How to Gain a Competitive Edge through Ecommerce Funding

Why is it called Ecommerce Funding?

This type of funding is called ecommerce funding because it refers to the process of raising funds for businesses that operate in the ecommerce space. Ecommerce is short for “electronic commerce” and essentially means the brand is conducting business online, through a website or online store. It is noteworthy that ecommerce businesses have unique characteristics which set them apart from traditional brick-and-mortar businesses. Ecommerce funding addresses the specific needs of these businesses and provides them with funding tailored to their industry.

Upsides of Ecom Funding

Here are some of the biggest advantages of ecommerce funding:

1. Growth Capital: Through ecommerce funding, brands get access to necessary capital to introduce new products, reach new markets and expand operations.

2. Enhanced Cash Flow: By providing extra capital, ecommerce funding can be a great way for ecommerce businesses to improve their cash flow. The working capital can be used to cover expenses, marketing, technology investments, and more.

3. Competitive Advantage: When utilized strategically and efficiently, ecommerce funding can support growth and help businesses scale quickly. Especially investments towards technology and infrastructure (think website performance, mobile optimization, secure payment gateways) can give many brands a competitive edge by providing a stellar shopping experience for customers.

Downsides of Ecom Funding

As always, there are also a few disadvantages that come with this type of financing:

1. Repayment Obligations: Debt financing means that the money borrowed needs to be repaid after a certain amount of time. In addition, there may be interest and other fees added to the repayment amount. This can create financial strain, especially when businesses experience unexpected expenses.

2. Limited Eligibility: This type of financing may not be available for every business and has specific requirements businesses need to meet. You can learn more about the requirements here.

3. Short-term Focus: Ecommerce funding is more focused on short-term gains  and rapid growth, rather than long-term sustainability and profitability.

Uses for Ecommerce Funding

Ecommerce funding can be used for various purposes related to the operation and growth of an ecommerce business. Some of the common areas where ecommerce funding can be utilized to gain a competitive advantage include:

Scaling the Business: Ecommerce funding allows brands to scale their operations more rapidly and sustainably. By achieving economies of scale, businesses can negotiate lower production costs, optimize their supply chain, and negotiate better supplier pricing.

Marketing: In order to be successful, businesses need to market their products and services to attract and retain customers. Ecommerce funding provides the necessary dollars to invest in various marketing channels such as paid advertising, social media, email marketing, influencer marketing, and SEO. As a result, brand awareness and increased customer engagement and other factors can give ecommerce brands a competitive advantage.

Technology Investments: Ecom brands require robust technology platforms and systems to manage their online store, handle transactions, and provide a seamless customer experience. Ecommerce funding can be used to invest in technology infrastructure and software, and help create seamless and secure shopping experiences for customers.

Logistics and Shipping: Businesses need to ensure timely delivery of their products to customers. Ecommerce funding can be used to invest in logistics and shipping infrastructure to improve the speed and efficiency of order fulfillment. Faster delivery times and reduced shipping costs can result in improved customer satisfaction, giving brands a competitive advantage in terms of customer service and overall customer experience.

Expansion: Ecommerce funding can be used to expand the business by launching new products and entering new markets. By leveraging additional capital, businesses can seize growth opportunities, penetrate new customer segments, and increase market share. This expansion can give them a competitive advantage by reaching a wider audience and diversifying their revenue streams.

Ecommerce funding can be the game-changer you’ve been looking for to take your sales and growth to the next level.

How to Qualify for Ecommerce Funding

Here are some of the factors that lenders or investors may consider when evaluating a business's eligibility for asset-based e-commerce funding:

Collateral: The value and quality of the business's inventory or accounts receivable will be a key factor in determining its eligibility for asset-based e-commerce funding. Lenders or investors will want to ensure that the collateral is sufficient to secure the financing.

Aging of Inventory / AR: Lenders or investors may also consider the age of the inventory or accounts receivable, as well as any potential risks or issues that could impact the value of the collateral.

Creditworthiness: While asset-based lending is typically secured by collateral, lenders or investors may also consider the creditworthiness of the business, including its financial history and other factors.

Financial Statements: Lenders or investors may also require the business to provide financial statements, such as balance sheets and income statements, to evaluate its financial health and ability to repay the financing.

In summary, ecommerce funding can be used for various purposes that are crucial for the operation and growth of an ecommerce business. It is important for ecommerce businesses to carefully plan their funding strategy and use the funds in the most effective way to achieve their business goals.

Learn more about ecommerce funding from Assembled Brands here.

Assembled Brands is the leading asset-based lender for emerging consumer brands. The company was founded on a desire to help growing brands finance their growth through revolving lines of credit supported by inventory, receivables and purchase orders.