What Are E-Commerce Loans?

As an online seller and if you run a business purely or mostly via the internet, you will know that a considerable amount of time is spent trying to optimise sales growth in increasingly competitive markets. All this has to be done with large numbers of companies are vying for the attention of online customers. Very often, payday loans are the go to product for business owners, particularly when new and without much credit history.

An e-commerce concept

One of the increasingly popular ways in which you may consider facilitating growth, is through funding. But what do you do if you lack the availability of funds to expand your business? We take a look at e-commerce loans and explore what they can do for your company.

E-commerce loans

E-commerce loans are a form of external financing that can be used as a tool for online sellers, to help a company expand when the business is struggling to get money elsewhere. These loans can be particularly beneficial as an online seller if you are trying to:

  • Find ways to fund an inventory (the number of goods and products you have in stock at any one time) to move your shop to the next revenue level
  • To have an operating cash flow, which you may be having difficulties with
  • To help find ways to pay any outstanding money owed to contractors or suppliers (known as payables)

Having money to hand

What are the Benefits of E-Commerce Loans?

E-commerce loans are primarily beneficial for your company to tide you over in the short-term. They can help you in some of the following situations:

  • If you are struggling with a sufficient amount of initial net capital to allow your company to grow
  • To help with seasonal peaks and troughs. This is usually when sales do not follow a straight line for various reasons. For example, it could depend on the nature of your business (perhaps with a spike in sales at a particular time of year) or unforeseen circumstances that lead to a dip in sales. Whatever the reason, an e-commerce loan may be able to help you with revenue fluctuations
  • E-commerce loans provide you with a certain element of financial flexibility
  • Having access to an e-commerce loan may mean you can take advantage of inventory sales at a discounted rate that you may not otherwise have been able to finance at a certain time of the year (as a result of seasonalities)

Running an online business

Things to Remember When Taking Out an E-Commerce Loan

There are some things you should be aware of before taking out this type of loan. One of the most important things you need to do is check that the lender if FCA registered, in order to protect you and your company from scammers. You can check through the Financial Conduct Authority register online, which lists all authorised lenders as well as any that have been reported for malpractice.

In addition, it should be noted that e-commerce loans cannot fix all financial problems that you may have as an online seller. For example, these loans should not be used to finance losses, as funding a low margin business with e-commerce loans is a particularly risky venture.

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