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Best E-Commerce Business Loans

Managing an online stores can be costly, you need to make sure that you have enough stock and to ensure the smooth delivery of orders. If you want to start a e-commerce business, or expand your current e-commerce operations, you may require funding to realize your true business vision.

Written by Brian O'Connell, updated on 10/24/2021
Financially Reviewed by
Gordon Scott, CMT on 6.1.2021

What is E-Commerce Financing?

E-commerce financing is similar to small business financing, primarily as it directly involves a lender and a business provider. The business leverages well-established e-commerce platforms to offer products or services to buyers (i.e., customers.) Needing cash to market their services and their operations, e-commerce companies reach out to financial lenders to get the capital they need to run their business.

Recommended Reading: Best Pharmacy Business Loans

A Quick Overview of the Best E-Commerce Financing Options

You can use an e-commerce business loan to purchase inventory or cover staff expenses. The table below summarizes the loan types available to e-commerce businesses. 

Recommended Lender

Financing Need

Best Loan Type

Loan Features 

Fora Financial

Fill out inventory orders,  update current technology

Merchant Cash Advance

  • Amount: Up to $500,000
  • Term: No set terms
  • Interest: One-time factor rate
  • Time to get the loan: Up to 24 hours

Fundera

Incremental expenses, fast cash

Business credit card

  • Amount: Limits depend on credit score
  • Term: Lender-specified
  • Interest: Lender-specified
  • Time to get the loan: 5-7 days

LendingClub

Startup and running costs

Short-term loans

  • Amount: From several thousand to over $1 million
  • Term: From a few months to 20 years
  • Interest: 5% and 35%
  • Time to get the loan: 1-3 months

SmartBiz

Cash for business growth

SBA loans

  • Amount: Up to $5 million
  • Term: Seven years for working capital, 10 years for equipment, and 25 years for commercial real estate
  • Interest: Fixed or variable rates
  • Time to get the loan: Up to 4-8 weeks

BlueVine

Large purchases

Invoice factoring

  • Amount: Based on the invoice
  • Term: Depends on the client agreement, usually up to 3 months
  • Interest: 0.5% - 6%, APR: 28% - 60%
  • Time to get the loan: A few days up to a week

Best E-Commerce Business Loans Explained

This part focuses on the small business loan types outlined in the above table in greater detail. We also discuss what each recommended lender brings to the table.

1. Fora Financial - Best for Merchant Cash Advance

To improve your online presence with your E-Commerce business you need a solid web page and platform, this can be done with a merchant cash advance. You can easily upgrade your inventory and get more stock to supply faster to more customers with this type of finance.

Fora Financial is recommended to use if you need an easy and fast loan to help with expanding your business without problems. You can have the money available within 72 hours after approval to use without restriction for your business.

You do not need any collateral to be approved for a merchant cash advance at this financial service and have no set term to pay back the loan. There are some benefits in the form of bonuses and discounts if you pay back the loan in a short period.

2. Fundera - Best for Business Line of Credit

A business line of credit is an ideal option if your business credit score isn’t solid. A business credit card works much like a personal credit card, however, the limit on funds is usually larger. 

What’s great is that if you refill your card before the start of each month, you won’t need to pay any interest. Plus, credit cards are generally easy to qualify for. If your business has just started out, and you as its owner don't have the credit score to qualify for other loans, a business credit card is a solid option. You can use the financing from your credit card to cover any of your expenses. 

Fundera is a good option for acquiring startup capital. In addition to SBA loans and equipment financing arrangements, Fundera also offers low-interest business credit cards. One of the requirements you should meet is a gross monthly sales of at least $10,000.

3. LendingClub - Best for Short-term Loans

Term loans provide you with a sum of money and you will be required to pay interest on the principal. They are predictable, can be acquired in just a few days, and can cover a wide range of expenses. Term loan amounts range from a few thousand through to millions of dollars. However, to qualify for a term loan you usually need collateral. 

You should consider this loan type if your e-commerce business has established credibility and if you are in need of a relatively large amount of money. This type of loan is particularly suitable and useful if you wish to expand an existing e-commerce business. 

LendingClub is known for helping small businesses and startups get started. Unlike most nontraditional lenders, this company provides longer-term loans of up to $500,000, lasting for up to five years.

4. SmartBiz - Best for SBA Loans

Small Business Administration is a federal agency that backs up credible businesses via approved lending partners. There are several types of SBA loans. However, the SBA 7(a) loan is the most suitable for small businesses that have not had enough time in business to prove themselves. 

Nevertheless SBA 7(a) loans are hard to qualify for. If you do manage to meet the lending criteria an SBA 7(a) loan will provide you with the cash you need with flexible longer terms and lower interest rates. 

If you have long-term plans for your e-commerce business and require quite substantial funding, this loan type is for you. While the approval process can take time, it is often worth the time and effort. 

SmartBiz is a certified SBA lender. It offers competitive rates and fast approval. For an SBA loan, you need a credit score of 650 and a business score of at least 150. While this lender doesn't require any fixed income figures, you need to prove that you have sufficient turnover.

5. BlueVIne - Best for Invoice Factoring

If you are selling to other businesses (i.e. B2B) your e-commerce shop will most likely not see payment for a few months. You may also need to make sizable purchases, which could leave you without operating cash. A short-term invoice factoring loan is an excellent way to go for businesses that find themselves in this situation. 

With an invoice factoring loan, you sell your outstanding invoices to the lender. Once your invoices are paid the lender will send the discounted amount back to you. 

If your business suffers from a cash flow gap, invoice factoring can cover this gap for a short period. In other words, an invoice factoring loan can tie you over while you wait for your clients to pay, as per your agreement.  

BlueVine offers short-term loans with fast approval periods, which is ideal for invoice factoring. BlueVine provides loans to borrowers with a credit score of 600 and higher that have been in the business for at least six months. Ensure you have enough turnover to qualify for this lender (at least $10,000 monthly) before applying.

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Why Do you Need an E-Commerce Business Loan?

Running an e-commerce business can be costly, let's break down possible e-commerce business expenses:

  • E-Commerce website ($5,000 to $10,000): Sure, you can DIY your e-commerce website using the simple tools offered on the market, but if you intend to go big, you will need to set a good basis for possible expansion. Ensure the website has all the attributes you need now, and consider the features you will need in the future, including excellent CRM software.
  • The domain name ($2 - $20 per year): This is the most overlooked recurring payment.
  • Hosting (at least $100 per month): You might think that a shared hosting of, say, $20 is a good idea money-wise. However, you're working with customers’ details, and as such hosting security can be a considerable risk. Invest in a decent service and protect your customers.
  • Staff ($200,000): It's easy to get overwhelmed by all the different hats you will have to wear as an e-commerce business owner. Plus, fast growth is one of the defining properties of a successful online business. You need to plan for fast growth so that you won’t be caught off-guard if this does in fact happen.
    1. Web developer ($53,000): Professionally made websites need professional maintenance, so you'll have to keep a contractor on hand to fix bugs.
    2. E-commerce manager ($59,000): Once your business takes off, you'll have to hand over the day-to-day tasks to a manager so that you can focus on other aspects of your business. 
    3. Director of e-commerce ($100,000): Although hiring for this position is probably far down the line, it's good to include this expense in your plan.
  • Insurance and fees (local rates): You'll have to research this well, as each state and city may have different rules regarding e-commerce business operations and permits.
  • Payment processor (variable): You should make sure that the payment service you use to receive funds from your customers is secure, fast and straightforward. 
  • Marketing (variable): Each additional marketing channel means an added cost. However, marketing is essential to the success of any e-commerce business. You may wish to think about hiring a dedicated marketing team. Later, your business may benefit from a content production team (quality photos, videos, and blogs are crucial to online success).
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How Does E-Commerce Financing Work?

Like any loan, the financial lender delivers an agreed-upon amount of capital to a qualified e-commerce company and charges interest and service fees to the borrowing company. Under the terms of the loan contract, the borrower repays the lender on a fixed basis (usually every 15 or 30 days) until the loan is fully repaid.

Before delivering the loan, the lender will vet the business and financial credentials of the e-commerce e-company, via a risk analysis process that focuses on business revenues, credit health, cash flow, and loan repayment history, among other factors.

Once the financial institution green-lights the loan, an automated system is established that delivers the funds to the e-commerce company and, in return, allows the borrower to repay the loan on the specified dates via electronic bank payment.

How to Qualify for E-Commerce Financing? 

While lenders will generally review common loan criteria like credit scores, cash flow, and repayment history, e-commerce companies seeking financing should be prepared to expect a full financial review from lenders who may use differing qualification factors.

The best path forward for e-commerce company borrowers is to fully review all business credit reports and, if necessary, consumer credit reports, and make sure those reports show a borrower in good financial standing.

The stronger the credit report, the better an e-commerce company’s chances of landing financing at the desired level. E-commerce company borrower should also be prepared to answer questions on how long the company has been in business, sales revenues, debt-to-capital income ratios, any tax records, business plans, and other company financial documents.

If that documentation is in order and demonstrates the borrower is a good steward of the company’s finance, that also boosts the odds of the business qualifying for e-commerce financing.

How To Apply For E-Commerce Business Loan?

In general, e-commerce financing is available through traditional finance lenders like banks, credit unions, angel and venture capital investors, peer-to-peer lenders, and through government agencies like the U.S. Small Business Administration.

Once the best lender is identified, the e-commerce company should have the proper loan documentation prepared, including:

  • Bank and tax records
  • Accurate credit reports
  • Company financial statements
  • Personal financial records and credit reports, if the borrower is taking out financing in his or her name, and not the company’s name.

The lender will provide a loan/financing application that the e-commerce company needs to complete accurately and thoroughly. That’s important, as any missing or incorrect application information may be enough to have the financing request rejected.

Expect the application to include requests for business and personal information, like name, address, phone number, email address, banking partner, credit information and, if needed banking and tax information dating back two years. The e-commerce company may also be asked to include company financial information lie annual revenues, balance sheets, profit and loss statements, and existing debts, along with any relevant business permit or articles of corporation.

Once the application is complete, the e-commerce company submits the application to the financing company, which will review it. It’s not uncommon for lenders to reply with questions or request more information to better vet the loan application.

If the loan application is approved, the e-commerce company should review the loan terms, review the loan contract’s fine print, and have the lender layout the final finance closing process. It’s a good idea to have a trusted business associate, financial advisor, or attorney review the loan contract for accuracy and thoroughness.

Tips for Getting an E-commerce Business Loan? 

While there’s no shortcut to obtaining e-commerce financing, there are several savvy tips to help get the job done. These suggestions are at the top of the list.

  • Expand your range of financing possibilities. Focusing on a single e-commerce financing provider may be short-sighted, as not all lenders are alike. To cover all the bases, obtain financing quotes from at least three lenders and make sure to review their loan terms.
  • Know what you need. Not all e-commerce companies are alike, either. Consequently, one e-commerce company may opt for an equity line of credit to tide them over lean seasonal business periods. Or, another e-commerce company may require a fixed loan to cover its financial needs over the course of a year or more. Knowing what your e-commerce financing needs is a big “Step One” in getting the financing suited to your company’s unique needs.
  • Explore financing alternatives. Not all e-commerce financing models are alike, either. If a bank or other traditional lender doesn’t meet your financing needs, turn to alternative lenders like peer-to-peer lenders, angel investors, or crowdfunding sources to get the financing your e-commerce company needs.
  • Improve your credit picture. Well in advance of filing any loan application, make sure your business and/or consumer credit score is in robust condition. Credit health may be the most important factor when applying for e-commerce company financing.

Are There Other Ways to Fund an E-commerce Business? 

If the traditional route to e-commerce financing, like term loans or business lines of credit, doesn’t bear fruit, there are solid financing alternatives, as follows.

  • Microloans: These loans are smaller in size than traditional business loan amounts, but they can still net a company as much as $50,000 (or as little as $1,000), depending on your e-commerce financing partner. If your business needs are modest, a microloan lender can seal the financing deal.
  • Peer-to-peer loans: Peer-to-peer financing platforms have grown substantially as digital lending has gone mainstream. Peer-to-peer lenders enable e-commerce companies to gain financing without having to relinquish any control over your company. For companies just starting out and who don’t need large amounts of financing, peer-to-peer lenders are well worth a closer look. Credit reviews tend to be more lenient with peer-to-peer lenders, as well.
  • The U.S. Government: Uncle Sam can ride to the rescue of an e-commerce company via a U.S. Small Business Administration loan. Like with any government entity, the SBA paperwork process can be lengthy, but if you’re in no rush, the SBA is open to financing U.S. small businesses, especially during the ongoing COVID pandemic. A bonus: SBA financing is backed by the U.S. government, so you know you’re dealing with a stable e-commerce financing partner.

See Our Additional Guides on Industry-Specific Loans

Bottom Line

Taking out a loan adds to your responsibilities. If you want to set yourself up for success from the start, plan before signing any loan agreement. You will also need to start your loan search by deciding why you need the cash. You might want to stay on the safe side and keep your loan money for a specific purpose.

Once you decide the purpose of your loans, our recommended lenders will make it as easy as pie for you to get the money you require to establish or expand your e-commerce business.