Nearly 90% of eCommerce companies fail within their first 120 days of business, and when they do, running out of cash is a top-five reason for failure. Founders who can secure the right type of funding for their journey will be in a much better position to keep cash in the bank and products on their way to customers.
Learn the best type of financing for where you’re at in your brand’s journey and what you plan on putting the cash towards. You’ll get the most value out of your funding and successfully grow your business.
Here are seven ways you can fund your eCommerce business:
How it works: You apply for funding from a provider and get approved within 48 to 72 hours, based on your projected revenues. You then have access to the funding immediately, and you start to pay back remittance as a fixed percentage of your daily sales.
You’re looking to fund your working capital cycle, such as inventory orders or marketing campaigns, without too much strain on your cash flow. For example:
Founders can use their own capital to get their business off the ground and avoid going into debt or paying high interest rates. But when you bootstrap it, you’re entirely on the hook for that cash.
How it works: You front your business, operating expenses, and working capital with your own money. You draw from your personal savings, a retirement account, or a similar source of savings, but the money is all yours. In some cases, you might also borrow from close friends or family members, but the idea is the money comes from within your inner circle rather than an external investor or lender.
You want to keep control over your company while avoiding high-interest loans or fees. Bootstrapping makes the most sense for founders who have a clear vision and want to retain this level of control over both their business and their profits. If you find yourself cash-strapped, consider pairing this method with a working capital finance solution, so you’re not going it alone.
An experienced venture capital firm brings expertise and experience in achieving fast-paced growth, but they’ll also be looking to see results quickly and collect their own return on investment.
How it works: You seek out a valuation and investment from a VC firm in return for an ownership stake in your company. Your investor will want to see your company increase in value so that they can eventually sell their shares at a profit. In the meantime, you can use their capital to invest in long-term projects and sustainable growth for your company, helping you both realise a return on investment.
You’re seeking out larger amounts of capital to invest in projects that will bring sustainable growth for the long term. Research & development, expansion to new locations or regions, and product development are all investments that can build long-term growth for your brand.
Read more: Learn why one eCommerce founder turned down VC investment and commercial lenders and chose flexible funding through Wayflyer.
Credit cards can be a way to access financing quickly, especially if you’re already pre-approved. But business owners who rely on credit cards for funding will find interest fees adding up in a hurry.
How it works: eCommerce founders or startup owners can apply for business credit cards or even use their own personal credit cards in a pinch. You don’t have to make payment on the balance until your next statement, 30 days later. Certain cards will also offer rewards such as air miles for travel or cash back on expenses.
For smaller, month-to-month business expenses, especially if you know you’ll pay the balance off within 30 days, so you’re not accruing interest. If you have a card that offers great perks, like travel points or cash back, take advantage of those rewards. But don’t rely on credit cards to finance all of your operating expenses.
Founders can go the traditional route and seek out a loan from a bank or commercial lender. But financial institutions are typically lacking in eCommerce savvy, so you’re not likely to get the best or friendliest terms for your business.
How it works: Apply for either a secured or unsecured loan. With a secured loan, you’ll be backing it with an asset like your home or another piece of property. This gives the lender more security, so you can usually land a better interest rate — but you’ll be putting that asset at risk if you can’t pay off the loan. You’ll go through an application review process with the bank or lending institution and eventually receive the funds. Then, you’ll pay back your loan in monthly installments with interest.
Your business is more established, and you have the financial forecasting in place to secure fair terms and capital for your company. If not, you should walk away and seek other financing.
Crowdfunding campaigns allow you to drive brand awareness and interest in your product while drumming up financial backing. The goal is twofold: access funding while building up a passionate base of customers and early adopters.
How it works: Crowdfunding comes in two different styles: equity-based and rewards based. Equity-based crowdfunding is where campaign contributors exchange funds for shares in your company. However, unlike a venture capital firm, the shares they’re purchasing are on a very small scale; individually, they won’t gain a controlling interest.
With rewards-based crowdfunding, contributors instead gain perks in exchange for their funds. These campaigns might include benchmark numbers on the way to the overall campaign goal. Brands will often give contributors early access to products, special releases or editions, or other exclusives for their part in the campaign.
You’re trying to build brand awareness from the get-go or bring on external funding to support product development. Crucially, you’d like to do so without losing control of your company.
Especially useful for enterprise eComm companies who need access to larger sums of cash, a line of credit allows you to draw on funding whenever you need it, up to a predetermined maximum.
How it works: You apply for a line of credit through a financing provider and get approved for a capital limit based on your sales and projected revenue. You can be approved for up to $1 million in some cases. Then, you draw on that limit when you need the capital and pay it back. As you pay it back down, your ceiling increases again, back to the approved limit.
Read more: Wayflyer Scaler offers up to two times your monthly revenue at market-leading rates. Learn more about how Scaler can help your brand.
You’re an enterprise brand, and you’re projecting sales to grow exponentially over the next year. You don’t have the capital up front to finance inventory, marketing, or longer-term growth initiatives, but you can borrow from a line of credit and then pay it back down. Your best option is always a financing provider that offers maximum scalability with no security requirements.
Access funding to help you grow faster for an even greater return with Wayflyer. Chat with us to see how you can use our funding and analytics alongside other types of financing to unlock more revenue.