by Evan Bleker
It has always been quite a challenge for small ecommerce businesses to get funding. Most lenders usually favor big companies with great backgrounds and a skyrocketing sales history, but what about small businesses in the ecommerce scene? You can, if you have the right know-how. Here are four quick tips on how you can look good to lenders, speed up your business’ funding, and stay afloat as a well-funded e-tailer:
Make Sure You Have an Offer That Converts & A Profitable Track Record Before Seeking Funding
An offer sketches that defining moment when you try and compel your customer to buy now. It is where you present your product/service and make an utterly convincing argument as to why someone should buy it. James Schramko coined the term “offer that converts” in his podcast back in 2017. He talked about making offers that convert onlookers or window shoppers into buyers and paying customers.
For example, if you are a beer subscription company, you could offer 24 months of classic beer recipes not seen since the 1800’s shipped straight to customers’ doors for $500 per year ($1,000 total). That would get the attention of both beer connoisseurs and bar owners alike, and entice them to quickly buy your product. If it sells, it is an offer that converts. Without an offer that converts, you do not have a viable business. Without a viable business, few people will want to lend you money. This brings us to another tip on getting the funds you need for your business — a profitable track record. Seeing your shop with lots of paying customers over a long time frame would smell sweet to lenders and backers who, in turn, would give you better deals on funding.
Maintain a Detailed & Updated Set of Financial Records
Think of your financial records as sort of your resume when applying for a job. Lenders and investors would look into these and check if everything is in order. A messy financial record may signify incompetence, or even shady business dealings in the eyes of investors, which is not good. To help with this, you can hire expert bookkeepers for that job who will turn your disaster financial records into books that are clean and organized. Clean financial records give you more pull with lenders and investors who are more likely to give you the best finance deal. You can check out EtailExpress.com for your outsourced bookkeeping needs.
Bank Debt is Your Friend
Bank debts are an easy and convenient way to get extra funds. Taking out a bank loan means you can quickly launch your business plans and deal with upcoming opportunities, enabling consistent business growth. The cost of equity financing by comparison is very high, especially when you are just starting out, because you have to give up a big chunk of ownership in your business. It will cost potentially millions in foregone profit ownership.
By comparison, the cost of debt financing is close to zero with today’s interest rates, so you keep more of the business’ eventual profits. Again, you will find banks a particularly cost-effective option if you have an established business with a good financial history. The more secure and successful your business, the more banks are likely to offer you attractive interest rates. There are also other financing options that are just as convenient and less demanding as bank funding, such as a startup loan from the U.S. government. They can be more forgiving to startups than banks and tend to provide more benefits to borrowers.
When You Take on Investors You Become an Employee
Taking on investors is like taking on new, nagging, and demanding bosses. Say goodbye to three-day work weeks, random vacations, or working at your own pace because investors will want to control what you do and how you do it. Moreover, there is also less room for slacking off because you could be replaced if you give up majority control, and then you have to walk away from the company you founded.
Evan Bleker is founder of Etail Express, a company focused on providing great bookkeeping services for internet retailers. Evan’s history of starting and running web businesses gives him a unique owner’s perspective when it comes to providing top rate business support services. He has been published in Forbes, ValueWalk, SeekingAlpha, Nasdaq.com, plus CMC Markets, and recently published Benjamin Graham’s Net-Net Stock Strategy through Harriman-House.