17 Ecommerce Funding Options Available for Beginners (2024)

It’s a common misconception that you need tens of thousands of dollars to start a business. In fact, ecommerce funding is more accessible than ever before. 

You can always bootstrap in the beginning, then look for additional funding options as you grow.

Ecommerce Funding Options

1. Ecommerce Funding Platforms

This is a popular type of funding for ecommerce businesses in which you borrow capital from eCommerce platforms or specialized eCommerce funding companies, such as Wayflyer, Payability, and Shopify Capital.

In many cases, you only need to repay the funding once your eCommerce starts making sufficient money.

Many of the platforms also allow you to retain ownership of the store, so you can create it in your vision.   

Benefits

• You’ll only need to repay with the money you make from your eCommerce sales, and the amount you pay is flexible.
• Funding is available more quickly than with other methods like loans or grants. 
• You can retain control of your eCommerce store.

Drawbacks

• You’ll have to repay the funding, unlike grants or bootstrapping. 
• There’s pressure to make more quickly to pay back your funding. 
• There’s a risk of not making a profitable store. 

2. Crowdfunding

Crowdfunding is known for being used to raise money for charity, but it’s also an easy way to raise business finance.

Crowdfunding involves setting up a page using a crowdfunding site like KickStarter or GoFundMe. Anybody with the link can then donate money using the web page. 

Crowdfunding suits people who are unable to get bank loans and have friends, family members, colleagues, and acquaintances who would be willing to donate. 

Benefits

• You don’t have to pay the money back or pay any interest. 
• Anybody with the link can donate, so you get money from a wide range of sources. 
• It’s great if you can’t access official funding. 

Drawbacks

• This method relies on other people’s kindness. 
• The amount you raise depends on how much people are willing to donate. 
• You may feel uncomfortable asking for money. 

3. Invoice Factoring

Invoice factoring is a way to get quick cash flow, but it’s not the most reliable form of online store financing.

Essentially, you send a copy of your invoices to a factoring company who then lend you a percentage of that invoice. 

The factoring company then pays the full balance of the invoice to you once it receives payment from your customer and subtracts its free.  

Benefits

• Invoice factoring keeps you in positive cash flow.
• If a number of your invoices are outstanding, factoring can get you cash quickly.
• You may find it easier to attract investors with more ability to plan and better cash flow.

Drawbacks

• You pay a fee for borrowing money from the factoring company.
• You’re still liable for bad debts if your customers don’t pay.
• Once you start using invoice factoring, it can be hard to stop unless you get an investment.

4. Revenue-Based Financing

Revenue-based financing is a type of funding for ecommerce that helps businesses find capital without incurring interest or giving up equity.

With this financing method, you promise to repay funds using a portion of future revenues. 

Revenue-based financing works well for business owners who require cash flow but can’t get a traditional bank loan or grant. They can be hard to secure, however, if you aren’t already making revenue.

Benefits

• This method is less expensive than methods that require giving up equity.
• You can maintain control of your business. 
• The repayments tend to be more flexible than other types of financing. 

Drawbacks

• You must produce a decent revenue, so it’s not ideal for startups. 
• There’s minimal regulation currently in this sector. 
• There’s less money available than other methods like bank loans or venture capital. 

5. Merchant Cash Advances

A merchant cash advance is a form of ecommerce seller financing that sellers repay using a percentage of sales.

This type of financing is best for businesses that accept payment by card from customers, and you only have to repay the loan once your business has cash flow. 

To get started, a lender will look at the average value of card sales and offer you a lump sum of cash. You then repay the lender with a percentage of your monthly card sales. 

Benefits

• You’ll get fast access to funds.
• There are no fixed monthly repayments; you’ll simply pay the lender an agreed percentage of your card sales. 
• There’s no collateral required upfront. 

Drawbacks

• Merchant cash advances are one of the most expensive ways to finance your small business. 
• The industry is relatively unregulated, putting you at risk. 
• Funds get deducted from your daily payments. 

6. Inventory Financing

Inventory financing works best when you’re in need of a short-term boost to your cash flow. Inventory financing involves offering your inventory of products as a form of collateral.

You’ll then use the funds to buy more inventory. If your business is unable to repay business funding or loans from a lender, the inventory will then be sold to cover the debt. 

Inventory financing works well for businesses experiencing a delay between paying from inventory and receiving payment from retailers. 

Benefits

• You can leverage your inventory instead of other assets like your home. 
• This type of financing works well with businesses of all size. 
• Inventory financing is helpful for businesses wanting to grow by increasing their product line. 

Drawbacks

• This type of loan can only be used to purchase more inventory. 
• The interest tends to be higher than with other financing methods. 
• This financing method typically incurs fees beyond regular interest. 

7. Credit Cards

You can apply for a business credit card which gives you access to a line of credit.

A credit card involves borrowing money to spend, which you don’t have to pay back until one or two months later. Failing to pay it back can incur interest. 

Credit card borrowing works best if you have a stable income so you can be sure you’re able to pay back the amount and avoid ending up in debt.

Contact the bank you have a business account with to enquire about a credit card. 

Benefits

• Credit cards are relatively easy to get.
• You can start spending the money immediately. 
• If you pay back your credit card payments on time every month, you shouldn’t have to pay interest. 

Drawbacks

• If you don’t pay off your credit card for a few months in a row, you could get into debt. 
• There’s a credit limit on how much you can spend. 
• Having previous debt can make it difficult to get a credit card. 

8. SBA Loans

The Small Business Administration guarantees some loans for online businesses to make it easier for budding entrepreneurs to take out loans.

The SBA does this by providing collateral or something else to make the bank feel that lending you a loan is less risky.

After all, the bank’s main objective is to reduce risk. You can apply for an SBA-guaranteed loan in your area online. 

Benefits

• Working with the SBA makes it easier to get an ecommerce business loan. 
• The risk usually associated with a loan is reduced. 
• You can borrow substantial amounts of money you might be unable to access otherwise. 

Drawbacks

• The number of SBA loans is limited, so you’re not guaranteed support. 
• Unlike with money from friends and family, you have to pay back bank loans. 
• Like regular bank loans, you’ll have to pay interest. 

9. Grants

Grants for ecommerce businesses are sums of money given for free, usually to support studying or opening a business.

You can get a government grant for starting a business, but the government typically reserves grants for businesses that benefit the community.

These businesses tend to be engaged in research and development or work not for profit. Check your eligibility and how to apply for this ecommerce business funding here. 

Benefits

• You don’t have to pay an ecommerce grant back, unlike business loans. 
• You can get a significant amount of money from the grant.  
• There’s no interest involved, unlike with a bank loan. 

Drawbacks

• Not as many businesses are eligible for grants as loans. 
• There’s an application process you need to go through that might take a long time. 
• You may have to adjust your business model to make it suitable for a grant.

10. Friends And Family

A common way to start your own business is with online business funding from friends and family.

This method typically involves asking loved ones for money that they may or may not ask you to repay once your business is profitable. 

This method is best suited for people who are unable to get larger sums from sources like bank loans and grants. 

Benefits

• Some friends or family members may lend you the money with no expectation of repayment.
• The money is easy to access. 
• There’s no interest involved, unlike with bank loans. 

Drawbacks

• You’re limited to the amount of money friends and family can offer. 
• This method relies on the kindness of others. 
• You may feel pressure to repay the money if loved ones need it. 

11. Peer-to-Peer Lending

Peer-to-peer lending is a way of borrowing money that doesn’t really go to an external entity such as a bank.

Instead, you lend money directly from another individual, such as a business owner whose company has had financial success. 

You can easily apply for peer-to-peer lending on websites such as Prosper. Various websites have niches, meaning some are easier to access with a poor credit score. 

Benefits

• If you’ve got a good credit score, many of the peers wanting to lend offer better interest rates than banks. 
• Many platforms allow you to pay back your loan early without penalties. 
• The process tends to be quicker than applying for other types of ecommerce finance. 

Drawbacks

• You’ll have to repay interest. 
• If you don’t pay your loan back on time, lenders may get debt collection agencies involved. 
• Depending on the site, you may have to pay additional fees on top of the interest. 

12. Equity Financing

Equity financing is a way to get ecommerce funding that works better for businesses that are already established.

It’s perfect if you need an injection of cash to make investments, increase ecommerce working capital or release new products. 

Equity financing involves raising funds for your company by selling shares in the business. You’re basically selling ownership of your company for cash.  

Benefits

• It’s a quick way to get extra cash. 
• You don’t have to repay the funds. 
• Equity financing doesn’t place additional financial pressure on the company like a bank loan might. 

Drawbacks

• You have to give investors an agreed percentage of your company. 
• Any future profits will have to be split with investors. 
• Investors will have to be involved in future decisions about your company. 

13. Small Business Loans 

Small business bank loans for Shopify stores are available from most commercial banks.

Banks are reluctant to take risks, so they want to be as sure as possible that you’ll be able to pay back the business loan for e-commerce.

To convince the bank, it can be helpful to put together a detailed business plan and emphasize any previous business experience you have. 

Don’t forget to factor the interest into your budget. 

Benefits

• You can borrow significant amounts of money without relying on people you know. 
• The money comes from a legitimate, trusted source. 
• You can usually repay the loan over a long period of time. 

Drawbacks

• This form of ecommerce financing requires you to pay back interest on top of the loan. 
• If you can’t repay the loan, the bank can seize your assets. 
• The bank has strict lending criteria, so getting a loan can be difficult. 

14. Bootstrapping

Bootstrapping is a way of gathering ecommerce startup funding without the help of external capital, such as loans and investors.

People can bootstrap by taking on extra income to fund the business, using credit cards, remortgaging a property, or borrowing money from loved ones. 

Bootstrapping essentially involves raising as much money as possible by yourself. Bootstrapping doesn’t usually raise large sums, but it does avoid the need for a costly bank loan. 

Benefits

• Bootstrapping removes the pressure of owing money to banks or investors. 
• You don’t need to pay back interest. 
• If you change your business idea, you can pivot easily without anybody else’s input.  

Drawbacks

• Your personal money is at risk if the business doesn’t make a profit. 
• You often don’t raise as much capital as you would using other methods. 
• You don’t have support from investors with planning your business. 

15. Venture Capital 

Venture capital is a form of private equity and investment where investors inject ecommerce capital into your business in exchange for equity and a percentage of control or revenue from your business.

Often, venture capitalists will also provide advice and expertise to the borrower. 

These types of ecommerce investors are more likely to invest in businesses with strong potential, thanks to a completely unique product or signs of rapid growth.

To apply, look for VC companies online, such as Intel Capital and Accel. 

Benefits

• Many investors can bring expertise to the table to benefit your business. 
• There’s no need for repayments and no interest involved.
• You’ll enjoy network opportunities thanks to the investor’s business contacts. 

Drawbacks

• You give away shares of your company and some control over the way it’s run. 
• It can be hard to know which venture capitalist offers the best deal. 
• You can feel pressure to grow quickly to please investors. 

16. Asset-Based Lending 

Asset-based lending involves being given an ecommerce loan that uses your assets as collateral or security. This means if you’re unable to pay the loan, the assets will be seized.

These assets can be inventory, property, or even intellectual property. 

Many of the biggest commercial banks, including JP Morgan offer this type of lending. To find the right lender for your needs, search online. 

Benefits

• This may get you higher levels of funding, especially for a property. 
• You won’t necessarily have to file as bankrupt if you can’t repay, you’ll simply give up your assets. 
• Asset-based lending can make it easier to get a loan. 

Drawbacks

• You’re risking personal or business belongings. 
• You’ll likely have to repay the loan with interest. 
• You might have to pay higher interest rates than with traditional bank loans. 

17. Line of Credit

A line of credit is a pre-agreed borrowing limit that you can access any time you need cash for your business.

This arrangement is usually agreed upon with a financial institution, such as a bank. You and the bank will agree on the maximum amount you can borrow. 

A line of credit usually comes with built-in flexibility and is great when you’re short on cash flow. To apply for a line of credit, discuss it with your bank.

Benefits

• Easy access to money when you need it. 
• Lines of credit tend to offer more flexible repayments than other financing methods. 
• You can borrow money repeatedly, not just in one lump sum. 

Drawbacks

• The interest rates can be high if you don’t repay the credit straight away. 
• There tend to be penalties for late repayments. 
• Because credit is so easy to access, it’s tempting to spend more than you can afford.