How to Finance Your E-Commerce Store

Online ShoppingRunning an e-commerce store is becoming a very popular way for people to work from home, either by selling things they’ve made or as an alternative to owning a bricks-and-mortar store.

However, there are a number of different challenges you’ll have to face if you think this option is for you. You’ll have to worry about an inventory, hiring competent employees, getting to grips with the latest technology, along with keeping a close eye on your finances and cash flow. If you’ve got a budding idea but haven’t yet decided how you’re going to pay for everything, this article is for you.

Finding the right funding for your e-commerce business can be a daunting prospect, but it’s easier than you think.

Debt or Equity?

This is the first decision you’ll need to make. Do you want to borrow money from a lender or are you willing to sell shares in your company? If you want to raise a large amount of cash, then equity is the better option. If your e-commerce business is already up and running, it shouldn’t be hard to find investors – provided your business is booming of course!

Why You Might Need More Finance

There are a number of reasons why you might want to raise money:

  • To buy inventory or expand your line of products
  • Redesign your website
  • Hire new employees
  • Cover operational expenses
  • Increase your marketing budget
  • To expand into a physical location

Ways to Raise the Money

There are a number of ways you can raise money for your business. It’s not quite as easy as it once was to obtain a bank loan because recent banking crises have led many of them to tighten their lending criteria. You often need to be an established business, which can make it difficult for those just starting out. However, there are other options:

  • Personal savings
  • Friends and family
  • Credit cards
  • Peer-to-peer loan
  • Traditional bank loan
  • Home equity loan
  • Online Lender
  • Venture capital
  • Crowdfunding

Before you start contacting any of the above, you’ll need to gather information about your business and finances. You’ll also need to have a sound business plan. In this plan should be your projected figures for the coming years, how you intend to use the money borrowed and financial statements. It will also be a good idea to have your tax records ready and available. There are a number of different companies that can help with this information, depending on where your business is located. Businesses in Australia, for example, can approach Online Tax Return for help.

One word of advice for any e-commerce business owners looking for additional finance. Only borrow or raise money if you truly need to do so. It is possible to expand your business without having to look for external finance. If you’re borrowing money without a clear plan of how you’re going to spend it, you’ll be better off waiting. Owning an e-commerce business can be very exciting. However, it does require you to make sound business decisions and to think with your head rather than your heart.

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