One issue that nearly every business owner has run into at one point or another is cashflow. If your business manufactures, sells, or distributes physical goods and is in growth mode it’s essentially a foregone conclusion that you’ll have periods where cash is tight.
The traditional methods for solving this generally revolve around heading into a bank and working with a business banker to establish things like credit cards, lines of credit, term loans, or other similar financial products. If this isn’t an option most business owners are forced to revert to selling equity in their business as a means to generate the necessary cash flow. Obviously for most business owners this is the last thing they want to do while their business is rapidly growing.
Due to the nature of eCommerce businesses and the rapid growth that tends to accompany them most “digital” entrepreneurs know this issue too well. They also likely know how difficult it is to not only explain your business model to a traditional banker but also meet the requirements necessary for getting financing.
That said a variety of services have recently popped up to help address this specific issue for ecommerce sellers. Take a look at the 3 offerings below that may be the perfect fit for your growing business that may be dealing with a cash crunch (or hopefully planning ahead for an inevitable one down the road.)
Financing Options For E-Commerce
Fortunately, there are ways to get the cash you need for your business. That is, there are various financing options available. Don’t have the money to buy your next batch of inventory? You can rely on one of these three services:
Brex offers a credit card specifically designed for e-commerce businesses. How is it different from their other cards? For one thing, it comes with longer payment terms. This allows companies to use it for their inventory financing cycles. Put it simply, it’s an appealing option for those who need a short-term cash infusion. It allows them to keep a steady supply of inventory without running out of money without being forced to pay insanely high interest rates that accompany most short term loan offerings.
One of the best things about it is that there are no annual fees. What’s more, is that there are no interest charges. Ultimately, how it works is that you get 60 days to pay your bill in full. It’s also worth mentioning that there are no foreign transaction charges—so you won’t have to pay extra just for accepting foreign currency.
Once you sign up (it doesn’t affect your credit score), you’ll be issued with a virtual number, which will be effective immediately. From there, you’ll eventually get a physical card as well. As far as the credit limit goes, it’s quite generous. That is, it’s based on up to 75% of your projected monthly sales (up to a maximum of $5 million).
As an added bonus, you’ll get to enjoy various deals and discounts on several platforms. For instance, you’ll be able to get preferred pricing on Google Ads, Instacart, Amazon Web Services, Snapchat, Zentail, Clear Channel, Expensify, and more.
Current Signup Bonus For Brex – $250 Amazon Giftcard
Best of all you can currently get a $250 Amazon gift card when you sign up for Brex. To take advantage of this promotion just click the following link to activate the promotion.
2. Amazon Lending
Did you know that Amazon offers business loans to eligible companies? It’s called Amazing Lending. Never heard of it? We don’t blame you. After all, not a lot of people talk about it. Heck, the site doesn’t even have a proper landing page! Don’t let that discourage you, though—it can be a lifesaver when you’re looking for a loan. Started in 2011, its purpose is to help small businesses expand their commerce operations by offering them quick and easy financing options.
There’s just one thing—the program is only available to those who sell on Amazon Marketplace. On top of that, it’s invite-only. In other words, you can’t just apply to the program. The only way for you to take part is if you receive an offer from Amazon. As it is, these invites are sent directly through an individual’s Seller Account.
How does Amazon Lending work? You can pretty much think of it as a merchant cash advance. Basically, Amazon will give you a lump sum, which you can then use to maintain your inventory. While the exact interest rates haven’t been disclosed, it is lower than most business credit cards (some sellers have reported that it’s as low as 6%).
As far as repayment goes, you’ll be expected to pay back the funds through monthly payments. In fact, you won’t even have to do anything—Amazon will take the amount directly from your Seller Account. Depending on your situation, this can either be a good or bad thing. For instance, it means that you won’t have to worry about late payments.
What Are the Requirements For Amazon Lending?
There are certain requirements that you have to meet for Amazon to send you an invite to the program. For one thing, you must have a selling history of at least 12 months. This means that new sellers won’t be eligible. Not only that, but you must have sold at least $10,000 worth of products in the last 12 months. Of course, they’ll also take into consideration your reviews. That is, you can’t have any major complaints filed against you in the past six months.
Payability is a financing firm that offers cash flow solutions for those who sell on e-commerce platforms. More specifically, they provide Amazon sellers with daily cash flow so that they can expand their inventory (yes, even on weekends). This, in return, will allow them to grow and scale faster. Basically, how it works is that they’ll provide the individual with 80% of their Amazon earnings from the previous day. As for the remaining 20%, it’s reserved to cover chargebacks and returns. You will, however, get it every two weeks.
You’ll also get the seller card, which will give you 2% cash-back on all of your purchases. Essentially, it’s a virtual credit card—that is, you can use it in the same way as a regular credit card (you won’t get a physical copy). This will allow you to save a bit extra, which you can then put back into your products.
How much does it cost? They’ll take a 2% cut from the total amount that you receive from Amazon. For example, if you made $10,000 in sales yesterday, you’ll receive $8,000 payment today. The remaining $2,000 will then be sent in two weeks, minus the 2% fee of $40.
How Do I Sign Up For Payability?
You can sign up on their website. Once you’ve created an account, you’ll be asked to type in your personal information, as well as your business’. From there, they’ll generate a contract, which you’ll have to sign. Afterward, you just have to wait for verification. The second you’re verified, you’ll be able to connect Payability with your Seller Central account. It seems like a lot on text, but the actual process only takes 10 minutes or so.
Other Tips For Dealing With Cash Flow Issues
1. You’re Overestimating Future Sales
Optimism is great but you want to keep it realistic. The last thing that you want to do is overestimate your future sales volumes. That’ll only put your cash flow at risk. For example, things can easily become a problem if you buy too much inventory. You won’t be able to sell it quickly enough to make a profit. Not to mention that it’ll take up space!
2. Prices Are Not Optimized
A common mistake that businesses make is that they price their products too low. While this can help to reel in customers, it can have a major effect on your profit margin. Given that, it’s crucial to set your prices properly. Don’t hesitate to do some research. You want to figure out how you can meet your financial obligations.
3. You’re Not Controlling Your Inventory
Excess inventory can cause problems. After all, it’ll tie up your cash flow. At the same time, you don’t want to have key items out of stock. If anything, that’ll only cause you to lose clients. Given all that, it’s crucial that you fine-tune your inventory. Ideally, you want to make it so that you stock products for the shortest time possible before it’s sold.
4. There’s a Gap Between Your Sales Payout and Inventory Purchases
Most e-commerce platforms payout weekly or monthly. Ultimately, what this means is that there’ll be a gap between when you’ll be paid and when you’ll have to purchase more inventory (you have the money but you can’t use it when you want to use it). This is especially a problem for fast-growing companies as you’ll have to buy more products to meet the new demand.