, grant recipients might be required to adhere to conditions in the future, including operating in specific areas and doing a specific amount of business with specified companies. 

Pros of Grants

✔️ Don’t need to be repaid.

✔️ Don’t give up any portion or control of your business.

Cons of Grants

⛔ Qualifications can be very niche.

⛔ Don’t provide large sums of money.

⛔ Can be highly competitive.

9. Bank Overdrafts

One easily-accessible method for financing is a bank overdraft. 

Before the institution approves this financing option, it is necessary for merchants to have a solid history with their bank, typically for a few months.

Although merchants typically won't be able to access amounts large enough to invest in new product lines or expand their business, it is a good method to use for managing short-term cash flow and expenses.


To access this funding, ecommerce sellers will pay a small fee to the bank each year to access their own line of credit linked to their account. 

Banks will typically examine your turnover to determine the limit, so amounts available with this method could vary from business to business. 

Pros of Bank Overdrafts

✔️ Flexible access to cash at any time

✔️ Good for short-term cash flow issues

✔️ Only overdraft what you need

Cons of Bank Overdrafts

⛔ Available at the discretion of the bank, so may not always be reliable.

⛔ Doesn’t provide access to large sums of money.

10. Invoice Financing 

Today, there are many ecommerce businesses that are based on Amazon or other platforms to sell their products.

These services will promote your business to their massive user base, but they will take a cut of your revenue at checkout.

However, they will often hold up your money for up to 60 days, keeping you from accessing valuable cash to pay employees or purchase new stock.

Invoice financing can help these retailers get their hands on the money they need right away by purchasing outstanding invoices from business owners.

Many lenders will advance up to 85-95% of the outstanding receivables, providing merchants with access to much-needed liquidity for funding operations and meeting short-term expense needs.


When the platform releases the money from your sales to you, you keep the remaining amount after deducting any fees you owe the financing company.

Pros of Invoice Financing

✔️ Less risky for all parties

✔️ Gives businesses fast access to cash

✔️ Doesn’t put the business in long-term debt

Cons of Invoice Financing

⛔ Will need to pay fees to the financier

⛔ If you don’t get the funds from the platform, you’ll still owe the financing company

⛔ May need to put up collateral

Now that you are aware of your options, let’s check how to choose the right financing option for your ecommerce business.

How to Choose the Right Financing Option For Your Ecommerce Business

Financing your online storefront properly can make or break your business.

To choose the right financing option for your ecommerce business, you should consider these factors:

🎯 Identify your financing needs — Determine how much and why you need financing before looking for options. Are you looking for short-term or long-term capital? Know your needs to choose the right financing.

🎯 Determine how reliable you are as a borrower — Most financing options require good credit and financial history. Check your credit score, financial statements, and debt.

🎯 Research available options — Once you have an accurate picture of your company's cash flow, you can evaluate your options and choose the one that will serve your company best.

🎯 Compare interest rates and fees — Interest and fees vary by financing option. Compare prices to get the best deal.

🎯 Consider the repayment terms — Some loans require regular payments, while others require a lump sum payment at the end. Understand the repayment terms before choosing a financing option.

🎯 Get professional advice — Before deciding, consult accountants or financial advisors. They can help you choose the best business financing option.

Following these guidelines will allow you to make a calculated choice that will have a positive impact on your company's success.

Or, consider some tried and true methods, such as asset based funding with Myos, if you are still unsure of how to finance your ecommerce business.

Secure Asset-Based Funding with Myos

Among all the financing options available to ecommerce merchants, few offer as many benefits with limited downsides like asset-based lending. 

This method allows businesses with a shorter-than-usual track record to get the funding they need quickly.

Myos is one of these growth partners who can assist you in expanding your business with zero risk and only the use of your assets as collateral.

What Does Myos Offer?

To help you get your business off the ground and running, Myos offers two distinct types of asset-based financing:

1️. Purchase financing allows you to make upcoming acquisitions without worrying about how to come up with the cash.


2️. By using stock financing, you can reinvest in your business through the purchase of additional shares of stock.


Myos employs AI and ML to evaluate the value of your stock and the consequent loan amount.

Therefore, it can use your stock in an undisclosed amount as collateral without worrying about losing any money.

To apply for a loan with Myos, you need to fill out their 3-step application form:

Step #1 — Decide what kind of loan you want to get.

Step #2 — Upload sales data or manually enter financing products into the app.

Step #3 — Enter your billing details and confirm the application request.

Possible Advantages of Myos Treatment?

👍 Assets only as collateral.

👍 No personal guarantees.

👍 Provides access to €10,000-2,5,000,000.

👍 Applications are typically reviewed within 48-72 hours

👍 The repayment terms can be adjusted up to 24 months.

Do You Qualify To Apply for a Loan?

The following conditions must be met in order to receive financial support from Myos:

✔️ Your business is based in one of these five countries: Germany, Austria, Cyprus, Estonia, or the UK (UK).

✔️ Your ecommerce business is operational for at least 6 months.

✔️ It has been at least 50 days since your company began selling products.

Have you had enough of the inflexible repayment plans and mountains of paperwork?

Get your non-binding offer to start growing your ecommerce business with Myos starting today.

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How Does Ecommerce Financing Work?

With the help of ecommerce financing, consumers can make purchases without having to come up with the full price of the item or service right away. 

For instance, instead of making one large payment to the retailer, the shopper makes several smaller payments over time, typically at a discount

The shopper makes the initial purchase, and the financing company reimburses them in full, plus any interest or fees, at a later date. 

If the consumer is unable to make payments, the financing company is on the hook. 

Payment to the merchant may be made immediately or delayed until the customer pays off the balance, depending on the terms of the financing agreement.

How Can I Finance a Business With No Money?

Obtaining startup capital when you have none is a tall order but not impossible. Some approaches to thinking about are as follows:

1. Crowdfunding — Raise money from a large number of small investors by utilizing crowdfunding platforms like Kickstarter or Indiegogo.

2. Loans — If you need a loan but have bad credit, you may be able to qualify for a loan with alternative lenders like online or peer-to-peer lenders.

3. Partnership — Look for an investor who will provide capital, resources, or expertise in exchange for a percentage of the company.

4. Angel Investors — Find angel investors who are willing to put up money for the company in exchange for some ownership.

5. Venture Capital — Get funding from investors willing to put their money into a company in the hopes of seeing it grow in exchange for a share of ownership.

To find out more on this topic, look at our article 3 Tips to Start an Ecommerce Business with No Money in 2023.

What are the Best Sources of Funding?

If you need capital for your business, you can pick from one of the 10 methods we've outlined here. 

However, asset-based lending stands out as the best option for businesses in need of financing because it provides a quick, low-interest, and immediate capital boost.

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