If you are an online seller who provides products and services to customers, your utmost struggle is to utilize your time and money in the most effective manner possible. The products and services that you provide to the customers is integral to your business. To keep up with the top performance and services, an online seller is required to consistently maintain the financing, through capital investment or e-commerce loans.
It is important for a seller to have competitive prices to challenge competitors, in this case, it is advisable to use tool for price monitoring.
It is important to understand the reason behind financing your business, right time and the appropriate mode of financing your e-commerce business. So, let’s start by understanding the different requirements or needs that require financing:
1) For the revenue growth of your business.
This is the most common reason for business loans. It is used by the small and medium enterprises to utilize finances to further grow a healthy and promising business.
2) To meet the short-term liquidity and difference in revenues
You can counter the fluctuations in your revenue caused by change in demand/supply or seasonal changes.
3) To grasp the opportunity of large orders
To be able to compete and develop your business, you need to target higher market order with larger sizes with external financing.
On the other side, gathering of finances or e-commerce loans for the purpose of funding a negative or low margin business needs to be avoided.
Whenever, you want to finance your e-commerce, you need to consider following major components that will eventually shape your financing or loans for the long-run.
· APR or Funding cost
It is the cost of funding a loan. The interest rate or the APR (Annual Percentage rate) is the fixed percentage that you will be required to pay on your principal amount.
· Modes of repayment
You can pay your loans in a single payment at maturity called the bullet loans. Also, you can pay in equal installments through amortizing loans.
· Maturity period or Term of loan
Longer the maturity period or the overall duration of the period, higher the interest rates or cost of funds.
E-commerce loans in the current banking industry
Most of the banks do not look at your online selling history therefore, it is difficult for yourself to show your creditworthiness. If you fail to provide appropriate data that is accepted by the banks or other lending institutions, your credit score is calculate lower than potential score. This will eventually result in higher costs of funding and difficult terms and conditions for your loan.
However, nowadays, there are a number of lenders who specialize in providing loans for e-businesses. They can connect more than one of your online accounts to analyze your creditworthiness. Therefore, it is important for you to assess the bank offerings and the services they provide to be able to get the best possible e-commerce loans for your business.
Learn more :
Ecommerce Loans: The Online Sellers’ Guide to Financing
10 Ways to Finance Your Ecommerce Business.