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Whether you are a start-up e-commerce startup, a thriving online business or a well-established brand, the transition to the next level requires capital. You may need upfront financing to get your business up and running – establish supply channels, research the right niche, finalize packaging, and more.
You may be growing rapidly and need funds to order inventory, avoiding stocks, and competing with rival vendors. Expansion to other markets and geographic areas also requires additional capital.
You may also need urgent capital to address a key strategic direction (rebranding, expanding the product line, or growing your supplier base). Establishing good relationships with lenders, as well as with your suppliers, is crucial to obtaining favorable conditions for years, driving your growth as a new seller.
Related: What is Amazon FBA? A Compliance Guide for Amazon Business
Before seeking funding, take the time to decide exactly why you are looking for funds: what are your business goals? Where will you spend the funds? Do you have a specific business plan? Are you comfortable with the repayment terms? Be exactly what you need and don’t be tempted to borrow more than that.
The companies we have grown and successfully positioned for a profitable exit, chose one of the following financing options to take their FBA business to the next level:
1. Amazon Loans
One of the easiest financing options for new FBA companies with excellent customer reviews, no complaints in the last 6 months and total sales of at least $ 10,000 last year, is the home equity loan service. ‘Amazon. Sellers can apply for term loans ranging from $ 1,000 to $ 750,000 with interest rates ranging from 3% to 16%.
Amazon also has a line of credit option available, in partnership with Marcus by Goldman Sachs, in which sellers pay interest only on the funds used. This, however, is relatively expensive with interest rates rising to 21%.
While you get quick approvals (1 to 5 days), there are some downsides as well. Term loans have a short-term repayment schedule. Therefore, monthly payments are high, regardless of your sales. Also, the funds can only be used to replenish Amazon inventory. Instead, funds from the line of credit can be used for other needs, such as personal and advertising.
Related: 3 Things to Consider Before Having an Amazon FBA Business
2. Fintech Loans
A large number of technology-driven new-age companies enable fast and convenient financing for growing FBA companies, with a steady cash flow with impeccable financial performance. Vendors like Payability and Sellers Funding offer fast financing of up to $ 250,000, depending on your monthly income, if you have at least $ 5,000 to $ 10,000 in monthly sales.
A single financing option, AccrueMe offers up to $ 1 million in financing to sellers with at least a 6-month history, no interest, no monthly payments, and no loss of ownership for the seller. As Don Henig, co-founder of AccrueMe, rightly says, the need for funding:
“The beauty of being an FBA marketer is that once you’ve established a profitable product, you have an almost unlimited profit opportunity because of the reach of the Amazon market. The only limit is the capital of a The sooner a seller can secure and deploy the necessary capital, the sooner they can protect and expand their market share and profitability.The delay in the deployment of capital, only yields the potential for profit to competitors. so important to prioritize access to capital. “
3. Commercial loans in terms of alternative lenders
Term loans have been a staple of traditional banks for decades. But alternative lenders and fintech companies have also started offering term loans to e-commerce companies. These loans are suitable for large and established FBA companies in the later stages of their life cycle.
Because income numbers and credit history are taken into account, these term loans are difficult to secure for start-ups.
Related: Term Loans Versus Lines of Credit: Which Is Right For Your Business?
4. Merchant Cash Advances (MCA)
Now, even new e-commerce companies can take advantage of MCAs to borrow up to $ 500,000 and return funds based on a fixed percentage of daily or weekly sales, depending on the agreed interest rate or factor ( ranging from 1.1 to 1.5). .
MCAs are a good fit for new businesses that have relatively low credit scores and don’t have a decent cash flow (at least $ 10,000 in monthly income). Approvals are quick (often within hours), with minimal documentation, and there are rarely any credit checks or collateral requirements.
However, you should be wary of high interest rates (up to 25% -30% APR) compared to other options and the shorter payback period leading to higher repayments.
5. Peer loan
You can get financing directly from investors who like your business and trust your credit and sales history. This works well if you operate in a niche industry or have a unique product.
This financing option is much more flexible compared to term loans and MCAs, as the credit score is not the only criterion used to judge your business. But approval times are longer and interest rates can go up to 9-10%. Also, things like credit checks, financial records, and detailed business plans are a must.
6. Branded accelerators
Ecommerce brand accelerators are experts armed with strategic and technological expertise to grow the value of your business. When you partner with a brand accelerator, industry experts analyze the details of your business and develop a unique growth plan to scale it to new heights.
They don’t bill you for their services until your valuation really sees a jump, and then they’ll charge you a small percentage of it. increase in valuation. This makes branded accelerators an economical option to finance the growth of your e-commerce.
Your funding journey should start with clear goals about how you will use the funds. FBA funding can provide you with a launch platform to move to the next stage of your business and scale it the way you want.
Finally, don’t think that debt is a bad thing on your balance sheet. Money attracts money and funding is essential for this to happen.