How Do E-Commerce Websites Get Funding?
If you’ve finally decided to try out your online business idea, you’ll probably need some funds to get you started and running. There are several ways you can acquire funds for your e-commerce website – you might have heard of a few, like Amazon loans. Read on to learn details on this and other methods for funding.
1. Bootstrapping
Bootstrapping, (from the saying “pull up by one’s bootstrap,”) simply refers to investing in yourself when starting your e-commerce website. Beginning your business by first investing your own capital makes you more devoted. One plus side of investing on your own is that you’ll steer clear of debt.
After beginning your e-commerce website, use a SaaS platform to help build your marketplace. Find your customers via any means and get them to purchase products. Once you’re assured that you have a money-making idea, then you can proceed to find investment. It will be easier to get funding to grow your business than funds to start it.
2. Crowdfunding
Crowdfunding refers to acquiring funds for your e-commerce website from large groups of people on crowdfunding websites. In return for their contributions to your income, you’ll have to offer your investors something like exclusive or free products.
Crowdfunding is among the quickest ways to acquire funding for your e-commerce website. Some of the crowdfunding platforms include
- Kickstarter – promotes businesses especially founded on or dedicated to creativity in arts and technology.
- GoFundMe – a platform for individuals and businesses alike; can be used to raise money for any cause and, therefore, is easily accessible.
- Indiegogo – specifically meant for start-ups and projects. Has a wide range of options for funding strategies and campaign types.
3. Equity Financing
Equity financing refers to selling a portion of your business in return for investment funds. Equity financing doesn’t necessarily mean you have to approach big-time investors. Some of the most common equity financings are:
Friends and Family
When starting a business or expanding it, people tend to turn to their loved ones for support. When receiving funds for your business from a loved one, you may not have to offer them equity. However, you should navigate the business deal sensitively and consider involving a lawyer.
Angel Investments
When an individual grants funds for your startup, they are considered an “angel investor”. Usually, the investor has a professional or personal relationship with you. It’s common for startups to grow from angel investments.
In these investment relationships, it’s crucial to protect yourself and your business. People sometimes make risky decisions because of the existing personal relationship they have with the investor. Maintain a preventative, defensive hold on your business’s safety.
4. Debt Financing
Debt financing involves acquiring a loan to either start or grow your business. Upon receiving a loan, you’ll need to pay interest over a given period. There are various forms of debt financing, including:
Business Line of Credit
When starting off your e-commerce website, you will create an effective timeline for the growth and development of your business. You can calculate any future expenditures over a period of time accurately. You’ll notice that not all the funds are needed at once. That’s where credit lines of business come to place. The line of credit allows you to withdraw a pre-approved amount over time.
Term Loans
Several term loans could help you jump-start and grow your business. With term loans, you’ll need to be reviewed for any previous defaulting. Your credit history and credit score will be reviewed. Also, your business cash flow and assets will be reviewed to ensure your eligibility.
Amazon Loan
Most beginning entrepreneurs opt for an Amazon loan. This is because Amazon loans offer both term loans and business lines of credit in one service. Amazon loans are easy to pay, and their approvals are quick. Amazon loans help free up cash flow in your business.
5. Inventory Financing
Inventory financing is sometimes referred to as purchase order financing. A business might take a slow toll, then pick up suddenly due to random and unexpected factors. If this is a scenario that occurs frequently, then the demand will surpass your supply.
Therefore, you will require funds to keep your business running and profitable, and that’s where inventory financing comes into place. You are granted funds to keep your business afloat, and you’ll therefore have to pay interest.
6. Mentoring Program
If you’re a first-time entrepreneur, it may be beneficial to join a mentorship program. Several online mentoring programs have amazing tools, resources, expertise, and connections. This will go a long way in helping you acquire funds for your e-commerce website.
Get Funds Today
Having reviewed the various ways in which e-commerce websites get funds, you can decide the best method for you. If you are still unsure which methods would serve your needs most effectively, contact an e-commerce-funding expert to learn more about what your circumstances mean for funding opportunities.
