Source | 5 Ways to Finance an Online Business | This digital era of technology allows you to bring exotic business ideas into reality. It’s not the time where you need high amounts of capital to step into the market. The multi-purpose online platforms allow you to become your own boss. It won’t cost you anything, but some minutes to develop a business Facebook or Instagram page.
Through some advertisements, you can attract millions of customers, irrespective of regional locality. This means you can sell to people around the globe. It doesn’t matter if you want to sell dry fruits or shoes because there are countless opportunities for every market.
There’s no point to be skeptical about starting an online business because according to the stats, sales of e-commerce businesses have increased by 3.9%. It is because lazy humans don’t like moving. Hence, they like getting everything at their doorsteps. If you have a plan which needs execution, here are five ways to finance an online business.
Before drowning yourself into debts, it’s best to consider your personal savings. Because with personal savings, no one would bug you for timely reminders for payments every month. Apart from this, while making your financial statements, you’ll see no there would be no deductions from profits. This is because you won’t have to pay interest since you’re using your savings.
Sometimes, these interests and repayments can become stressful because sales are not the same every time. Some days, they’re touching the sky while other days customers are nowhere to be seen. Therefore, personal savings are best to knock-off the stress and competition too!
You might have saved for a trip abroad or for buying a new house, but if your business climbs the stairs of success, everything would automatically become possible. In the case of no savings, there are other options available to finance your online business.
Business Line of Credit
In the initial years of business, you never have enough cash available due to which you need to consider funding options. You can consider a business line of credit as one of the potential opportunities. It would help acquire funds for your online business. Unlike credit cards, you’ll get ‘cash’ for funding of all your expenses.
You’ll witness a smooth flow of business operations with a business line of credit because it would make up for all the business expenses. Usually, your business might be making profits, yet it has a negative cash flow, line of credit would make up for it.
It allows us to capture the ongoing opportunities, for instance – the raw materials are on discount, but you don’t have enough cash. You can acquire some funds through the line of credit to get your hands on cheaper raw materials.
There would be a specific limit to the amount of money you can borrow. All the money which you borrow would have to be paid back with interest. If you successfully pay back the borrowed amount, not only will your line of credit close but it also improves your credit score. This can help your business in future borrowings. There are many sites online to find more about an unsecured business line of credit and the benefits of applying for one.
Are you tired of running after your receivables for money? Invoice financing is your option to acquire funds by selling your invoices to the factoring investors. It’s natural to allow your clients some credit periods until they make their payments, but it can leave you empty-handed.
You need money, or else it becomes impossible to make up for business expenses which impede the smooth flow of operations. Through invoice financing, you can get access to immediate funds by selling your invoices. It can relieve you from the stress of delayed payments because now it’s not your headache. The best part of invoice financing is that bad debt is no longer your concern; it’s the factoring company who needs to worry about it.
Most businesses prefer accounts receivable financing over any other sources of finance due to no criteria of repayments or interest. Because it’s not a loan or debt on your shoulders, just a small favor for which some standard or varying fees is charged by the companies. Usually, the lender pays 85% of the invoices are rest of it when they receive it.
Furthermore, it’s followed by a smooth procedure. You don’t have to wait for days because it only takes a few hours to apply for invoice financing. It doesn’t require you to travel to places with piles of papers due to the option of applying online. Once you have provided all the information, money would come into your business account automatically.
Business Credit Cards
Prepare for the worst – isn’t this true? The economic conditions of the whole world are so uncertain that you can’t guess what happens next. If you think that somewhere in the future your business would need additional funds or pay unexpected expenses, you’ll need a business credit card.
It can work like your shield and help you out when you’re in dire need of money. Look for banks that are offering zero annual percentage rates in the beginning. This would help you pay for the expenses without worrying about the interest rates. Furthermore, brands and restaurants offer special discounts on business credit cards. It also has a higher credit limit, than lines of credit. This means you can use it for pricey expenses too!
Consider another option if the interest rates are soaring because it would do nothing but further add on to expenses. If at any point, there comes a need to acquire a business loan, your credit score is determined by your credit card history.
Acquiring a loan for your online business could be challenging because without any physical evidence, banks don’t prefer giving loans. You do know your business would do wonders, but banks need a financial track record with a good credit score to qualify you for the loan.
But the lending options don’t end with banks; there are other lending platforms, willing to sponsor businesses. Many investors out there are looking for unique business ideas for investment. This means you won’t have to make any repayments, nor they would charge any interest. Instead, in return for funds, they would seek a small part of ownership in your business, usually 6%-10%.
There’s no restriction on the number of funds; it depends on your potential. If an investor sees your business has the potential and capacity to grow, you can receive up to $50,000. More than funds, the level of experience they hold is more valuable and an asset for your business.
Through the help of venture capitalists, you can also develop connections in the industry, creating brand awareness and growth opportunities. If you’re willing to share the ownership of your business, there’s no better option than this.
These days virtual existence holds more importance than an online store. Both forms require finances because even a small business has sufficient startup costs. Don’t let the lack of funds stop you from starting your venture. There are many options available through which you can fund your online business. If you wish to know, investigate these five ways to finance an online business.