Ecommerce is no longer just an alternative to buying in-store; in fact, ecommerce mega-platform Shopify predicts an increase in worldwide ecommerce sales from $1.3 trillion in 2014 to $4.5 trillion in 2021. (That’s a 246.15% uptick, for those keeping score.) So, finding funding for ecommerce business is, well, serious business. You’re following in the footsteps of big companies across both B2B and B2C—not just Etsy shops.

The evolution of ecommerce means you have lots of options for funding. For ecommerce finance, you can seek the same kind of small business loans that many other businesses do.

We talk to a lot of business owners who want to borrow money, but are overwhelmed by or are unsure of the variety of capital options. There are always risks and rewards to assess when borrowing money. On one hand, if your small business finances are sound, taking out a loan could be the push you need to expand and take your business to the next level. On the other hand, there are always consequences if you default on your loans.

Plugnpaid has partnered with Lendflow to enable you to explore all the best options available for your ecommerce business. An experienced funding advisor will work with you to determine the best solution from their network of over 60 of the best capital providers in the market.

There are a wide variety of funding solutions that are structured slightly differently to fulfill specific needs of the business. Here are the 5 best, and most common for different scenarios:

Business Line of Credit

Best for incremental ecommerce expenses

As you’re building your business, you might find that you need ecommerce funding here and there, not all at once. A business line of credit is an excellent type of financing for that.

As a kind of hybrid between a traditional business loan and a credit card, a line of credit enables you to draw against a pre-approved amount of financing, and only pay interest on what you’ve borrowed. It’s almost always a higher limit for a lower interest rate than a business credit card. And it’s a great tool to have in your back pocket for general working capital expenses like overhead or payroll, investments like marketing campaigns, or emergencies like system maintenance.

Purchase of Receivables

Best for newer ecommerce businesses that need an extra boat for growth

Newer ecommerce businesses often find themselves in a situation of poor cash flow and are not established enough for a bank level product like an SBA loan. This can occur when your customers take a while to pay you and you have to pay your suppliers long before the product is delivered.

Purchase of receivables financing works by looking at your revenue history and any outstanding invoices you may have for which you are waiting on payment. This structure can also have flexible repayment schedules that can be tied to your revenue. If your revenue goes down, you can lower your payments so that it doesn’t hurt your business. Alternatively, you can pay back the principal as a percentage of your revenue, paying more when times are good, and less when you have a downturn.

Inventory (Purchase Order) Financing

Best for ecommerce companies in a period of unexpected growth

Ecommerce can be a slow burn. But there may be those lucky moments when your product gets picked up by a major influencer. Maybe a celebrity is photographed on your bespoke bedspread, or Vogue features your personalized pill box. All of a sudden, you’re inundated with orders… that you can’t possibly produce with the cash flow you have. All of a sudden, that slow burn is a box of fireworks, and you’re in the grand finale.

Here’s where inventory financing, or purchase order financing, comes in handy. It’s a reliable type of funding for an ecommerce business, because a lender will advance a large portion of the cost of your production to the supplier or manufacturer. You’ll pay interest to the lender. But if your margins are solid, it’s a small price to pay for new customers who could become recurring if you get them their product faster.

Invoice Financing

Best for ecommerce businesses with cash flow problems

Ecommerce isn’t just B2C. In fact, one group of researchers estimated that B2B ecommerce sales will hit $1.7 trillion by 2020. If you’re among that group of entrepreneurs, then, you might extend your customers trade credit (which you might know as “net terms”).

Trade credit is a form of somewhat informal short-term financing, in which you extend your buyers a certain period of time to pay off a portion (or all) of an invoice. That can make your cash flow uneven—especially if your customers pay late or not at all.

Invoice financing is ecommerce funding that can help with cash flow issues. In this kind of business loan, you work with a lender to front you up to 85% of the outstanding invoice. When you collect the invoice, you’ll receive the remainder, minus any lender’s fees. Many small businesses across many industries do this. It could be a great option for you, too.

SBA Loan

Best for well-established ecommerce businesses looking to expand

This well-known type of financing is available to ecommerce businesses with strong financial track records and time in business under their belts. Guaranteed by the U.S. Small Business Administration, SBA loans are doled out by intermediary lenders that work directly with borrowers to provide preferred repayment terms.

Since these loans aren’t easy to get, and approval takes time, you shouldn’t bank on an SBA loan if you’re a brand-new business with little financial track record to present or if you’re trying to secure funding ASAP. But if you think you might qualify for an SBA loan, it’s worth the application process.

Say you want to open up a brick-and-mortar location for your ecommerce business, like many innovative companies are doing to establish a different type of presence. That’s a great use for an SBA 7(a) loan, the most popular type of funding within the program. Financing through the SBA can be just what you need to take your ecommerce business into a major new growth phase.

The plug&paid partnership with Lendflow allows you to explore all of these options and more through the one simple application you can access from capital.plugnpaid.com where you will be paired with a dedicated and experienced funding advisor to help you navigate the process and evaluate your options.

External funding is like any other business tool - it can help you take your business to the next level, stand out from the crowd, and unlock your true potential!