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E-commerce Business Finance – How to Fund Your E-commerce Business

e-commerce business finance

Getting e-commerce business finance can be a challenge no matter what stage you are at with your venture – from start-up to established business. You might think that banks are the only option for getting e-commerce business finance but there are other ways to get the money you need to grow your e-commerce business. Here we’ll look at some of the options for getting e-commerce business finance.

Traditional secured bank term loan

This is what comes to mind when most people think about a business loan. Banks have stringent requirements for this type of loan – you are required to provide collateral (such as residential property) and a large amount of documentation (including financial statements), then you might have to wait up to two months to get an answer. The term of this type of loan is typically two to five years. If you have a new business or don’t have collateral to pledge against the loan, this won’t be a viable e-commerce small business loan option.

Family and friends for e-commerce business finance

This is one of the most common loans for new businesses. If you need e-commerce business finance, approaching family and friends for a loan might seem like an easy option. However, you will want to keep it on a business level, so you don’t damage your relationships. This means having an agreement in writing on how it will work. It should answer questions such as ‘When will the money be repaid by?’ and ‘What are the amounts of payments and when will they be made?’ You might consider basing repayments on your cash flow, so you don’t have to make payments when you are low on cash. Learn more about getting a business loan from family and friends.

Credit cards

As a form of e-commerce business finance, credit cards are easy to get. Most people will already have a personal credit card which they can use for their business. A business credit card will require documentation about your business and is not as easy to get. On the downside, the interest rate on credit cards can be high and you could end up only making the minimum payment. In this case, you might never pay it off and end paying a large amount of interest over the years.

Home equity loan as e-commerce business finance

If you have a home loan and equity in your home, you might be able to get an e-commerce small business loan using by using your home as collateral. Although residential property prices have stabilised, and are not increasing rapidly, the increase in residential property prices means that many people have equity in their homes. For many business owners, this can be an opportunity to fund their businesses. One advantaged of taking out a home equity loan for e-commerce business finance is the potential to get a low interest rate. The main downside of using home equity to meet your e-commerce business finance needs is the risk – if you run into problems in your business, your home could be at risk.

Bank overdraft

With a bank overdraft, you can run a negative balance on your regular business transaction account. You pay interest on the negative balance plus ongoing fees for having the business overdraft. You can get a secured or unsecured business overdraft, but the unsecured version will have a higher interest rate. One main drawback of a business overdraft account is that it can be called in at any time. This means the bank could close the overdraft and demand the amount outstanding.


Peer-to-peer lending matches investors with people seeking a loan. The platform is typically a website that matches investors and borrowers and is run by a financial service provider which charges fees to both lenders and borrowers. In participating in peer-to-peer lending, investors are purchasing a financial product while borrowers are taking out a loan that is repaid over a period with interest. When applying for a peer-to-peer loan, the company running the lending platform will check your credit history and your ability to repay the loan. Get more information on peer-to-peer lending.

Crowdfunding as e-commerce business finance

Like peer-to-peer lending, crowdfunding uses an online platform. The big difference with crowdfunding is that you get many investors to ‘invest’ a small amount to enable you to create a product or realise an idea. In exchange, they get your product when it is completed. The challenge with crowdfunding is getting enough people to invest in your idea to reach the amount you need to create the product.

More applicable to e-commerce business is crowd-sourced funding where you sell equity in your business. With crowd-sourced funding in Australia, investors are allowed to invest up to $10,000 per year in an SME. In exchange for the funds, investors get shares in the business. Get more information on crowdfunding and crowd-sourced funding.

Venture capital

This is a challenging one for any new business because venture capitalists are looking for a hot idea that will generate big and quick returns. In addition, you need to give away some control which usually includes involvement with management and strategic decisions of your business. Although not impossible, the nature of venture capital makes it an unlikely source of e-commerce business finance.

Unsecured online business loan

One form of e-commerce business finance that’ growing in popularity is unsecured online business loans. Unlike a traditional secured bank loan, the online unsecured version can be obtained fast with a minimum amount of paperwork. Online lenders, such as Moula, use state-of-the-art technology to safely and securely analyse the potential borrower’s finances. Based on recent bank transactions and credit background checks, a decision to provide a loan can be made within 24 hours. If approved, the funds are transferred immediately into the borrower’s bank account.

The term for unsecured business loans is short – up to two years – so the funds can be used to fulfil short-term needs. For example, if an e-commerce business has the opportunity to buy fast-moving stock at a discounted rate, an unsecured online business loan could be the solutions that make it possible.

Use our free Business Loan Calculator to crunch the numbers and find out what your payments would be with an unsecured small business loan from Moula.


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