How your eCommerce business can overcome financing barriers in 2024

February 5, 2024

eCommerce essential guide: how to overcome financing barriers in 2024

By the end of 2023 global eCommerce revenues were set to top $6 trillion, and looked highly likely to continue their upward trend into 2024 and beyond.

Given the fact that more than a fifth of consumers now prefer shopping online rather than going in-store to pay for products and services, you might be forgiven for thinking that the growth of your eCommerce venture will be plain sailing.

But any successful entrepreneur is always prepared for glitches in their fortunes. In eCommerce, there can be several reasons why revenues and cashflow aren’t always as smooth as you’d like them to be:

Seasonality - Depending on your key product profile you may be at the mercy of peaks and troughs in the sales calendar. If you’re a gifting business, for example, you’ll be prepared for slower periods that don’t wrap around the Holidays. Calm advance planning always helps, but headaches can still happen along the way if a badly timed shortfall is greater than expected.

Supply issues - Through no fault of your own you may find your eCommerce business at the mercy of untimely market forces that cause stock shortage problems. Your suppliers might struggle to stay afloat in these times of peak inflation, for example. Global turbulence in geopolitics is also creating flux in the supply chain. It can be difficult to predict what might happen next, leaving your customers disappointed - and intent on looking elsewhere.

Security scares - Cyber attacks are no longer just the plot of a spy movie; they’re a clear and present danger, and eCommerce is no exception. Cyber criminals are intent on stealing valuable data and causing disruption and damage, and they are targeting retail and eCommerce more than any other sector. It’s fast becoming a question of when, not if,  you’ll face a breach. And if your defenses don’t mitigate the problem an attack could cause instant financial damage.

Other issues will always arise, from staffing snags to rivals stealing a march through smart marketing campaigns you weren’t prepared for. All of which can leave your finances exposed and your business in need of new financing – with all of the hoops you’ll need to jump through to get it.

Funding #fails to watch out for

If you’re facing an unexpected shortfall in funds it can be an anxious time. Unfortunately, in the scramble to secure additional cash eCommerce business owners risk making matters worse for the future.

Figures suggest that alternative funding sources – liquidity that doesn’t come from a bank – now accounts for almost half of all financial assets globally. With the promise of quick cash on the table and more flexible terms than might be attached to standard bank loans they are an attractive option.

But there are watchouts you need to be aware of before applying:

Value exchange - Many options, such as Venture Capital, come with conditions attached that might do more harm than good to your ambitions. For instance, investors can insist on equity in return for backing your business. Further down the line, this can mean an unintended hit to control and profits if you give too much away in a rushed attempt to secure funding.

Wisdom of crowds? - If your eCommerce business has a reasonably large and loyal customer base this might be an option you’d consider to raise much-needed funds. But beware: the time, effort and resource that goes into crowdfunding can give poor returns and distract from finding better ways to close the gap in your finances.

Peer-to-peer scrutiny - Offered at lower interest rates than traditional loans, and with no need to secure against assets that eCommerce businesses rarely own in any case, red tape is the downside of the peer-to-peer lending option – especially when you need a quick funding hit. It’s also a comparatively unregulated area as things stand.

If these examples make funding seem like a minefield that might be best avoided, there is another option that could prove to be the answer to your financial problems.

Revenue-based financing to the rescue

Revenue-based financing (RBF) can be the perfect fit for your eCommerce business if you’re struggling to access the funds you need.

With RBF, you receive capital in exchange for a percentage of your future revenue. There’s no dilution of equity or need to secure the money against assets, and repayments are made flexibly based on weekly revenues.

RBF allows you to inject cash into inventory, sort supply-chain gaps, find funds for staffing issues or marketing strategy, and remedy other problems.

What’s more, the application process isn’t complex and the funds often hit your account within days. All in all, RBF could be the perfect fit if you’re in a financial fix.

Contact Stenn today, and read our report on RBF, to find out how we can support your business.