5 Ways To Finance Your E-Commerce Startup

E-commerce store

Just by taking a short time to research which companies are the most prevalent online, it is clear to see that e-commerce is enormous. So many businesses are relying on the internet to help them sell their products and services, and more and more people are shunning traditional brick and mortar stores because everything they need they can purchase from the convenience and comfort of their home through their laptop, smartphones, or tablets. Therefore, if you want to start a business, e-commerce is definitely the route you should take.

However, as with any business, you will need at least some money to get started. It can be a stumbling block for many who, excited as they are to launch their business, do so without the necessary funds, only to find that they are unable to continue because they have run out of money. So that this does not happen to you, here are some useful ideas on how to secure funding for your e-commerce business so that you can be successful and make a profit.

Use Your Savings

By far the simplest and cheapest way of funding your new e-commerce business is by using your own savings, assuming you have enough there to fulfill your needs. Many people are reluctant to do this, especially if they have spent many years saving, but funding your business in this way does mean that you start with no debt, and this can be a boon later down the line.

As well as not being in debt (other than to yourself, and the terms that you decide on can be deferred if that makes more sense and won’t leave you in trouble financially), you won’t be giving away any of the equity in your business either, meaning that you retain control. It can also be a useful bargaining tool if you need to raise additional funds at a later date.

Apply For A Business Loan

If you have no savings, or you do but not enough to cover everything you need to purchase to get started and give yourself the best possible chance of succeeding, then a business loan could be another good option. It is essential to carry out thorough research before making any applications, however, as you need to find the loan that is right for you from a lender you can trust. Look at all of the terms and conditions, the interest rates, and how much the loan will cost you overall before choosing the lender to apply with. The more applications you make, the more it will negatively affect your credit, and the less chance there is of obtaining the funds. This is why you should make sure you are choosing the right lender.

A bank or other reputable lender will want to see your business plan in order to determine whether the loan is going to be paid back successfully. Again, it may take you some time to create this plan, but it is vital, and as an additional benefit, you should be able to use it yourself to ensure you are on the right track with your business.

Apply For A Personal Loan

Getting a business loan isn’t always easy (and nor should it be), especially for startups because there is no trading record for lenders to work on. If your business plan can’t convince them, they won’t risk their money. Therefore, your next course of action could be to apply for a personal loan and invest the money into your company. You can do this even if you have a poor credit rating since there are bad credit loans that you can try that will help you in this case.

When you take out a personal loan, you would then use the loan amount for money in your company. When the e-commerce business starts to make money, the company can pay you back with interest. Remember, though, that until the company can pay you back, you are responsible for the loan, and you will need to pay the installments yourself.

Find An Angel Investor

An angel investor can work wonders for your e-commerce venture. These are people (perhaps individuals; perhaps groups) who invest money into businesses that they find interesting and that they think could be successful. They will want to see a return on their investment and will purchase some of the equity within your business. It is a serious endeavor to undertake, so you do need to know what you are getting into before jumping in.

Just as with an application for a business loan, the investors will want to see your business plan so that they can determine whether or not the idea has merit. They will also want to meet with you to discuss your ideas and what it is you want from them. Some investors are happy to put their money into a business and let the owner make all the decisions, whereas others prefer to have a more ‘hands on’ approach and help to run the company with you. This can be ideal if you need help in marketing, for example.

Your Credit Card

Credit cards can be both a benefit and a problem when it comes to business, and it depends on how you use them as to which it is for you. Credit cards tend to have high-interest rates attached to them, which means that you will be paying back much more than you spent when you make purchases in this way. If you can pay the entire balance off each month, then it makes no difference, but if you choose only to pay the minimum, then it could cost you far more than you anticipated.

Therefore, using a credit card to fund your entire startup is probably not a wise idea. There are plenty of other options to try first. However, using a credit card for smaller purchases can be useful, as you can spread the payment and it is a more secure way of purchasing items both online and instore.

Michael Pignataro
co-CEO - Operations at 'corePHP'
Michael spearheads ‘corePHP’s software solutions and service offerings. Focus on sales and marketing for the organization. A huge believer in family and has an amazing wife and 4 beautiful children. Loves camping and hiking.

Michael's philosophy is simple: "If you can dream it, we can do it."

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