After the rapid growth of the e-commerce sector in the country, every business owner must make an effort to stand out. Capital is the primary aspect that decides your initial growth here. It is why most businesses depend on e-commerce funding to optimise the bottom line. Funding helps when you need new equipment or more funds to finance the existing project. The blog discusses how your e-commerce business may benefit from funding.
What does e-commerce funding imply?
E-commerce funding is financial assistance provided by investors, venture capitalists and other ways for the business to grow. The funds business owners receive from funding can help buy machinery, inventory management and other business expenses. The purpose of e-commerce funding is to help businesses with immediate and long-term business requirements and needs.
It is the reason there exist multiple ways to finance your e-commerce business. The most popular of them are small business loans. These loans help start-ups and early-stage businesses secure funding for their regular business needs.
However, there are other funding sources to finance the business needs, let’s first know how they may benefit your business.
How does e-commerce funding help your business scale?
Every business has its share of challenges- gaining an edge over competitors, struggles in converting more prospects or limitations to investing in an advanced setup. However, with the right e-commerce funding, you can scale without limitations. Here is how the funding helps an e-commerce business:
- Power up advertising to increase conversions
Sufficient e-commerce financing helps you optimise the advertising structure. It enables you to invest a good portion in marketing to attract the right audience and increase conversions.
- Leverage advanced technology to boost sales
Sales are a critical aspect of any e-commerce business. If you have been recording negligible sales for a long, optimise the process. You need advanced technology and software setup to grow. E-commerce financing helps you rationalise that.
- Expand into a new audience segment
If you want to expand your offerings but money constraints make it challenging, finance your goals. You can use it to grow and invest in appealing to new audience segments or launching a new trail of products.
5 Funding options to scale your e-commerce business
As mentioned above, starting an e-commerce business and maintaining it requires constant cash flow. However, with too many engagements, business struggles to accumulate sufficient cash flow to meet business needs. Here, some e-commerce business financing options may help achieve the goal.
- Small Business loans
These loans are for businesses at an early stage like startups and small e-commerce businesses needing quick cash injection for business needs. Business owners can use e-commerce small business loans to start their business, invest in equipment and technology, or purchase another business. Usually, a firm having turnover of about £1-£3 million can get up to £50000 for their needs. You can either get secured or unsecured small business finance depending on your needs.
- Approaching angel investors
Angel investors are high net-worth individuals who put their expertise and invest in a business out of will. They help the firm grow by leveraging years of expertise in a particular industry or niche. It may be an ideal arrangement for start-ups with a good product but limited capital.
The investors demand equity in the company for funding. You do not need to repay the funds here like in small business loans. However, equity dilution may impact your control of business decisions.
- Venture capitalists
Venture capitalists invest in a company with solely profit intention. They usually want to be a member of your company’s boards of directors. However, just like investors, you do not need to return their money. They usually offer a higher sum than angel investors for business growth.
Venture capitalists provide strategic support to facilitate the company’s growth. They do so by providing you exposure or opportunity to connect with the capitalist network. Moreover, you may receive free mentoring and consulting services here.
However, pitching to venture capitalists may be tiresome. Sometimes, it takes years to get funding through this route. On the other hand, huge funding amounts and network support make venture capitalists an attractive route to finance needs.
- Revenue-based funding
Revenue-based funding, as the name symbolises, helps the start-ups get the funds according to the revenue. A company can get up to £5000,000 in 24 hours. Under this, the lender demands 5-25% of your revenue, depending on the business risk, as a repayment until you pay the loan.
One advantage of this setting is–you do not need any business plan or a pitch deck to qualify or apply. They only need access to some applications you use for business, like- Facebook, Shopify or accounting software. Businesses with good cash flow may find this arrangement well.
- Merchant cash advance
Ideal for hospitals and restaurants, merchant cash advance provides advance clients with up to 6 months of credit. Debit card turnover must be £5000-£500,000. Here, the loan provider deducts 15% every day from your debit or credit card receipts.
The primary advantage of this setting type is- that you get the money quickly with the flexibility to use the money according to your will.
The downside of this setting is the costs. It may prove costlier than revenue-based funding and small business loans. For example, a merchant cash advance may cost you 30-40% more of what you borrow. Interest rates and other fees remain capped in business loans for small businesses in the UK. It ensures that you borrow only what you can comfortably pay back. Thus, it is an ideal arrangement for businesses with constant but limited cash flow needing quick money for operational needs.
Bottom line
This is how e-commerce funding may help your business thrive and succeed in the competitive landscape. Options like- Small business loans, merchant cash advances, and revenue-based funding provide your business with the much-needed cash push. It helps you achieve immediate and long-term goals without emptying your cash reserve. Identify the right funding option by researching each and achieving your goals without waiting.
Harry Kane is a financial writer and author who has covered wide topics related to business loans and finance for the last decade. He has been working as the Chief Contributor in finding out deals on various business finance products covered by Thebusinessfunds, a reputed business loan broker firm in the UK. The primary work of Harry is to analyse the loan requirements of various businesses according to their circumstances and affordability. He directly communicates with the loan aspirants and guides them to get the right loan matching their needs. He has a vast experience in finance writing, working with many major business firms in the UK. At Thebusinessfunds, Harry also used to write well-researched blogs covering the financial problems of business loan aspirants and providing relevant solutions. He is a postgraduate with MSc. in Banking and Finance.
