Funding for Ecommerce Businesses: 10 Best Loans

Written by

Lucinda Honeycutt



Written by

Lucinda Honeycutt


Reviewed By Our team of writers and content creators are experts in ecommerce and we fact-check every claim in our work to ensure it’s accurate and up-to-date. (Learn about our editorial guidelines.).

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These are pretty exciting times for ecommerce. People are buying through online shopping more than ever. 22% of retail sales are estimated to come from online shopping. That’s huge, considering that the number used to be just 15% in 2019. And it’s still growing. The ecommerce market is expected to be worth $5.4 trillion by 2026.

If you’re running an ecommerce venture, you might get giddy with those prospects. Who wouldn’t want a slice of that sweet trillion-dollar pie?

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But to take advantage of this trend, you should set up your new business for success. Rather than just nursing your cash flow to make sure you’re making money, you should be prepared to grow and scale. However, this can be rather tricky. Scaling up requires investment. Even if you have deep personal pockets to make that investment, you should consider getting outside financing to fund your business’ growth.

Funding for Ecommerce

Fortunately, there are many ways to get funding for your business these days. Gone are the days when banks and investors are your only options for external capital. Online funding platforms have emerged as viable resources for cash.

We’ll cover everything you need to know about funding for ecommerce, including 10 resources you can use to access funding.

How Your Ecommerce Business Can Benefit From External Funding Solutions

Funding becomes necessary when you’re looking to grow and scale to the next level.

If your business is suddenly doing great and demand for your product jumps up, you’ll eventually reach a point where you’ll be exhausting your capacity. You may experience stockouts or overbookings. These not only create friction with your customers. They also stall your growth. You don’t want to be turning customers away.

To overcome this, you have to scale your operation. How you should go about it will depend on the nature of your business. For instance, stockouts can be avoided by having sufficient inventory and efficient supply chains.

One thing is certain – you will need cash. Purchasing more inventory, buying equipment, renting space, increasing your presence and widening reach, and hiring more people all have costs.

In addition, sometimes, opportunities present themselves suddenly. Without ready capital, you can miss out on the chance to capitalize, leaving your business stunted.

Businesses can also go through rough patches. If your business focuses on a niche, good sales can be seasonal. Having cash on hand also serves as some form of insurance that can help you weather the crunch.

Types of Funding

Ideally, if your business has been booming, you can reinvest your profit into the company. In business speak, this is called retained earnings. This way, everything is self-contained. You don’t need to deal with anyone else. You get to continue growing your business on your terms.

But if you don’t exactly have this capability, you can consider outside financing. Conventionally, you can get it either through debt or equity financing with venture capital or bank loans. These are otherwise known as loans and investments, respectively. There are also emerging types such as revenue-based financing and alternative business financing options like merchant cash advances and invoice factoring, which are helpful for those with a limited credit history. Businesses can also apply for grants or launch crowdsourcing campaigns.

Different entities and organizations can give you access to these ways of funding. You can get loans from banks and lenders. Venture capitalists (VCs) and investors can provide you with seed and early-stage funding in exchange for equity.

Ecommerce-specific funding platforms can give you access to any or a combination of these funding methods. They can even provide businesses with customized plans for the growth area your business needs explicitly.

Let’s see how each works.

Debt Financing – Small Business Loans

Debt financing is probably the most common option out there. Here’s how loans work. A lender gives you money on the condition that you have to pay it back over a period of time with interest.

For example, you get a loan for $1,000 at 1% simple interest and you have to pay it back in a month. That means that you have to pay the lender back the $1,000 principal and the $10 interest after a month. That’s about as basic as loans can get.

Unfortunately, most loans aren’t as straightforward. Most borrowers need significantly large sums and an extended period of time to pay them back. This is why typical loans such as home loans, car loans, and business loans are amortized. An amortization schedule maps out how fixed payments are spread out over some time. Part of each payment is applied to the principal and the rest to the interest. Amortized loans may seem attractive since you’d know the amount you have to pay every month.

Amortization Calculator


However, borrowers must be wary of how loans work in practice. Lenders usually take advantage of compounding. Compound interest is the sum a lender earns from interest. So, if you have a multi-month loan, any interest that’s left unpaid from the previous month is included in the following month’s computation for the total amount. 

For example, you get a loan for $1,000 at 1% interest a month. That would have a total cost of $1,010. If you aren’t able to pay any of the loans back, all that amount, including the $10 interest, will be used to compute the following month’s cost. $1,010 at 1% will then have a $1,020.10 total cost. The lender is able to earn $0.10 more from the interest on interest. Keep in mind, however, that this is very simplistic. In reality, you will get penalized should you miss monthly payments.

Interest rates in these amortized loans are usually expressed as annual percentage rates (APR). A 1% monthly interest rate translates to an APR of 12%. A $1,000 loan at an APR of 12% but with a term of 5 years will have a total interest of $334.67 – a far cry from the $10 extra you have to pay if it’s just for a month. But since the monthly payment is only $22.24, it’s understandable why some might consider this quite an attractive deal.

Annual Amoritization Schedule


Lenders can also use various amortization methods. These methods use specific formulas to compute the monthly payment amount and determine how much one pays for the interest and principal. If we’re going to take a look at the amortization’s monthly schedule, you’ll notice that out of the $22.24 payment, $10 is applied to the interest and the rest is applied to the principal.

Monthly Amortization Schedule


Payments, especially in the early part of the term, are credited more towards the interest than the principal. By the end of year one, you’d still owe a significant amount on the principal. Over time, the payments towards the principal becomes larger, which lessens the impact of compounding by the tail end of the loan’s term.

Amortization Calculator


These mechanisms allow lenders to earn more from interest, especially for longer loan terms. On top of this, lenders also tack on all sorts of fees for administration, processing, and documentation. So, the total cost of the loan can become so much more.

Institutions like banks, lending companies, and credit card companies typically provide such loans. Other financial products such as credit cards, lines of credit, and cash advances are also forms of debt financing. Only with these, the card company or institution predetermines your maximum loanable amount in the form of your credit or cash advance limit.

You would also have to qualify before traditional lenders would give you money. They’ll often ask for many documents, including a business plan, to be attached to your application. Usually, you also need a good credit score before banks would even entertain your application.

With larger loans, you may even have to put up collateral – a property such as real estate or other assets that the lender accepts as forms of security just in case you can’t pay the loan back. If you miss payments, you’ll be considered in default, and the bank will be able to repossess your property. Lenders are often wary of lending to startups and small businesses without collateral. They can also impose higher interest rates to borrowers that they consider risky.

These are why entrepreneurs shy away from this funding method.

Equity Financing

In equity financing, an investor would give you funding in exchange for equity or part ownership of your company.

You can approach investors and ask for X dollars to own Y percent of your company. These figures will be based on your business valuation. So, if you ask for $100,000 in exchange for 10% of equity in your company, you’re essentially estimating that your company is worth $1 million.

Unfortunately, business valuation can be messy. Plenty of factors come into the valuation. The process involves counting the business’ assets and liabilities, cash flow, and growth potential. It can also consider the uniqueness of the product or service and actual market demand. The more positive these factors are, the higher the valuation is.

Serious investors will perform their due diligence. They’ll do background checks on you and the business. They’ll ask to look at your books to see how well the business actually performs. Investors can counter your ask with a different valuation should they have their view of how your business should be worth. In the end, you and the investor must agree on all terms.

Just about anyone can be an investor in your business. But if you’re looking for significant funding, you should approach VCs and angel investors since they typically have the means and resources. Aside from getting capital, the advantage of partnering with investors is that they can also help you grow the business. It’s often in the investor’s best interest for your business to succeed.

A downside to equity financing is that you’re giving up part ownership of your venture. Depending on the extent of their buy-in, they can also have a strong influence or control over business goals and decisions. Investors will also expect a return in their investment. They can pressure you to generate profit as soon as possible.

You have to be sure if you’d want to go this funding route as a business owner. Once you take on equity funding, it won’t be your show anymore.

Revenue-Based Financing

Another form of financing that’s becoming quite popular these days is revenue-based financing. Funding from this type of financing is essentially a loan. But instead of needing to pay fixed monthly installments, businesses pay lenders back using a percentage of their actual income or sales.

For example, you get a $1,000 loan at 12% interest which you agree to pay back using 5% of your monthly sales. Most revenue-based financing plans work with fixed rates and no compounding. So, you have to pay back $1,120 in total. Every month, you must pay 5% of your sales. If you make $2,000 in sales in Month 1, you have to pay $100. If in Month 2, you only make $1,000 then you pay $50. This goes on until you’ve paid off the $1,120 total.

So, the bigger your sales become, the quicker you can repay your loan. But just in case you suffer from poor sales, you wouldn’t be as pressured to pay off a definite amount, unlike traditional debt-based financing. Your loan repayments will be lower during lean months.

Such a payment scheme does appear more forgiving compared to traditional loans. It’s a reality that sales of businesses catering to specific markets and niches fluctuate. This gives businesses plenty of flexibility and makes taking in outside financing less daunting.

In addition, you wouldn’t have to give up equity when you opt for revenue-based financing since they’re essentially loans. You will still own your business.

Merchant Cash Advance

Through a merchant cash advance (MCA), a business can receive funds in exchange for future credit or debit card sales. It may seem pretty similar to revenue-based financing but technically, a merchant cash advance isn’t a loan. It’s a “sale” of future card transactions. Institutions that offer MCAs often work with payment processors to directly get a percentage of the merchant’s card sales until the amount has been recouped.

Among the key differences between MCAs and revenue-based financing are the criteria for qualification. Revenue-based financing often requires a healthy cash flow or a strong sales record. Companies that offer MCAs usually don’t have such a requirement. Businesses with fluctuating sales records may find it easier to get an MCA than revenue-based financing. They can still enjoy the flexibility of having to pay using a percentage of their sales.

Since MCAs aren’t technically loans, they can go beyond the interest rate or fee limits that some lending laws may have. It’s possible for MCAs to become more expensive compared to revenue-based financing.

Invoice Factoring

Many ecommerce businesses have been successful by setting up shops in online marketplaces like Amazon and Shopify. However, among the common complaints of merchants on these platforms is the time it often takes for the income from their sales to be released. Until then, you won’t be able to use the money for inventory or operations.

Similar to a merchant cash advance, a factoring provider basically “buys” your receivables from these platforms. This gives them control over the invoice. You will receive around 80% to 90% of the total invoice amount, and you’ll get the balance once it has been paid by the platform minus the provider’s fees.

For example, you have $10,000 in receivables from your monthly sales on Amazon. You can avail of invoice factoring from a provider and get $9,000 or 90%. The provider will now have “dibs” on your $10,000 receivables. The provider will get the receivables once Amazon releases the money. You’d still get the remaining amount minus the fee that’s going to be charged by the provider. If the provider charges 3%, it takes $300 from the $1,000 balance, and you get the remaining $700.

Asset-Based Lending

If your business deals with tangible assets like machinery, equipment, or inventory, you may opt to get asset-based loans instead of conventional debt financing. Conventional loans often require collateral that can be easily liquidated or sold. Banks and lenders prefer real property, cars, stocks, and bonds.

Small businesses would often just have their specialized equipment as assets. With asset-based loans, a business can put up one of these tangible assets as collateral. For example, an automotive shop can put its tire changer worth $1,500 as collateral for a $1,000 loan. So, if you don’t make payments, the lender will repossess the tire changer as a settlement for your loan.

Unfortunately, since many types of equipment can be difficult to sell or liquidate, lenders can demand that you put up an asset that’s worth significantly more than the loan amount.


Grants are essentially “free money” that you can get for your business. They’re often awarded by governments, large corporations, non-profit organizations, and philanthropists as part of a program they’ve created.

Applying for grants can involve a lot of work. Not only do you have to convince the awarding body that you qualify, but you also have to prove that you deserve to get the money. Most grants have precise criteria. You may have to work on innovation projects or support a particular advocacy aligned with the thrust of the grant.

Grant-giving bodies may also impose certain conditions or require you to deliver on your promise.


Thanks to Kickstarter and Indiegogo, crowdfunding has become an acceptable means of getting businesses funded. Basically, you’ll be relying on the generosity of strangers who are willing to just give you the money.

Getting your campaign noticed can be challenging. Typically, you’d have to promise something spectacular to entice donors. For example, your product or service must be something truly exciting. Aside from this, donors should also be the first ones to get a hold of your product when it launches, or they should get early access and priority bookings for your service. Most expect bonuses and freebies when becoming a supporter.

Crowdfunding does seem to be too good to be true for businesses. You can get funded with little to no strings attached. However, many crowdfunding campaigns have turned out to be scams, so people have now become a lot more cautious in choosing which businesses or ventures to support.

What to Consider When Looking for Ecommerce Financing

We’ve gone over the different types of funding options available for ecommerce businesses. Now, let’s go over what to consider when looking for funding.


This is perhaps the most important thing to consider. Why are you looking for funding? If it’s for growth, you should already have a definite plan on how you’d scale. Do you need more inventory, equipment, or people? Are you planning to spend money on marketing?

Knowing this is critical since it would determine other considerations, like how much funding you really need. Some financiers also limit where you can spend the money. For example, some options would only allow you to spend funds on something physical or tangible, like inventory or equipment.


Based on your plan, you should also know how much you really need. Aside from grants and money from crowdfunding, most funds will have to be paid back in some form and you will have to pay interest.

You wouldn’t want to be getting an excessive amount that you’ll struggle to pay back in the future. The actual amount you need can also determine what kind of financing you should get. Most lenders and funders often have ranges and limits for the money you can get from them.


You should also check how urgent your need for cash is. Banks don’t approve and release loans within hours. Deals with investors and VCs don’t close overnight. You may have to explore other resources if you’re on a very tight timeline.

Some lenders specialize in releasing money quickly, but they often charge more in interest and fees. If you have more specific requirements like equipment or inventory, you can opt for these specialized lenders and companies since they can often act quickly to help you resolve your needs.


Find terms that suit your situation. If you’re looking into debt financing, you should be weighing what you can afford monthly and the total cost.

Longer terms may mean smaller monthly payments, but you can end up with double or triple the total cost. Shorter terms may mean smaller total costs, but the monthly payments can be steep.

Even if you’re considering equity financing, you should also still check if you have what it takes to meet your investor’s demands.

Aside from figuring out these essential details, there are also other things you may want to consider.

Know Who You’re Dealing With

Funders aren’t built equally. Some funders bring something extra when you deal with them. Investors and some growth platforms can lend you their expertise and networks to help you achieve your business goals. This support can be extremely valuable if you’re trying to grow your business.

Others may not care about you at all. So, you have to be wary of who you take money from. Unscrupulous lenders would even want to see you fail, especially if you’ve put up collateral that’s more valuable than your business. They may stand to make more from repossessing your assets than getting paid.

The Best Funding Resources for Ecommerce Businesses

What’s great about all of this is that, aside from having many forms of funding now available to small businesses today, the number of funding outfits is also increasing.

Traditional lenders are now seeing competition from business-focused funding platforms. Many of them are even specializing in ecommerce. They offer revenue-based financing and other alternative business funding options which are more suited for ecommerce ventures.

They also simplify the application process and release funds as quickly as possible. Aside from funding, they also offer other value-added services like growth plans and analytics to help their funded businesses succeed.

Here are ten funding resources you can approach to fund your ecommerce business:

1. 8fig

8fig Homepage

Starting the list is 8fig. It’s an ecommerce funding and analytics platform that looks to help businesses scale by providing customized growth plans built for rapid but sustainable growth.

The platform tries to take the guesswork out of scaling by figuring out the exact capital you need to grow your business. It integrates with your ecommerce platform and uses AI to analyze your business’ sales performance, expenses, and other financial data to provide the best terms for funding. Ecommerce businesses can also use it as a free analytics tool for cash flow management even if they choose not to receive funding from 8fig.

Unlike most funders, 8fig works with businesses with sustainability in mind. Instead of releasing funds as a lump sum, companies get them in a steady stream. The platform believes that dropping a large amount onto a business can disrupt its natural cash flow and create complications. It can also lead some owners to overspend or splurge. These mechanisms help funded businesses move towards the right direction in their growth journeys.

Businesses must have a monthly revenue of over $8,000 for three months or a yearly revenue of $100,000 to qualify for funding.

2. Payability

Payability Homepage

Payability caters to merchants on ecommerce platforms like Amazon, Shopify, Walmart, and Newegg. It understands that many merchants on these marketplaces may have cash flow issues due to the time it takes for these platforms to release money.

The platform provides funding options that are essentially merchant cash advances and invoice factoring. Through its Instant Access option, merchants can get a daily advance of 80% of their sales from the previous day. Payability can also purchase future receivables through the Instant Advance option, where you get 75% to 150% of your monthly revenue. You remit a fixed percentage (12% to 25%) of your sales until the advance has been paid.

To qualify for Instant Access, you need at least $10,000 in monthly sales for at least three months. For Instant Advance, you need to hit $50,000 in average monthly sales for nine months.

3. Wayflyer

Wayflyer Homepage

Wayflyer helps businesses through revenue-based financing. The platform provides flexible funding options that can be spent on marketing, inventory, and other business needs.

You must connect your marketplace or processor platform like Amazon, Shopify, WooCommerce, or Stripe to Wayflyer. It will then crunch the available information and provide you with funding offers. The platform practically buys a portion of your total sales and makes funding available as an advance. Depending on your business, you can get funding worth $10,000 up to $20 million.

You need to be in business for at least six months with an average revenue of $20,000 a month. The platform only charges 2% to 8% for each cash advance amount. Wayflyer only works with businesses set up in select territories, including the US, Canada, and the UK.

4. Shopify Capital

Shopify Capital Homepage

Ecommerce platform Shopify has created a funding program specifically for its merchants. This in-house financing is available to stores with solid sales histories. Shopify hasn’t been public with specifics of how the program works, but if you qualify, you simply get messages containing funding offers.

The program provides merchant cash advances where you can get $200 up to $2 million. The amount can be spent on payroll, inventory, and marketing. The platform deducts part of your daily sales on the platform until the amount is recouped. It also provides revenue-based financing where you can get a lump sum which you can pay back through a percentage of your sales.

5. PayPal Working Capital

PayPal Working Capital Homepage

Similar to what Shopify has done for its merchants, PayPal has also gotten into the funding space through PayPal Working Capital.

The program provides loans to its business account users. You can avail of loans amounting to 25% of your previous year’s sales through the platform. Still, the actual amount is based on your sales volume, account history, and past Working Capital transactions.

It charges one fixed fee and takes a percentage of each sale as repayment for the loan. However, it requires you to meet a minimum repayment total every 90 days, depending on your loan amount. You need to have a PayPal business account for 3 months and process $15,000 within the past year with no outstanding PayPal Working Capital loans to be eligible.

6. Payoneer Capital Advance

Payoneer Capital Advance

Payoneer is another payment solutions provider that has entered the business financing game through its Capital Advance program.

Capital Advance is aimed at sellers on Amazon, Walmart, and Wayfair. Businesses can get up to 140% of their monthly marketplace payouts or up to $750,000. All you have to do is to connect your marketplace account to Payoneer. The platform will check your store’s sales performance, and Payoneer will generate funding offers for you.

Payoneer charges a small fixed percentage of the funding amount. It takes back a portion of each payment made to your marketplace store until the funding total settlement amount is collected.

7. Sellers Funding

Sellers Funding Homepage

Sellers Funding provides online businesses with flexible funding options such as Working Capital and Daily Advance. You have to connect your marketplace account to the platform, and it will check your eligibility.

It has a couple of options for business funding. For Working Capital, you can get anywhere from $5,000 to $5 million with terms ranging from 3 to 24 months with options to avail of 4 months of interest-only payments. For Daily Advance, you can get up to 90% of the previous day’s sales and get charged a simple rate like 1.5%.

For Working Capital, you need at least 6 months of sales history with $20,000 of net sales per month. For Daily Advance, you need to have 3 months of active sales with at least $1,500 net sales per month.

8. Uncapped

Uncapped Homepage

Uncapped is another online business-focused funding provider. It provides several financing options, including revenue-based financing, fixed-term loans, and inventory financing.

You can get anywhere from £10,000 to £10 million with fees as low as 2% for revenue-based financing and fixed-term loans. Your online business has to be operational for at least 6 months and generates £10,000 in monthly revenue. For inventory financing, Uncapped provides £10,000 to £10 million or up to 100% of the inventory price to Amazon sellers.

Uncapped also has a specific program for software-as-a-service (SaaS) companies where they can get loans with rates as low as 0.5% per month with terms from 6 to 24 months.

9. Choco Up

Choco Up Homepage

Choco-Up provides funding for ecommerce businesses. Companies can get funding based on their performance. You can connect your account to Choco Up and it will use your data to compute funding offers.

Payments are automatically deducted from your bank account and is computed based on a percentage of the revenues in your connected store accounts. The rate is fixed and is clearly stated in the terms of your funding. The fees are also straightforward with no compounding interest. What’s stated on the terms is what you will have to pay.

Your online business has to be up and running for at least six months with a revenue of more than $10,000 per month.

10. Become

Become Homepage

Become matches small-to-medium businesses with lenders. Through the platform, businesses can get connected to a variety of loan products being offered by different lenders. These products can range from traditional equipment loans, startup loans, merchant cash advances, invoice factoring, and lines of credit.

It does have an ecommerce-specific option where online businesses can get a loan of up to $100,000 through the lenders on the Become platform. All you need to do is to connect your Amazon or Shopify store account and your marketing platform account (Facebook or Google). From your business data, the platform generates a report of your funding viability. You will then receive loan offers with varying amounts, rates, and repayment terms.

Choose the Right Funding Resource for Your Company

Unlike traditional lenders or investors, many of these ecommerce-focused platforms do take a more proactive and positive attitude towards the businesses they fund. They already understand what ecommerce businesses go through. They’ve customized their offerings to solve specific funding concerns. They know that your success is their success.

Your decision to get outside funding shouldn’t be as daunting now that you have options on how to go about it. To recap, here are some tips to help you choose the right resource:

  • Figure out your growth strategy. This will help you determine how much capital you’ll need to put your plans into motion.
  • Seek out the best resource that provides the most attractive terms. There’s nothing stopping you from engaging any one of these resources. You can consider which kind of funding, fee structure, repayment method, and schedules would work best for your situation.
  • See what the platform or resource has to offer aside from the money. Some platforms go beyond just providing you with funds. They also give you access to tools and insights to guide your growth trajectory, and they can even open up their networks of potential partners.

Ultimately, this should warm you up to the idea of getting external funding. It just might be the key to your business’ growth and success.

About the author

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Lucinda Honeycutt
Lucinda has been a web geek since the '90s. She's a web designer and content creator who specializes in small business, ecommerce, digital marketing, and SEO.

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