Ecommerce has taken over the global market, and new businesses are started all the time. The internet has provided us with the right tools to expand our businesses further than we had thought. Time and distance have become irrelevant, and we can get our goods or services all over the world. But just like any other type of company, your online business also needs funding, both to start it and to develop. This is a short guide to help you understand the best 5 ways to finance the growth of your e-commerce business.
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#1 – Bank Loan
This is one of the most traditional ways to get funding. There are many banks to choose from and many options when it comes to the type of loan. However, a bank loan is not that easy to get. All banks have strict requirements. Not only will you have to provide them with a lot of documents, but there are also many additional costs attached. You need to prepare yourself for every fee and make sure you qualify. And let’s not forget the interest, which is usually pretty high, and the fact that most banks ask for collateral.
#2 – Online Lender
If bank loans are out of your reach, online lenders may be the solution you need. The advantage is that everything moves faster, and it’s a lot easier than dealing with the bank. You won’t need as much documentation, and your loan will be approved quickly. Not to mention the costs will be lower, and no collateral is required. If you want to get a sense of what it means to get a small business loan for your company, BizFly Funding is a great option. Take a look at the multiple types of loans and credit products. Or you can even get a free same-day quote. There are many lenders to choose from, just do your research and make sure you are dealing with a serious one.
#3 – Crowdfunding
Crowdfunding is a way of raising the money to fund your business online. Basically, you will be asking a large number of people to donate or invest in your business. There are many platforms, like Kickstarter or GoFundMe that can help you do that. There is also a lot of information available online on this type of funding, as well as other options for funding your business. And it’s a good idea to go through it carefully because crowdfunding can be risky. And before you try it, keep in mind that you will be subjecting yourself to public scrutiny and may be facing rejection. And even if you are accepted, you will have a lot of competition to deal with.
#4 – Home Equity Loan
This type of loan is basically a mortgage, so it’s a bit more complicated and riskier. And you should only take it into consideration if you are a homeowner and have more than 50% of your home’s value as equity. You also need to have a good credit rating to qualify. Your payment history will be closely analyzed. Just like in the case of a normal mortgage, you will have to regularly make fixed payments to cover both the principal and the interest. But the most important aspect is that you will be using your home as collateral, so make sure you really want to take that risk. That doesn’t mean you are not a responsible borrower. But any business has its risks, and there really is no guarantee you will do great in no time. So, risking your home to get funds is a decision you shouldn’t make without seriously considering all other options.
#5 – Family and Friends
When you first started your online business, you have most likely used your personal savings. That’s what people usually do, provided, of course, you have those savings in the first place. That is the ideal solution because you won’t be in anyone’s debt, and you don’t have to pay any interest. But after getting your business started, you may come to the conclusion you need more money to keep it growing. They say, “you need money to make money” for a reason. And there are situations when a bank credit or any other type of official loan is out of your reach.
The only thing to do then is to reach out to your family and friends. The advantage is they usually don’t ask for interest. But there is also a downside. They may feel entitled to keep offering their insight on how to run your business, whether you want it or not. And the most important aspect is that if you fail to pay them back in time you risk damaging your relationship with people close to you. It’s not always a good idea to involve your close ones in your business.
Tricky Business
Taking your business online definitely has its benefits. You won’t be paying rent like a regular store, you can work at your own pace and have more freedom as well as a huge market. But you also have to adapt to the rules of e-commerce and keep informed on the steps you need to take to be successful. Marketing is crucial, so do your research and discover the best ways to promote your store. But nothing is possible without funding. So, you need a realistic assessment of your situation and your plans. And after carefully considering all the available options, choose the one that best fits your needs and turn your e-commerce business into a success story.
About Carson Derrow
