Brick-and-mortar retailers, small mom-and-pop stores, and all manner of other physical businesses are closing their doors, filing for bankruptcy, or otherwise radically changing their business model to adapt to online retail and ecommerce.
Many new small businesses looking to take advantage of these trends want to start an ecommerce-based business. At the same time, existing small businesses may be looking to expand their offerings into the ecommerce space.
Both of these tasks require capital to transform from idea into reality, and that’s where ecommerce business loans come into play.
The Basics of Ecommerce Business Loans
Ecommerce business loans can be a bit of a nebulous term, and you won’t find a ton of lenders specifically advertising “ecommerce small business loans” on their list of products or services.
In reality, businesses that are in need of a loan (whether for ecommerce or for another market sector) generally rely on standard small business funding.
Within this category are several standardized types of products, including small business loans, merchant cash advances, business lines of credit, debt consolidation loans, and more.
Almost any of these options are suitable for small businesses, whether they are based around ecommerce or simply looking to incorporate ecommerce into their current capabilities and offerings.
Therefore, ecommerce small business loans can be talked about in the same context as all other kinds of small business funding, with the same considerations, terms, costs, sources, and other criteria.
Let’s take a further look at some of the core concepts surrounding small business financing, including small business loans suitable for ecommerce companies.
Secured vs. Unsecured Funding
One of the most basic (and most consequential) decisions borrowers need to make when seeking small business loans and funding is whether or not they will apply for secured or unsecured funding.
At first, these terms can be confusing, and naturally lead many people to think they refer to the safety or reliability of a particular loan or credit product. In fact, they reference whether or not the loan is backed by collateral put up by the borrower.
A secured loan or credit product is one in which collateral has been pledged for repayment in the event of bankruptcy or failure to repay the loan in the ordinary course of business. From the lender’s point of view, the debt has been “secured”.
An unsecured version does not have any collateral involved in the process. For many small businesses, especially those who may be seeking ecommerce business loans, significant assets to put as collateral are not always available.
Putting up collateral for a loan is risky, especially since so many small businesses face uncertain futures, and many end up failing within a few years of their founding. It also can add weeks to the loan application process for collateral valuation.
At the same time, there are few advantages for borrowers from secured business loans and funding – simply somewhat lower interest rates.
Many business owners seeking small business funding therefore don’t want to take the risk associated with collateral, and want their cash as fast as possible. Therefore, they prefer unsecured small business loans and credit products, with no collateral requirements.
Types of Ecommerce Business Loans and Credit Products Available
There are several different kinds of small business loans and related credit products available for small business borrowers, including those that would be suitable as ecommerce business loans or ecommerce funding.
Briefly, these different types of funding include:
- Small business loans, offering a lump sum of cash up-front, which is repaid over a period of time (usually a few years) with interest, through equal periodic repayments, typically monthly
- Short-term small business loans, which are similar to the above but repaid daily or weekly rather than monthly, usually over a period of months to a year
- Business lines of credit, which work like a credit card account, providing a facility against which you can borrow, repay, and borrow again in amounts as needed
- Merchant cash advances, allowing you to pre-sell some of your future credit or debit card sales at a discount in exchange for cash up-front, the repayment of which is responsive to sales revenue and not based on calendar dates
- Debt consolidation loans, which aren’t directly used to fund a business, but to help consolidate and manage existing debt, thereby saving the business money
- Loans for women-owned businesses, which create greater access to small business funding for a demographic that has historically been discriminated against
- Bad credit business loans, with relaxed credit score requirements to increase access for businesses with bad credit, previous financial troubles, or a limited credit history
There’s a lot more to each of these small business funding options, of course, but all of them (as appropriate) could be used to fund or pay down debt for an ecommerce-based business, and therefore could be considered ecommerce small business loans and credit products.
Unsecured Small Business Loans from Private Lenders
Finally, a note about sourcing small business loans is in order. There are two primary sources for small business funding: banks and private lenders. Banks are generally the most familiar for anyone seeking small business funding, but are not always the best choice.
In a nutshell, banks don’t like to lend to high-risk borrowers, and most small businesses are considered high risk (often due to the statistical high rate of failure for newer small businesses).
As a result, they tend to limit their product and service offerings, and may not even offer small business funding at all. If they do, it tends to be the secured variety only, with collateral requirements, high credit score and revenue requirements, and a very low approval rate.
By contrast, private, non-bank lenders set their own risk metrics, and are much more likely to offer unsecured loans and credit products.
They typically have faster application processes, more easily-met requirements for eligibility, and give you a better chance of obtaining an ecommerce small business loan quickly, getting funded quickly, and getting back to running your business – a definite win as far as most business owners are concerned!
Ecommerce Business Loans from BizFly Funding
Whether you need funding for your ecommerce business, or are looking to take your existing brick-and-mortar business into the digital realm with ecommerce options, ecommerce business loans and credit products may be just what you need.
When seeking a source for those loans and credit products, we urge you to consider BizFly Funding. BizFly Funding is one of the leading private, non-bank lenders operating in the US today.
They only offer small business funding, and are therefore experts in the needs and financial particulars of the small business community.
As a private lender, BizFly Funding offers unsecured small business loans, lines of credit, debt consolidation loans, loans for women-owned businesses, merchant cash advances, and bad credit business loans – a full portfolio of small business funding options.
Many of these are suitable as ecommerce small business loans, and can provide as much as $1 million for your small business.
To find out more or to start the application process online, visit BizFly Funding at https://bizflyfunding.com.
Frequently Asked Questions about Ecommerce Business Loans
In many cases, ecommerce business loans aren’t a separate class of loan or small business funding option, any more than restaurant business loans or construction business loans are different.
They are all just small business loans that are suitable for their respective industries.
Many lenders simply offer a generic or basic small business loan product, which can be used by literally hundreds of different business sectors.
There are also other small business funding products not limited to just loans, including credit lines, merchant cash advances, and more.
It’s always best, however, to check with your chosen lender if there are any business sector or usage restrictions (it’s rare, but not unheard of) before you sign on the dotted line for your ecommerce business loan.
In terms of requirements to be eligible for an ecommerce business loan, like all kinds of funding and lending, these will vary by lender.
On a general basis, however, most lenders require you to have a certain minimum credit score, minimum monthly revenue, and have been in business for a minimum period of time.
It goes without saying that lenders may only be licensed to lend in certain markets, such as within a country or state, and therefore may impose residency or similar restrictions.
Secured small business loans and small business funding products will also require collateral be pledged and evaluated as part of the application process, whereas unsecured small business funding does not have that requirement.
Always check with your chosen lender for their minimum eligibility requirements before applying for an ecommerce business loan or any kind of small business funding, to give your business the best odds of approval.
Start-up or venture capital funding are available from some lenders, though this is usually a different area of finance than traditional small business financing.
Most firms offering small business funding, including ecommerce business loans, small business loans, lines of credit, and so on generally do not accept brand-new start-up companies or companies yet to be formed.
Most maintain a minimum time-in-business requirement of several months to as much as a year, which can vary by lender and the funding product for which you are applying.
Ecommerce small business loans are usually offered by the same lenders who offer all kinds of small business funding.
This usually breaks out into two key categories of lender – banks or traditional financial institutions on the one hand, and private, non-bank lenders on the other.
Both offer different pros and cons for small businesses in need of small business loans.
Generally speaking, banks have higher minimum eligibility requirements, and usually only offer secured (collateral-required) funding options.
Private lenders usually are more accepting of risk, with lower eligibility requirements, and often provide unsecured (no collateral required) credit and loan products.
Many small businesses in need of ecommerce small business loans therefore prefer private lenders as their source for credit and loans.
Most lenders offering small business funding, including small business loans suitable for ecommerce businesses, don’t restrict how you may use that funding (other than that it must be used for your business, not as a personal loan or for something illegal).
Some lenders may require you to disclose your plans for your small business loan during the application process, but that is far less common with private lenders and unsecured small business funding.
In any event, unlike a car loan or home loan, small business loans, including ecommerce small business loans, are considered unrestricted funding, to be deposited in your bank balance and used however you see fit for your business’ needs.
