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How to Get Funding for Your E-Commerce Business

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When it comes to e-commerce funding, business owners have a variety of options to choose from.

Below we’ll break down the various ways e-commerce businesses can fund their future sales growth, and offer suggestions and solutions for Canadian small businesses that need access to additional working capital quickly and easily.

Choosing the right option could help you move your business plan forward, getting you the e-commerce financing you need to solve immediate problems, or continue your growth and make it to the next level in a competitive market.

Cash Flow Solutions for Cash Flow Problems

Why does an e-comm business need working capital for today? Lot’s of reasons! Business growth can come in many shapes and sizes, so bringing additional dollars into the mix can do anything from cover marketing expenses to purchasing inventory to building infrastructure.

And of course, the search for e-comm funding isn’t always about financing growth – sometimes a small business will need it to help with temporary downturns, to solve unexpected problems or cash crunches.

Either way, if you run an e-commerce platform, have a proven track record of success and solid monthly revenue, there is a funding model that will work for you out there. There is certainly no reason why you should be slowed down by red tape or delays that you typically see with a financial institution like a bank.

 

E-Commerce Financing Options: Should You Use Equity Financing?

There are many ways to raise funds, from venture capital to personal savings to business loans to merchant cash advances. However, if you have a growing business and don’t want to give up equity in order to access the financing you need, you’ll probably want to avoid equity financing.

Equity financing, which is when you sell a portion of the business in exchange for a capital infusion, has some advantages, like the fact that funds won’t need to be paid back being a particularly attractive one. However, offering someone an ownership stake means you dilute the ownership of your own business, and will mean you’re not the only one making the decisions for that business.

Equity financing typically breaks down into four general categories.

Angel Investors

This category of equity financing is similar to venture capital funding, but depends less on data analysis to acquire funding approval. An angel investor is often someone in the business or startup’s personal or professional orbit.

Venture Capital

A popular option for early-stage startups, venture capital (VC) firms offer more than just financing, they offer expertise and advice. Acquiring the funding can be a more difficult process, as VCs usually require some form of board of directors and reporting structure to be instituted in order for them to take a stake in the business.

Friends & Family

Asking the people closest to you for funding might seem like a good idea right off the bat, since you all know each other and a certain degree of trust already exists between you. However, not all friends and family groups can raise the amount of money an e-commerce business might need, and the old adage is in play here: money and blood don’t always mix. If you offer equity to this group, lawyers and black-and-white contracts should be involved in order to try and avoid future disagreements.

Initial Public Offerings

Depending on the size and complexity of your business, an initial public offering (IPO) could be an equity finance solution. But “going public” can be an onerous and difficult process, and will require business owners to make information public regarding suppliers, financial reports, customers, and more. If you need less than half a million dollars, this is probably not the way to go.

 

Business Loans and Other Debt Financing Options

If you’ve decided that equity financing is not the way to go for your business, then you can always choose to take on debt to finance your operations instead.

You may choose to use business credit cards, bank loans, or lines of credit, and the interest payments on that debt can even be classified as tax deductions, which is a plus. However, debts need to be repaid, and this is true even if the business eventually fails.

In addition to higher interest rates, a downside of some forms of debt financing is that you may be forced to offer up some form of collateral in order to access the cash. If anything goes wrong – which is very possible in a volatile and quickly evolving economy –  a loan default will impact your credit rating, which will have ramifications for years to come.

Another downside, at least when dealing with major financial institutions like banks, is that even if you jump through all the hoops, cross the t’s and dot your i’s, you could still end up being rejected. And if you do get the loan, it could take weeks, or even months in some cases, to get approved.

Banks are conservative by nature, and will often choose not to take what they consider a risk, even though the numbers show that your e-commerce business is promising.

Revenue-Based Financing: A Better Solution?

Finally, we come to what might be the best solution for your e-comm business, especially if it is one that is doing well, has a track record of success, and simply needs additional working capital to continue its growth trajectory.

Unlike working with equity financing or traditional debt financing like bank loans or lines of credit, a revenue-based financing solution tailored specifically for e-comm sites is one that uses your existing cash flow as a source of working capital.

Because e-commerce sites typically use credit card processing as their main source of payment, it becomes very easy to repay the amount borrowed, and to automate the process in a way that makes sense for your business.

Because Merchant Growth specializes in financing small businesses in Canada, we can also provide the advantage of flexibility. The repayment plan is tailored to each individual business, and repayment terms can be daily or weekly, depending on what works best.

 

How Does it Work? Funding for E-Commerce Business Owners

Our process is streamlined – after all, it was designed to be. In fact, small businesses can receive funding in as little as 24 hours. You simply need to take part in a simple, three-step process.

Step 1: Fill out the application

This application is short and sweet. Five minutes is all you need to get the ball rolling – maybe even less. The application can be done online or over the phone. Most of the heavy lifting is done in step 2.

Step 2: Review your options

This is where an expert from Merchant Growth will get in touch with you to discuss the particulars. They’ll want to know certain information about your sales numbers, growth metrics, monthly revenue, ad performance and the nature of your business challenges in order to prepare and offer you a customized solution that is easy to work with for everyone.

Step 3: Receive your funds!

This is always the best part. Depending on the situation and the amount your business needs to continue its growth, you can often have the funds deposited into your bank in as little as 24 hours. Sometimes even on the same day!

Strong Support is Key

With funding provided in as little as 24 hours, and amounts ranging from $5,000 all the way up to $500,000, no hidden fees, and no collateral required, this is often the best financing option for e-comm sites that need a financial boost and some extra funding to continue their upward trajectory, and without having to wait weeks or months for approval.

Best of all is the continued support offered by Merchant Growth. We pride ourselves on our top-quality customer service, and are always there to act as a platform for growth, answer your questions, and make adjustments as necessary, topping off your business with any extra cash as the need arises.

What are the Minimum Requirements?

As long as you’ve been in business (in Canada) for six months and have monthly revenue of over $10,000, you can apply!

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Complete our online application and we’ll contact you to present financing options tailored to your business needs.