eCommerce Financing: Explained

  1. eCommerce Financing
  2. eCommerce Financing: Explained

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ecommerce financing

With the rise of lockdowns, eCommerce is exploding. But like every other industry, eCommerce businesses need capital to grow – for inventory, marketing and general working capital.

The options for eCommerce are generally the same as more traditional funding solutions, but tailored to the new economy. In some ways, eCommerce financing is even better, because it’s faster and most times, risk-free.

There are two main options for eCommerce companies. These options include both traditional-styled loans and newer financing options fully integrated into the digital world. Let’s dive right into what eCommerce financing is, what types are available, and how it can help you.

What Is eCommerce Financing?

eCommerce financing is financing for web-based businesses that sell products online. Those companies can be Direct-To-Consumer (D2C), or marketplace sellers on Amazon, Walmart and the like. (commonly referred to as FBA or fulfillment by Amazon).

The funding options for these businesses depends on whether you’re D2C or B2B.

  • Business Loans – for sustainable, bigger eCommerce companies.
  • Invoice Solutions – for smaller, rapidly scaling eCommerce companies.

What you do with these two types of funding depends on you. Both the above financing are otherwise known as “inventory financing” because most times, eCommerce companies use them to buy more inventory. The second most common use of funds is for financing your ad budgets.

When Is eCommerce Financing Used?

Inventory Financing

eCommerce businesses face many of the same financial challenges as other businesses like needing to pay for inventory (cost of good sold).

Ad Campaign Financing

Whether you’re running ad campaigns on Facebook, Instagram, or Paid Search, most eCommerce companies know their winning channels. If you sign up for a loan or invoice solution, you can finance your ad spend with someone else’s money. But be careful, this can be risky if you don’t have profitable ad campaigns!

General Working Capital

Working capital needs like inventory and other expenses like taxes and memberships can be covered with other forms of eCommerce financing.

Financing Requirements

Most eCommerce financing products carry slightly different requirements than traditional business financing options. There is typically a larger emphasis placed on your business’s sales performance. At the same time, there is typically less attention paid to your credit score. Here is a quick run down:

  • $5,000 per month in sales, via a marketplace like Amazon
  • 3 months in business

The requirements for a loan vary, depending on where you get it from.

Financing Amounts

You can typically receive the financing you need and are eligible for through eCommerce financing. Fintech lending has helped open up borrowing options for online businesses. So, you can often apply for financing as low as a few hundred dollars, like a Shopify loan. Of course, if you qualify, you can find loans for hundreds of thousands or even millions of dollars, usually from the same lender.

As is the case with any business loans, your results will be determined

Consumer Credit

Some financing products allow you to give your customers more buying power. This form of consumer credit allows your customers to buy what they need right now and pay the full purchase price over time. This kind of consumer credit gives eCommerce businesses a boost through the purchasing power they pass onto their customers. It’s also a form of borrowing that can provide a fast return on investment for eCommerce businesses.

How Does eCommerce Financing Consumer Credit Work?

Consumer credit is a risky but often worthwhile pursuit for eCommerce businesses.

Loan & Rate Types

There are also several financing types to choose from. You can choose between flat-rate and discount-rate programs. Some programs like PayPal’s are no-charge financing programs, but you’ll have to pay their fees.

Is eCommerce Financing Consumer Credit Right For Me?

If you’re in the eCommerce industry, the answer is yes. There is always something to gain from eCommerce financing, whether through guaranteeing you have the working capital you need or using consumer credit to increase your business. But none of this means that eCommerce financing is a perfect, risk-free option.


Giving your consumers credit can increase your sales. But for that to happen your customers must pay back what they’ve borrowed.

For that reason, it’s worthwhile to be frugal and save more money in case you’re left hanging by a bad customer. When you start using consumer credit, you’ll have to take a small hit and wait until your customers start making their payments.

View our application for e-Commerce Funding.

Risk Mitigation

It’s up to you to determine the risk that eCommerce financing presents to your business. After that, you can act accordingly.

You can determine how creditworthy your customers are before offering them consumer credit. But even creditworthy borrowers represent some risk to your business.

Fortunately, you can use consumer credit products that incentivize your customers to pay on time. For example, you can offer lower interest for customers that pay in full by a specified time. You can also use free-to-offer consumer credit from some companies, including PayPal.

Last Word

If you’re prepared to take the precautions we’ve gone over, eCommerce financing is likely the right option for you. Like any form of financing, it carries risk. But when handled responsibly, eCommerce financing offers your business what it needs.

Consumer credit for eCommerce customers can empower your business by empowering your customers. But before you make the choice, self-assessment is what you need to make sure you make the right decision. Temporary measures to be prepared for a temporary drop in cash flow are recommended.

Not sure where to go for a business loan? Read these quick & helpful guides:
Check out our preferred marketplace lenders.

Lender Minimum Revenue Time in Business Minimum Credit Next Steps
$100K/year 1 year 600+ See if you qualify
$10,000/mo 3 mo. n/a See if you qualify
$10,000/mo 3 mo. n/a See if you qualify
$75,000/yr 24 mo. 620+ Request Intro
Varies Varies 560+ See if you qualify

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