3 Common Myths about Funding in the eCommerce Industry
If you are an eCommerce seller in one or more marketplaces such as Amazon or Shopify, you know how competitive this industry is. You need to create every advantage you possibly can to succeed and beat the competition. One of the ways to do this is by getting funding through a third-party source. This can make the difference between success and failure of your eCommerce venture but some sellers shy away from it. Here is a look at some of the common myths that eCommerce sellers usually have and how funding can provide a huge advantage to sellers who use it.
Myth #1 – The best way to get funding is through a traditional bank.
Traditional banks lend money based on credit scores and on a timeline that works for traditional businesses. eCommerce does not lend itself to either of those situations. When you work with a company that specializes in funding eCommerce vendors, they understand who eCommerce sellers are, how to work with them to meet their needs, and how to see the potential in their business where traditional banks do not.
Myth #2 – Amazon Lending is the best way to get capital for my eCommerce business.
Amazon is the biggest eCommerce selling platform in the U.S but getting funding through them is not the best idea. You cannot apply, you have to be invited and for many, that may never happen. They also control your store, inventory, and receivables once you take their money. You have no power to negotiate this either. Getting financing that you have more control over is a better idea.
Myth #3 – Getting approved for funding is difficult and time-consuming.
If you are an established company with at least 6-months of operation and consistent sales, a company like SellersFunding will work with you to get the cash you need. They work with small to large size businesses. The application process only takes about 5 minutes, and once the analysis is done, clients usually have an offer within a day.
The Advantages of Using Other People’s Money
Now you know that the myths about using other people’s money to fund your eCommerce business just aren’t true. You should also know about the advantages businesses have who build their business this way.
Paying for inventory with someone else’s money increases your ROI tenfold. When you buy inventory with your money, you calculate your ROI as a percentage of profits based on what you originally spent. By financing that inventory you only spend 5%-10% of what you normally would which takes your ROI from, let’s say, 200% to 2,000%.
In the meantime, not having to tie up your cash in inventory means you have so much more flexibility and potential on what to do with that cash. You can invest in a new product line, solve cash flow gaps, hire a new employee, improve or create a marketing campaign, upgrade your equipment, and lastly you may even invest in yourself.
Conclusion
eCommerce is a huge business, and it rewards people thataway from the standard trends, embracing new ways of doing things, and creating your own path. The sellers who realize this and adventure themselves in that direction end up being the most successful ones. Ignoring the myths about using other people’s money and realizing that there are plenty of advantages in doing so might be the decisive factor in an eCommerce Seller path.
About the Author
Ricardo Pero, Chief Executive Officer of SellersFunding, received an MBA in Finance from Columbia University and has 20+ years of experience in Corporate Treasury and Wealth and Asset Management. As an investor and advisor to companies in the U.S. and Latin America, he enjoys helping start-up e-commerce businesses of all sizes to achieve success.
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