5 Ways to Find Financing for a New Product Line Development
E-Commerce Seller Financing • October 25, 2019
However, financing issues can prevent an e-commerce store owner from actually going through with it.
If you already have plenty of incoming sales, you may be waiting until you accrue enough financing to add new products to your store. Yet, relying on that can significantly slow down your progress.
Therefore, seeking additional financing can help you expand your inventory and grow your e-commerce store.
Below are financing options that you may consider:
5 Financing Options for a New Product Line
1. Borrowing from Family and Friends
Asking your close ones for help can be an excellent way for all parties involved. However, it also includes a great potential risk of ruining this relationship in the event of you not being able to pay the borrowed amount back.
Therefore, no matter how awkward that may seem, it’s best to approach family and friends financing as a business relationship. You may want to prepare and present a business plan and prototypes or examples of the products you are considering.
In addition to that, drafting a loan agreement can help you avoid any potential future issues.
Another option that you may consider is offering the friend or family member who is ready to finance your idea ownership of the company. This way, you may agree on sharing a percentage of your profits with them rather than repay the loan. Your friend or family member then becomes your business partner and, depending on what you agree, may even help you with some business operations.
Regardless of which path you choose to take, remember that relationships are one thing and business is another. Treating family and friends financing as a business procedure can spare you some headaches in the future.
2. Peer-to-Peer Lending
If you like the idea of borrowing from an individual, yet don’t feel like you family or friends would be on board, peer-to-peer lending may be a good alternative for you.
Peer-to-peer lending is a financing option when you obtain a loan from another individual through peer-to-peer lending websites. These provide both personal and business loans, require less paperwork, and their interest rates may be lower than if going through banks.
Some popular peer-to-peer lending sites are Upstart, Funding Circle, Prosper Marketplace, Peerform, and Lending Club. However, if you perform a search online and find other options if these do not satisfy your needs.
While a funding option, crowdfunding is donation-based financing rather than a lending option. Yet, it has enabled multiple companies to launch new products. Some companies have successfully launched their beta versions and used sponsor feedback to improve their products and launch improved version of them.
There a multiple crowdfunding sites out there, and their conditions vary. Some require you to collect your target sum of money to access it while others don’t. Some platforms allow you to incentivize donations with sample products.
So, you should review the terms and conditions of various sites to determine which would make the best fit for your e-commerce business. The two best and most popular options for launching new products are Kickstarter and IndieGoGo; however, you can find plenty of other sites if you do not like these.
Keep in mind, though that launching a crowdfunding campaign does not guarantee funds. You must craft a quality pitch and also provide photos of prototypes or completed products. Innovative and unique products that you may have invented or created yourself have the best chance of getting sponsor attention.
Don’t be afraid to get help from a professional to help you develop a pitch and supporting materials. It may determine whether your campaign succeeds in gathering the funds needed or not.
4. Bank Business Loan
Bank business loans are some of the most popular and traditional financing options. Similarly to personal loans, business loans allow you to use the financing you need and pay it back with an interest rate added.
The benefit of taking out a business loan is that you can deduct that from your income during tax time. Even though you pay an interest rate, that’s usually lower than the income tax, you would need to pay otherwise.
The downside is that bank financing may include additional hidden costs, requires tons of paperwork, as well as plenty of time to be approved (or not). Interest rates can be high as well, especially if you have bad personal credit or have not taken out loans before.
5. Business Loans from Alternative Lenders
Because of various issues associated with traditional bank business loans, an increasing amount of companies offer business loans to small businesses as well.
In contrast with banks, these companies usually offer flat rates. So, when you take out a business loan, you know beforehand how much you will owe. Interest rates from banks can vary, and you will likely not know how much you will need to pay back until you actually apply.
Trustworthy alternatives e-commerce seller financing providers also tend to be upfront about any other expenses they may have. Nonetheless, be careful and read the terms before you apply, because there are companies that have seemingly good terms, yet may have other conditions that may cost you money.
Alternative lenders also tend to not look into your credit score. They also require very little paperwork, and the application and approval process tends to be quick.
If you have a fantastic new product line idea that you can’t wait to offer to your customers, E-commerce Seller Financing can help. We offer flat rates and no hidden costs. With us, you can apply in as little as 5 minutes and receive a reply about whether you’ve been approved within 24 hours.