If you have been toying around with a big e-commerce business idea but hesitating to take the plunge, it is likely that funding concerns would have been the prime reason. Regardless of the state of the economic environment, accessing funds for startups remains the single biggest challenge for entrepreneurs, particularly for owners of e-commerce startups that typically have no track record, collateral assets or even founder experience to reassure conventional lenders like banks and credit unions. If it is funding that has stopped you from realizing your entrepreneurial dreams, here are some practical ways to give wings to them:
If you are sure you have a brilliant e-commerce business idea but are unable to get it off the ground because no lender wants to entertain you, the only way to start off is with your personal savings. E-commerce businesses are generally not very capital intensive and if you plan it right and have been saving for some time, you can launch your venture in a small way and hope that you will be able to generate enough cash to make it grow. Using personal savings at this juncture is also a smart strategy because it is at this stage you are most busy giving birth to your baby and you don’t want the procedural complications and the bureaucracy of bank loan applications as well as the steep rates of interest. The best part of using your own money is that you remain the owner of your business and there is no opportunity of others interfering in it. If you are considering asking family and friends to chip in, explain to them all about your business and how you plan to return their money, otherwise, you could possibly end up with strained relationships.
Get a Personal Loan Online
If you think that your personal savings are not going to be sufficient, you can easily get a personal loan from private lenders. The process is quite easy and quick; all you need to do is to log into the website of a lender, fill up the application form, upload the requested documents, and you should have the loan approval in a few minutes. The money is transferred directly to your bank account and has no strings attached. You can also opt for a personal loan that comes in the form of a line of credit, where you can draw only as much as you want and the interest is only applicable to your utilization. You can also structure the repayment over a tenor of your preference, however, keep in mind that the longer the tenor, more the interest you end up paying.
Use Credit Cards to Run Your Business
You can apply for a business credit card that will not only allow you to keep your personal expenses separate from business expenses but also generally offers you a higher credit limit. The limit you are given depends on your credit score and even though the card is in the name of the business, you remain liable for the dues personally. Credit cards offer very quick and no-questions-asked access to funds but you need to be wary of keeping the dues under control so that the cash flow of the business is enough to service the monthly payments. Try not to roll over the balances because the rate of interest charged by the card issuers is generally very high. If you have too much outstanding on your credit cards, you can opt for a debt consolidation loan from a reputed lender and save substantially on your interest outgo.
There are a number of government programs both at the federal and state levels as well as by private corporations that entrepreneurs can take advantage of for raising funds for their ventures. The U.S. Department of Commerce’s Economic Development Administration agency provides financial assistance to encourage innovation and entrepreneurship to support economic growth. Small Business Development Centers are also present in every state and can help to connect small business owners with sources of funds as well as training, networking, and mentorship. There are many federal government agencies that give grants for a variety of services; you can explore the database grants.gov to find out if you qualify for one.
Obtain Flexible Funding with a Line of Credit
A line of credit is nothing but a pre-approved loan that you obtain from a private lender or a bank. Instead of a typical loan disbursal of the full amount, with a line of credit, you can use only the amount you need for your business and pay interest only on the amount utilized. Not only do you save a lot on the interest outgo but you can time the availability of the funds to your need without having to engage in time-consuming and laborious application procedures every time you have a need for the money. Since it is in the nature of an unsecured loan, the rate of interest on lines of credit is more than a home equity or other loans secured with collateral, however, it is significantly cheaper than credit cards.
Many e-commerce entrepreneurs have successfully raised funds through crowdfunding that has become practical and cheap with the advent of online platforms dedicated to matching fund requirement and availability. Typically, you can put up a presentation on your e-commerce business and invite participation from investors. Since the platforms have their own following, it is possible to approach a lot many more investors than on an individual basis. You will also need to figure out how you will reward people who are backing your idea; typically, they are given hefty discounts on the products that you sell over the market price.
As the owner of an e-commerce venture, you will need to examine in detail the stage of your business, the extent of your fund requirement, and the amount of cash being generated by your business when deciding on the funding route. It is always better to be conservative and retain ownership control and not take on too much debt that will end up overwhelming you.
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