min read
Written by: 
Nikolaus Hilgenfeldt

The Ultimate Guide to Securing Financing for an E-Commerce Business

E-commerce is a growing industry across the globe—currently, 77% of the population buys goods online, with further growth expected in the coming years as larger legacy brands and malls turn to this convenient and customer-friendly model.

For online sellers looking to grow their operations to keep up with this rising demand, oftentimes the limitations they face have to do with a lack of funding. So what are the main financing options available to e-commerce businesses, and how can you select the loan option that’s right for you and your business? 

Continue reading through this guide as we break down how e-commerce businesses can go about securing funding, including some of the main financing options available to them. Plus, we’ll provide you with the advantages and disadvantages of each route, helping you to decide on the right funding source.   

What Is Financing for E-Commerce?

Before we dive deeper into the common financing options for e-commerce businesses, let’s discuss why they require funding in the first place.

E-commerce funding provides merchants with the money they require to get started or continue growing their businesses. Specifically, receiving external funding gives them the opportunity to expand product lines, enter new markets, grow their workforce, and invest in marketing efforts, among other working capital uses. Read this article to learn more about the ways working capital can support your business.

Financing is available from a number of sources both traditional and alternative, like banks, government grants, angel investors, crowdfunding, friends and family, personal savings, and more.  

Each e-commerce business will have different funding needs based on its niche, the products it sells, and the overall growth strategy. Thus, they may require different funding methods based on their current stage of development and how quickly they plan on growing. 

How Does Financing for E-Commerce Work?

Given that there are different financing options available to e-commerce businesses, each route comes with its own terms, repayment schedule, and other financial considerations. If you are new to the world of working capital financing, we have an article where we break down the main industry terms to guide you—check it out!

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

The Different Financing Options Available for E-Commerce Businesses

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

Click here for a full guide to all e-commerce financing options, though you can continue reading below as we briefly explore each of them. 

Revenue-Based Financing 

One of the main options e-commerce sellers have to access working capital is through a revenue-share agreement based on a percentage. This is a very common route pursued by merchants, as they can access a sizable portion of funds in a relatively short time frame. 

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

Lenders may evaluate e-commerce 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 other financing options like bank loans or venture capital. 


  • No formal pitch deck or business plan required
  • No credit score requirements
  • Monthly payments are proportional to business growth


  • Slower growth leads to a longer repayment period

Lines of Credit

Another financing option for online sellers is to open up a line of credit. This is commonly used by e-commerce stores and allows businesses to access cash as needed. There are typically no limits to what you can use the funds from a line of credit on, so it’s a flexible financing option for merchants. 

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.  


  • Interest-only payments during the draw period, ~10 years
  • Only pay interest on the portion of funds utilized


  • Strict requirements from banks to qualify
  • Difficult to increase your credit limit

Merchant Cash Advance

Some sellers may secure funding through a merchant cash advance (MCA). This is commonly used in the hospitality and restaurant industry, though many e-commerce sellers can also take advantage of this financing option.

With this method, lenders will give borrowers a cash advance for up to a six-month period. Borrowers will typically be able to access between $5,000 to $500,000, which online sellers can use to keep inventory levels up, invest in marketing, or a number of other uses to help propel their business forward.

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 e-commerce business. 


  • Immediate access to cash for short-term spending needs
  • Repayment amounts proportionate to revenue
  • Flexible qualification requirements


  • Repayment method could pinch cash flow levels
  • May charge additional fees for origination, maintenance, etc.
  • Short-term solution

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 when they’re looking for external financing.

Even still, getting a bank loan will require merchants to undergo a formal application and underwriting process. Banks typically are risk-averse institutions, meaning they’ll have strict application requirements and may not be willing to lend to newer businesses with a short track record of being in operations.

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


  • Flexible use of funding
  • Lower interest rates than other options


  • Rigid application requirements
  • Will require a business plan and cash flow projections
  • Typically won't provide access to large sums of cash

Equity Investors

Once e-commerce 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 e-commerce stores with a sizable cash injection in exchange for business equity. 

Plus, cash isn’t the only benefit to e-commerce stores receiving equity funding. Equity investors providing the funding are typically experts in their field and have experienced a certain level of success in growing companies of similar nature.

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. 


  • Access to large sums of cash
  • Direct access to experienced 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


Crowdfunding is a source of business funding that’s been growing in popularity recently. More companies than ever are taking advantage of crowdfunding platforms to raise money for their operations. 

Specifically, crowdfunding is a popular option among start-ups and businesses in the earlier stages. They can access a wide range of funding from a few thousand dollars to a couple million in a relatively short period of time. 

When taking this route, businesses will receive small amounts of funding from a large number of public investors who want to back companies that interest them or they believe in. This is a flexible financing option, and merchants can choose to do whatever they wish with the funds they receive.

Even still, crowdfunding investors 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. 


  • Investors won’t influence your business
  • Quick access to cash
  • Can grow public awareness of your business


  • Large competition among businesses seeking crowdfunding
  • May need to invest in marketing to see meaningful crowdfunding results


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

In addition, the funds that are provided through many grants are not very sizable, so it may not be a worthwhile pursuit for many e-commerce businesses looking to access large sums of cash quickly.

Plus, grant recipients may be liable to meet certain stipulations in the following periods, like doing a certain percentage of their business with named entities, operating in certain regions, and more. 


  • Don’t need to be repaid
  • Don’t give up any portion or control of your business


  • Qualifications can be very niche
  • Doesn’t provide large sums of money
  • Can be highly competitive

Bank Overdrafts

One easily-accessible method for financing is a bank overdraft. This will require merchants to have a good track record with their bank, usually for a few months, before this will be granted by the institution.

These are good to use for short-term cash flow and expense management, though merchants typically won’t be able to access sums large enough to invest in new product lines or expand their business.

To access this funding, e-commerce 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. 


  • Flexible access to cash at any time
  • Good for short-term cash flow issues
  • Only overdraft what you need


  • Available at the discretion of the bank, so may not always be reliable
  • Doesn’t provide access to large sums of money

Invoice Financing 

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

These platforms will allow you to be exposed to their millions of users, in exchange for a small transaction charge on each sale for being housed on their site. 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.

Thus, invoice financing can come into play for these merchants. Invoice financing allows business owners to sell their pending invoices in order to access these funds immediately. Many lenders will advance up to 85-95% of the pending receivables, depending on a number of factors. Therefore, merchants will be able to use this cash to fund operations and meet short-term expense needs.

Once the funds from your sales are released by the platform, you will keep the remainder minus any fees you owe the financing company. 


  • Less risky for all parties
  • Gives businesses fast access to cash
  • Doesn’t put the business in long-term debt


  • 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

Asset-Based Lending

Lastly, let’s take a look at asset-based lending. This is an appealing financing option for many e-commerce businesses, as it provides quick access to cash with minimal downside risk for merchants.

Asset-based lending is a form of business loan for online sellers. The lenders will use the assets you’re purchasing as collateral, taking away much of the risk and qualifications associated with other types of business financing.

So, rather than reviewing the track record of the business or monitoring its past performance, lenders can approve merchants for these business loans based on the assets they possess, which will be unsold inventory or stock for most e-commerce businesses.

Different asset-based lenders may have their own qualifications and requirements for how they approve funding, though it’s generally a flexible way for e-commerce businesses to access the funding they need. 


  • 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


  • Assets are held as collateral by the lenders
  • Assets could be repossessed if you fail to make repayments

Looking for ways to fund an Amazon store? Check out this guide to see other options for you.

How to Choose the Financing Option That’s Right for Your E-Commerce Business

Considering all the financing options available, how can e-commerce sellers choose the option that’s the right fit for them? Let’s go over some of the main considerations e-commerce sellers should make as they evaluate the available options. 

How Quickly the Funds Are Needed

One of the first things to keep in mind when considering these financing options is how quickly you’ll need access to the requested funds. 

If your online business needs to meet short-term expense liabilities or cash flow needs, you may not have the time to go through the process of applying for a business loan, line of credit, or government grant and waiting for approval.

So, consider the turnaround times for receiving funding with the above options. Some of the routes that will provide you with quick access to funds include: 

  • Merchant cash advance
  • Invoice financing
  • Bank overdrafts
  • Revenue share
  • Asset-based financing

Amount of Funding

Additionally, another point to keep in mind is how much funding your e-commerce business is after. Again, if you’re looking to meet near-term spending needs, you may pursue different funding options compared to if you’re trying to fund a product line or business expansion.

For e-commerce companies looking to fuel their growth with large sums of money, the following financing options can be a good fit: 

  • Revenue share
  • Merchant cash advance
  • Lines of credit 
  • Equity investing
  • Asset-based financing

Length of Business History

Each method of e-commerce financing will come with its own set of requirements and qualifications. One of the main criteria for the traditional forms of business financing is the length of business history.

In many cases, formal lenders like banks and equity investors are looking for a positive track record from a business before they will lend it money. Logically this makes sense, as they are at risk of giving a business money that they won’t be able to repay. So, many times these lenders will depend on a year or two of records that the business is already self-sufficient and making enough money to repay any potential new debts.

However, in today’s modern markets, this isn’t always the best indicator that a business will thrive. Because of this, many forward-think financing solutions that have grown in popularity recently will have flexible requirements when it comes to the business history they want to see from applicants.

Some of the financing options that are open to businesses with limited business history include: 

  • Revenue share
  • Merchant cash advance
  • Crowdfunding
  • Invoice financing
  • Asset-based financing

Documentation Requirements

On a similar note, many traditional lenders will also want to see a detailed business plan and cash flow projections from applicants. This is for many of the reasons that we listed above, as lenders will want to hedge their bets and only invest in businesses that they see have a good path forward to growth and will be able to repay the investment.

Many e-commerce businesses today that have a solid track record with selling goods but need to access funding a few months in to further their business development or invest in inventory may be denied by these traditional institutions. Plus, it takes a lot of time and business expertise to be able to craft a business plan that banks or equity investors will deem worthy of an investment.

In any case, there are financing options for e-commerce businesses that don’t require detailed documentation, like: 

  • Revenue share
  • Merchant cash advance
  • Crowdfunding
  • Invoice financing
  • Asset-based financing

Repayment Methods

Lastly, merchants looking for external funding should consider the repayment methods that are associated with each financing method. While some routes, like government grants, don’t require any repayment, other methods will require e-commerce businesses to give up control and equity of their company in exchange for a sizable cash injection.

Even still, financing options with more traditional repayment terms include lines of credit and bank loans, whereas other methods like invoice financing, asset-based financing, merchant cash advances, and revenue share will all base repayment on the sales levels generated by the business. 

Secure Asset-Based Funding with Myos

Among all the financing options available to e-commerce merchants, few offer as many benefits with limited downside like asset-based flending. When utilizing this method, businesses with limited business history requirements can be approved and access the funding they need–and quickly.

Especially when it comes to selling online, the industry moves quickly. So, e-commerce businesses don’t have the time to sit around waiting for the right government grant to appear, or to undergo the underwriting process of receiving a bank loan. With asset-based financing, you can apply in five minutes with lean document requirements, making it accessible for many businesses in the earlier stages. Plus, you’re not giving up any of the control you have over your business as you would do when receiving equity financing. 

All in all, when working with Myos, online sellers benefit from flexible repayment plans, lean document requirements, and limited business history qualifications. There’s no personal risk on your end with asset-based financing, so check out the financing option that will provide you with all the upside of being an e-commerce entrepreneur, without the downside.

Let you products fund your growth today with Myos asset-based financing.

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