7 Ways You Can Finance Your Ecommerce Business

Ecommerce is the quickest way to get up and running as a startup, but it can still be difficult to finance your Ecommerce business – learn how.

7 Ways You Can Finance Your Ecommerce Business

Online businesses face a number of barriers when they get started. Traditional lenders are reluctant to lend to them. If an e-commerce business can get a loan, the payment terms are rarely compatible with the ebb and flow of e-commerce sales. For example, your monthly payments tend to be fixed, even though your business’s income is likely to fluctuate depending on the seasons. However, there are alternatives to traditional banks. Here are seven ways you can finance your e-commerce business.

1. Self-Funding

If you have the cash saved up, this strategy spares you from interest payments or applications. You don’t give up ownership of your business, and it means you get all of the profits.

However, you could pay hefty penalties if you pull money out of your retirement account, and you’re leaving yourself exposed if you drain your emergency fund dry. Another method of self-funding the business is to charge business expenses on personal credit cards. But this also comes with high-interest rates, leaving you personally liable for business debt. And the minimum payments come due no matter how much cash you have coming in.

2. Friends and Family

Don’t be afraid to ask around people in your extended family and circle of friends if they would be willing to lend you some money. You could ask them for a loan, or you could ask them to partner up. You could also offer some equity in your business.

You’d be surprised at how much interest you could get from people close to you when they believe in you. Also, treat them like actual investors when asking them for money. Come with a clear plan, trajectory for the business, and try to explain in as clear terms as possible what you actually do. They will be more inclined to take you seriously and offer some help.

3. Home Equity Loans

Home equity loans are also an option, but you have to hold at least 50% of the house in equity. The maximum loan you’ll be able to get will be around half of the house’s market value. But know your house will be on the line, so this is something you’ll have to be careful of. This should be only used as a last resort, and if you’re 100% sure that you’ll be able to pay it. It’s also better to borrow less than the maximum and only use it as a supplement to other financing options.

4. Peer to Peer Lending

Peer to peer loans may let you borrow money from hundreds of strangers or a pool of investors. Peer to peer lending has several points in its favor. Peer to peer lending platforms tend to approve loans quickly. If approved, the money may come flowing in. The loan terms are more flexible than conventional lenders. You could choose to repay the loan in a month or sixty. A side benefit of this approach is that you aren’t asking friends and family for money.

However, loan payments tend to be fixed. This can create problems when cash is tight. The interest rate on peer to peer loans is lower than the average credit card, but it isn’t as low as the standard business loan.

However, if you want the best rates, you have to look around. There are plenty of comparison sites that will allow you to find the best loan for your business and needs. You’ll get a quick snapshot of what industries they work with, and the average interest rate that you can expect to pay

5. Angel Investors

Angel investors are investors who provide cash and often advice to startups. Angel investors may loan anywhere from thousands to hundreds of thousands of dollars. They tend to have more favorable loan terms, and their advice can help your business grow.

The downside is that they often demand equity. Another issue is the stiff competition you face when seeking angel investors. Expect to have to give dozens of sales pitches, and you still may not qualify for their support.

However, there are things that you can do to stand apart and make your business more attractive. But you also have to know that they’re all different, and different things may pique their interest. Some will be more interested in your story, but you still have to be professional and show a clear plan for the future of your company. Others will be impressed by the numbers, so the more relevant data you can bring to the table, the better. Also, be careful to be realistic with your valuations.

6. Short-Term Loans/Payday Loans

Short-term loans and payday loans are another option. This is a perfect choice for those who are working a day job while trying to build their small business. Payday loans allow you to borrow against your wages or income stream. And your credit score will not be the main determinant when applying, so this is a good choice if you have less than stellar credit.

But if you want to get the best deal on your loan, you have to shop around. Providers like Sunny Loan are very popular, but you should consider looking at other options. You can shop a variety of lenders to find a sunny loan alternative with a lower interest rate, a more convenient payment date or lower fees. Or you could find someone with a higher loan amount.

7. Crowdfunding

Crowdfunding can take the form of peer to peer loans. Crowdfunding can take other forms, as well. You could pre-sell your products online, and if you don’t get enough orders to justify a production run, you can refund their money. You can also offer rewards to thank your investors like company-branded swag or first-run editions of your product.

This is a common strategy for arts projects, bands, and game developers. Donation crowdfunding asks people to back the investors without a reward. This approach is similar to charity in that you’re asking people to back your venture in return for feeling good about supporting a local startup or the benefits it brings to the community. But these opportunities aren’t the easiest to come by, so consider going the traditional route if you want to increase your chance.


Banks have tightened their lending criteria, and that’s made it much harder for small businesses to secure funding. Fortunately, alternative lending options have grown up to serve startups and small firms. Do your research so you can find one that’s right for you.