How e-commerce businesses use finance
- Funding stock purchases ahead of peak trading periods such as Black Friday or Christmas
- Scaling marketing and advertising spend to drive sales growth
- Covering the gap between placing a supplier order and receiving marketplace payouts
- Investing in website development, platform migration or automation
- Expanding into new sales channels or marketplaces
- Paying a VAT or corporation tax bill without disrupting stock orders
- Funding international expansion and related stock or logistics costs
- Consolidating short-term borrowing taken on during a rapid growth phase
Funding types that often fit
- Revenue-based finance
Repayments are linked to a percentage of sales, which suits businesses with revenue data from platforms like Shopify, Amazon or card processors.
- Merchant cash advance
Similar to revenue-based finance, advancing funds against future card or online sales, with repayments flexing alongside revenue.
- Stock finance
Funds bulk or seasonal stock purchases ahead of known peak trading periods.
- Unsecured business loans
A fixed sum for marketing, platform development or growth, repaid over an agreed term.
- Working capital finance
Helps smooth cashflow between supplier payments and marketplace or payment provider payouts.
What lenders look at for e-commerce businesses
Lenders assessing online businesses often use sales platform and payment data alongside bank statements:
- Monthly and seasonal sales trends across your platforms
- Diversity of sales channels, rather than reliance on a single marketplace
- Gross margins after marketplace fees, advertising spend and returns
- Stock turnover and how quickly inventory converts to cash
- Consistency of payouts from payment processors or marketplaces
Sector challenges: marketplace fees, payout timing and returns
E-commerce has a few features that shape the funding that suits it:
- Marketplace and payment processing fees that reduce effective margin
- Payout timing from platforms that doesn't always match when sales are made
- Return rates that can affect net revenue, particularly in fashion and apparel
- Sharp seasonal spikes requiring upfront stock investment
- Advertising cost volatility affecting customer acquisition cost and margin
How to prepare an e-commerce finance application
Good data makes e-commerce applications quicker to assess:
- Provide access to or exports from your sales platforms alongside bank statements
- Summarise your sales channel mix and any recent growth trends
- Have your latest filed accounts and management accounts ready
- Be clear about seasonal buying needs and timing
- List any existing revenue-based finance or stock finance agreements
Frequently asked questions
Related guides
Indicative only. Subject to lender assessment and approval.
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