Few things in life are more frustrating than having a solid business idea and struggling to find the capital to get it up and running. You can see it working so clearly you can almost touch it, but people just don’t get it when you try to explain it.
The good news is the annals of commercial success are lined with concepts people didn’t grasp at first.
So, while financing your ecommerce business might be something of a daunting task, if you really believe in it and have the drive to pursue it relentlessly, one of these methods will help you get the cash you need to get going.
The Rich Uncle
Yes, this is one of the most well worn clichés out there, but here’s a twist. On the idea. It doesn’t have to be just one relative, it can be a consortium of relatives and friends, each of whom gets a stake in the business in proportion to their investment.
The primary drawback with this one is the potential it holds for stressing your personal relationships if things don’t pan out. You might also have to endure advice from “silent” partners who may, or may not have a concrete grasp on what you’re doing.
Crowdfunding
One of the best aspects of this approach is you can put your idea in front of a lot of people to see if it really has legs. This can be a smart move before you put a lot of time and effort into fully building out your site.
In the interim, you can use a free ecommerce website builder like Shopify to provide proof of concept, so potential investors can see your vision firsthand.
The downside here is your idea will be widely circulated before it’s “set in stone”. This could give potential competitors an opportunity to usurp it. However, this also holds the potential to serve as a marketing tool—attracting people who may not have heard about you otherwise
Small Business Association Loans
While you will need to be ready to document every aspect of your business plan, experience and unique expertise, Small Business Association loans also make you examine the viability of your concept thoroughly.
Keep in mind though, rather than acting as a lender, the SBA only guarantees the repayment of your loan. You’ll still need to apply with a traditional lender. However, the SBA also coaches you to ensure your application is strong—and to make sure they won’t wind up on the hook if things go sideways.
Online Lenders
While a viable funding option, they are also a chicken/egg proposition.
In other words, most online lenders prefer to offer cash to businesses capable of demonstrating a solid track record of generating around $2,500 monthly in revenue. They also want to see you have been at it for at least a year.
So, while they aren’t sources of startup cash, online lenders can come in handy when you’re ready to scale up after a year of so of solid results.
Home Equity Loan
You could well be sitting in the source of your startup capital right now. If you currently owe less on your home than its market value, you can take a home equity line of credit for the difference and use the money to get your business off the ground.
You’ll need a solid credit rating and you’ll be required to put your home up as collateral. If you’re considering this option, you’ll want to make absolutely sure you’re capable of repaying the loan, even if your ecommerce venture is less successful than you anticipated.
As you can see, each of these methods of financing your ecommerce business has its pros and cons. However, reward is seldom realized without taking some sort of risk.
