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The ultimate guide to eCommerce financing

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The world of eCommerce is booming. It’s predicted that 95% of purchases will be made online by 2040. It’s the perfect time for entrepreneurs who want to set up an eCommerce business and make their mark on the world. 

You’ve got your business plan, ideas, and support from your nearest and dearest. But how do you overcome the obstacle of financing your new venture? Thankfully, there are lots of financing options available for eCommerce businesses. 

This comprehensive guide will discuss the available options for eCommerce financing. 

What is eCommerce financing?

eCommerce financing is a collection of funding options for eCommerce businesses. Various eCommerce platforms and lenders offer tailored eCommerce funding to help enterprises to increase their inventory, develop technology, or fund marketing campaigns. 

“Funding is a crucial element of a successful eCommerce business model,” explains Mike Raines, owner of Raines Insurance Group and creator of Special Risk Term. “As an entrepreneur, it’s your job to find the best funding solution that fits your business. A cost-effective line of credit will provide financial freedom that enables your business to grow without the risk of overspending.”

Previously, funding options were limited to inventory financing, with products serving as collateral. Multiple forms of eCommerce financing are now available, including bank loans, credit cards, eCommerce grants, and invoice financing. 

How to get funding for your eCommerce business

Getting funding for your eCommerce business has never been easier. With so many financing options, eCommerce business owners can choose a source of funding that will suit their circumstances. It’s best to research all loans, credit cards, and funding sources before committing to any payment terms. 

The best way to determine what your eCommerce business needs are to:

  • Write a business plan.
  • Determine funding needs, like payroll, inventory, etc.
  • Decide how much funding you need.
  • Consider how you’ll repay the funding.

Once you have the answers to the above questions, you can start looking at the funding options available for your eCommerce business. You may have to give up shares of your company in exchange for a significant investment if you choose equity investing or crowdfunding options.

eCommerce financing options

Several factors are involved when choosing suitable eCommerce funding options, including location, amount, repayment terms, and eligibility. Raising funds for your eCommerce business is a lengthy process that can take months of research and planning. 

“When your business requires funding, there are two main financing options: sell equity or acquire debt,” says Hayden Poudrier, Co-founder and CEO of Fraction.com. “Choosing a finance method for your eCommerce business is a big decision for the future of your business. Although equity funding does not get repaid, your shareholders influence your business operations. Consider carefully whether debt or equity funding is the best choice for your business.”

If you have already explored self-funding options, your next port of call should be your local authority to ask for support and advice.

Government funding

Check to see if your state is providing any funding or grants for eCommerce businesses before you start searching for alternative funding methods. You should also check to see if you fall into any of the Small Business Administration (SBA) categories so you can use their business and funding opportunities. 

A significant advantage of government funding is that there’s no repayment process. eCommerce businesses must fall into a niche category to qualify for most government grants, which can make this a problematic funding method to obtain. 


Crowdfunding is an excellent financing option for new eCommerce businesses and startups. The process involves collecting funds via a fundraising page on a crowdfunding website. Business owners can advertise their cause on a public platform to a large audience of public investors. 

“Success is not guaranteed with crowdfunding. That’s the gamble you choose to take when using the platform,” explains Colin Palfrey, CMO of Crediful. “With careful planning and hard work, crowdfunding can be a realistic way to raise funds for your business. Exposing your ideas to the public on a crowdfunding platform will provide insight into whether your business idea will work in the real world. If you choose this option to finance your business, you’ll receive more than funding.”

Investors won’t have a say in your business because the shares are small. However, the company can offer rewards and incentives to people who pledge money to their cause. Crowdfunding is a flexible option because there are no restrictions on how the merchant can use the funds within their business. 

Equity investment 

If you own an established eCommerce business, equity investment could be a financing option. An experienced investor will offer a sum of money in exchange for shares in your eCommerce company. 

“There are several types of equity financing available to eCommerce businesses. Venture capital (VC) investors, in particular, are attractive funding options for startups,” says Anthony Martin, Founder and CEO of Choice Mutual. “Acquiring equity financing is a low-risk option for eCommerce businesses who also need advice and support from experienced investors.”

Equity investors can also benefit eCommerce businesses by offering access to their network and sharing helpful business knowledge.

Bank loans

A bank loan is the most common method of securing business financing. The application process can be rigorous, with credit checks and strict requirements for every applicant. Most bank loans offer a lower interest rate than other forms of credit, which is perfect for a business looking to grow. 

“Do your due diligence before applying for a business loan from a bank,” explains Andrew Gonzales, President of Business Loans. “Check what you need to qualify for a bank loan, including financial records and documents they require. Doing this will save time and prevent unnecessary damage to your credit report.”

Newer businesses may struggle to get approval for a bank loan. Be prepared to show a track record of sales and cash flow projections if your eCommerce business is still in the early stages of trading. Banks will likely offer more significant sums of money to established businesses than new eCommerce companies.

Invoice financing

Invoice financing is a funding method that enables eCommerce businesses to access working capital. The lender will offer funding based on the business’s accounts receivable. This is the perfect solution for companies that need short-term cash to fix a temporary cash flow problem. 

The process of applying for invoice financing is simple in comparison to bank loan paperwork. This option is only available for B2B eCommerce companies with reliable payment histories. 

Business credit cards

Funding an eCommerce business with credit cards is a straightforward and convenient process. You should have no trouble applying for a business credit card if you have a clean credit history. You can manage your cash flow and keep personal finances separate by charging business expenses to your credit card. 

“A business credit card is a quick and easy fix for an eCommerce business in need of cash,” says Nate Tsang, Founder and CEO of WallStreetZen. “Try to find credit cards that offer 0% interest within the first year so that you can grow your business without additional repayment fees. You could reap the rewards a business credit card offers if you spend money on inventory, marketing, or web design.”

Credit cards can lead to a mountain of debt if you take on more than you can afford. Cash flow predictions and previous sales help determine how much you can borrow. If you are confident that your business can afford the repayments, a business credit card could be a suitable financing option. 

Merchant cash advance

A merchant cash advance (MCA) is a possible financing method for businesses that use debit or credit card payment systems. The MCA will offer a cash advance in return for a percentage of the company’s debit or credit card sales. The lender will deduct any fees and interest from the weekly or daily debit/credit card sales until the total amount has been repaid. 

Applying for an MCA is a viable short-term funding solution for eCommerce businesses that need a lump sum for inventory. The interest rates are poor compared to a business loan or credit card. The lender may ask for bank statements and proof of revenue before approving your application. 

Key takeaways

The success of your eCommerce business could fall on the financial options you choose. Researching each possibility and weighing the pros and cons is the best method for selecting the best financing option. The key points to remember when researching eCommerce financing are:

  • Business plans and cash flow predictions are essential.
  • Your business needs are unique.
  • Not all financial options will suit your eCommerce business.

As a business owner, you can make the best financial decisions for your company’s future. Ask a professional if you need support choosing eCommerce financing options for your business. 

Published November 15, 2022