| Company |
Min. Credit Score |
Min. Time in Business |
Min. Revenue |
Loan Amount |
Interest Rate |
| Uncapped |
None |
6 months |
$120,000 |
$10,000 to $10,000 |
2% and up |
| Kabbage |
640 |
1 year |
$3,000 (monthly) |
$2,000 to $250,000 |
6-month loan: 2-9%
12-month loan: 4.5-18%
18-month loan: 6.75-27% |
| Biz2Credit |
575 |
6 months |
$250,000 |
$250,000 to $2 million |
7.99% and up |
| Fora Financial |
None |
6 months |
$144,000 |
$5,000 to $750,000 |
1.1 to 1.3 |
| Bluevine |
625 |
6 months |
$120,000 |
Up to $250,000 |
4.8% and up |
| National Funding |
600 |
6 months |
$250,000 |
$5,000 to $500,000 |
1.1 and up |
| Fundera |
None |
None |
None |
Varies |
2.75% and up |
| SmartBiz |
600 |
6 months |
$250,000 |
$30,000 to $5, million |
7.0% and up |
E-Commerce Business Expenses
Even though e-commerce businesses operate online, there are still expenses that come with running one. Possible business expenses include:
- E-Commerce website: This includes the domain name, hosting, and CRM software. This can range from a few hundred per year to over $6,000 if you opt to use a designer.
- Staff: Staff may include employees to help create and ship your product, web developers, marketing and social media specialists, customer service representatives, and more.
- Insurance and fees: Each state may have different rules regarding e-commerce business operations and permits, and the fees will vary depending on the type of business you run and the state you live in.
- Inventory and warehouse space: If you’re selling a product, you’ll need inventory. If it’s a large product,you may also need to finance a warehouse.
- Marketing and advertising: This includes running ads on sites like Google and Facebook, direct and local marketing, hosting giveaways, attending networking events, and more. Most small businesses spend 7-12% of their revenue on marketing.
- Platform fees: You’ll pay fees on the platforms you sell your products, such as Amazon, eBay, or Shopify.
- Returns and refunds: Some customers won’t like the product and will send it back; others may receive a broken item and want a replacement. Unfortunately, returns and refunds are more of an expense that most e-commerce business owners realize.
Bottom line: you can expect to spend anywhere from a few thousand dollars to upwards of $200,000 or more per year on building and maintaining your website, hiring staff, purchasing equipment and inventory, and paying for marketing and advertising.
How Does E-Commerce Financing Work?
E-commerce business funding works similarly to other types of small business loans. 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 small business loan, the lender will vet the business and financial credentials of the e-commerce company, including credit history, annual revenue, and length in business. Once approved for the loan, the lender disperses the money as soon as the next business day.
How to Qualify for E-Commerce Financing
While qualifications for e-commerce financing will vary between lenders, you can typically expect you’ll need to meet the following minimum requirements:
- 600 minimum credit score
- 6+ months in business
- $100,000 in annual revenue
Of course, some lenders will accept lower credit scores and have lower monthly revenue threshold requirements. The higher your credit score and stronger your business credentials, though, the less you’ll pay in interest rates and fees.
Here are 8 ways you can build your business credit >>
How to Apply for a Loan for an E-Commerce Business
Once you decide on a lender, you’ll fill out an initial application. Typically, these take just a few minutes to complete and you’ll receive a preliminary decision shortly upon submitting.
If the lender approves you initially, you’ll be asked to submit some business financials, including:
- Your business tax ID
- Personal and business tax returns
- Bank statements
- Collateral, if required
- Legal documents, such as business licenses or leases
If additional paperwork is needed throughout the process, the lender will contact you. Once everything is submitted and approved, you can expect funds to be in your account within 24 to 72 hours.
Alternative Funding for an E-Commerce Business
Traditional financing options include term loans and lines of credit, mentioned above. However, there are other avenues you can explore, too, such as:
- Microloans: These loans range from $1,000 to $50,000. 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. For companies just starting out and who don’t need large amounts of financing, peer-to-peer lenders are well worth a closer look.
- SBA loans: SBA loans are backed by the Small Business Administration and come with lower interest rates and better terms than traditional term loans. The paperwork process can be lengthy, but if you’re in no rush, the SBA is open to financing small businesses.
Conclusion
E-commerce business owners who need the funds to start or expand their business have a variety of online options to choose from. Funding times are quicker than traditional banks, and eligibility requirements are often less strict. If you need capital quickly, apply with one of the lenders recommended above so you can get back to focusing on your business.
