One primary reason why eCommerce businesses fail is the lack of funding. Some business owners may have believed that a company with little to no funds would survive, but little did they know that a simple lack of funding is business suicide.
If you are running a business, you must have enough to cover all the expenses and the slack days where profits are a loss.
To help you prevent this from happening, we gathered all the data and came up with five simple ways to fund e-commerce startups that you may use to get more funding.
Why is Funding Important in E-commerce startups?
A business without funds is like a car without gas. Oi, don’t get me wrong on this one. Even if you have an e-vehicle, it still needs a battery to run.
Just like a business, you need to have a good amount of money for its operation to run smoothly. Whether your business is new or not, you must have funding that will cover the marketing sales, sales expenses, and other forms of costs that you will incur when working on increasing your business’ reach.
Without an excellent funding technique, your business might go bankrupt or close down in just a year or two. So, to help you ensure that your business will have a good run, we have consolidated the best ways to fund e-commerce startups.
5 Ways to Fund E-commerce Startups
There is no doubt that funding can either help your eCommerce startup to grow big or cost you to lose everything. Before you get to the latter, here are the best ways you need to fund e-commerce startups.
Bootstrapping
Bootstrapping may be a little bit risky, but this method is one way to help your business have a good run until you find a good source or way to fund eCommerce startups.
In bootstrapping, the business owner needs to use his capital and his e-commerce startup business’ profits to fuel the entire operation. However, bootstrapping needs a simultaneous and spontaneous release of products. It doesn’t matter whether it is an existing or new product.
What is important is there is a constant flow of outgoing products. Why? The more you release, the more you attract people to buy your products. This means that you will have more money or profit that you can use to fund your business.
Unfortunately, if there is a little delay or no product to release, the company might end up out of funds leading it to close the operation or outsource for additional funds. Thus, there must be a constant flow of revenue if you choose this way to fund your eCommerce startups.
Angel investor
The angel investor route is way better than getting funds from regular investors. Why? Most angel investors have massive funds to support e-commerce startups, which are pretty hands-off.
This means that you still have control of your company. Unless they wanted to take part in the decision-making process. Or the deal is more favorable to them than you and your business.
However, getting an angel investor is not as easy as you think. You need to send proposals, and only if they find your business attractive and profitable will they offer you a deal in return for a part of your company’s equity.
Venture capitalist
Though the angel investors route is a great way to fund e-commerce startups, the venture capitalist is also vying to be one of the best ways to fund eCommerce startups.
Why? Venture capitalists have the money to fund e-commerce startups and a vast network of connections your business needs to grow and survive in the long run.
Crowdfunding
Crowdfunding is one of the simple ways to fund eCommerce startups. It is a process of collecting any amount of money from individuals or groups.
It is easy to find a crowdfunding page, but it takes a few searches and background checks to find a reliable page to help you with your funding.
Also, as the business owner, you need to go online and create a crowdfunding profile with a detailed description of your business, your business’s goals, and most importantly, an overview of where the money from the crowdfunding will go. This will give the audience a clear understanding of what they are supporting and where their money goes.
Private lender
We listed this as one of the simple ways to fund e-commerce startups though we know that this is one of the riskiest routes an eCommerce startup can take.
Private lenders are a great way to fund e-commerce startups since these are the type of people who are eager to lend cash for a very viable business.
This simple way to fund your business startups is best for people who don’t have a good credit score. They can barely get a loan from banks and other institutions. However, you must look for a private lender who offers a win-win situation regarding how much money they lend and their asking interest rate.
Other Ways to Fund Your Ecommerce Startups
Family and Friends
Family and friends are another simple way to fund eCommerce startups. They can lend you money without interest as your additional capital, or they can also help be one of your investors. Either way is a win-win situation for you and your business.
The only problem with this type of funding is you might have issues with your close friends and families, and instead of losing the business, you might end up losing them.
Bank Loan
You must consider a bank loan if you have a good credit line and need a larger amount to fund eCommerce startups. But, you must do your best to fully pay the loan on time since this type usually needs collateral. You do not want to lose your house, car, or other assets and your business.
In exploring alternative forms of funding or investments for your startup, don’t overlook the potential of traditional saving instruments like certificates of deposit. For instance, a Wells Fargo certificate of deposit can offer a predictable, secure rate of return over time, providing a cushion or supplementary source of funds as you grow your e-commerce business. This form of saving might not have the high returns associated with venture capitals or angel investors, but it poses significantly lower risks.
Small Business Loan
Mainly called a Small Business Administration Loan, the SBA provides up to $1,000,000 loan to qualified business owners. This amount, however, will go through a partner lender and not directly to your bank.
Once you meet all the guidelines set by the partner lender, you will be granted a loan favorable to you with low-interest rates.
In addition to classic funding sources, it’s imperative for e-commerce startups to explore structured financial solutions like Small Business Administration loans. Understanding the SBA loan requirement unlocks potential access to significant funds–potentially up to $1,000,000 through a partner lender, with favorable low-interest rates for those that qualify.
Conclusion
The five simple ways to fund eCommerce startups are the best funding methods we have gathered. Whichever method you will choose, always remember that your main goal is to get the funds that will keep your eCommerce business afloat. Thus, get the right deal from the best investor.
