4 Ways to Finance Your E-Commerce Business
The pandemic of 2019 highlighted the need for e-commerce. Traditional businesses are steadily losing their appeal, and trends indicate that consumers are turning towards websites in place of physical buildings. Moving online is not as easy as it seems. You have to create a digital footprint from scratch. This evolution involves designing a website, formatting it, and curating content before you start making a significant leap.
Business development and online e-commerce solutions cost money, and you will also need cash to secure suppliers, get employees or even outsource for help. You will also need to get permission from your local council and pay a minimal fee of NZ$115 in New Zealand. What may seem like minute costs can end up becoming one giant payout. Therefore, to have a steady business, you need to find ways to fund it. When you have a stable source of capital, your company may flourish.
Review your Financial Profile
Before starting your independent venture, you must review your financial status quo. Any pending payments can act as an obstacle in your entrepreneurial journey. You may have trouble getting investors or banks to lend you money down the line. It also puts your credibility on the line. If you cannot manage your money, consumers and potential companies you want to collaborate with may not trust your judgment.
However, you can get rid of any liabilities or debts through consolidation. Round up all the money you need to pay off and look for loans to consolidate your debt. You can apply on the website https://nectar.co.nz/debt-consolidation-loan/ to get the amount you need at a reasonable interest rate. You can pay off your loans and bring your credit score to a satisfactory level. This step can help you prepare yourself for your online business since you’re now open for loans, investments, and sending an application to banks.
Ways To Secure Financing
The best part about living in a community is you can depend on the people around you to help. While banks and creditors are in place, you also have the safety of your friends and family to lean on. Knowing your options saves you from spiraling into worry. So, here are some methods you should look into:
- Dig Into Traditional Loans
Applying for loans exposes you to two loans, namely unsecured and secured loans. The first kind depends on your credit score. You qualify for most unsecured loans if you have an excellent secure above 670. The lender will not ask for your assets as collateral, such as a house or a car. You also get a longer time to make repayments. Personal and student loans are two examples of unsecured loans that you can get for your business.
Your second option is secured loans. These are accessible even if you have a low credit score, but there is a catch. You have to promise an asset in exchange for collateral. So, if you delay payments and cannot pay off your loans on time, anything you sign over, you must give up. But these loans, such as lines of credit, are available at a lower interest rate, making them a viable option to consider. Depending on how much you need, where you stand financially, and your overall score, you can make your choice.
- Check Out Your Personal Savings
Personal savings is also known as bootstrapping. It is a process in which you use your savings alone to fund your business. There is immense pride involved in being financially stable. You also get to retain complete ownership of your company because you established it using your money alone. However, this is also a risky move. If you cannot generate revenue or cannot profit from your online business right away, you will go into a massive loss. You can also try using your savings to fund three-fourths of your enterprise and the rest one-third by getting a loan. It allows you to save part of your fortune for a rainy day, and it can act as a safety net from potential bankruptcy.
- Apply For a Crowdfund
GoFundMe is one of the most popular crowdfunding platforms. These channels aim to ask people to support your endeavor or help you make ends meet. From a business perspective, you can start a crowdfund to get the needed capital to begin your enterprise. However, since you’re starting a venture, you need to give some incentive to encourage people to look your way. These can be discounted services, freebies, or an exclusive right to your first product. Pledge is a popular platform in New Zealand, allowing you to ask for up to NZ$ 850,000. All you need to do is design a campaign that states the purpose of why you are starting this fund. What will your business be about, how will it benefit the community, and what is the upper limit of the amount you need. You can keep your fund alive, at least for a few months. However, if you don’t get any sizable donations, you may need to withdraw. The rules of every campaign differ. The only way is to make sure you go through the limitation set by the website before launching yourself. Fraudulent campaigns can be reported and get removed.
- Ask Your Friends and Family
While you may feel shy about asking your loved ones, their support is essential. Your parents may be willing to give you money for no payback. The gesture is exceptionally kind, but it is best to return the borrowed money once you make a steady income. It will also help if you try to draft a contract with the help of a lawyer to define the parameters on which you’re borrowing cash. If you have no plans of paying back the money and are dipping into funds your family saves for you, make sure you clarify your stance. The same rule applies to friends. You need to define the relationship since your friend may express the desire to be a partner or get upset if you can’t pay back on time.
Final ThoughtsFinancing your e-commerce business is a painstaking process. You need to address several aspects before creating a stable website for yourself. The first factor you need to work out is dealing with outstanding debts. You can’t build a functional business when you can’t tap into loans. Once you’re free of overdue payments, you can look into traditional loans, crowdfunding, savings, or ask friends or family to help you out. Each of these methods is valid and can facilitate you in establishing your e-commerce business. However, before you commit, make sure you know what you’re doing, understand your limitations, and don’t bite off more than you can chew.