An ecommerce business has the benefit of not having to pay rent on a physical storefront. These cyber stores usually only have to worry about obtaining a web host and acquiring the inventory for its virtual operation. The price of web hosting is usually very reasonable. Acquiring inventory, on the other hand, may be a bit of a different story especially for a new venture.??Securing the necessary funding for inventory is always a challenge, particularly so for a new business. In fact, this can be such a significant challenge that it has put some ecommerce ventures out of business before they really even got off the ground. This is often because the business owners were unaware of all the funding sources available to them. Not having funds is also not an excuse anymore for not having inventory to sell. With the wider acceptance of services like drop-shipping, you can fill your cart with inventory without needing initial funds at all. Lets look at some of the options available.
# 1: Bank Loans
Bank loans are an obvious first choice for inventory funding. Many people only think about loans for purchasing real estate, which is their most traditional purpose. However, since in cyberspace there is no need for a physical storefront, you might consider borrowing money to fill your inventory instead. Bank loans are also much cheaper than using credit cards or overdrafts for buying inventory and this is a common trap for most small businesses. If you approach a bank for a loan, they will want to see a solid business plan in place. Any documentation you have, like profit and loss reports, or balance sheets prepared by an accountant, will assist you in your application.
# 2: Payment Plans
Another option that business owners should consider is a payment plan. Some vendors are happy to let customers order inventory if half of the total cost is paid up front. The other half is usually due once the items arrive. Other vendors will even send business owners the full volume and allow them to start a monthly payment plan. This is often the best option for business owners who are initially low on funding. It may also be possible with some vendors to have goods on consignment, so you only pay for the items you get orders for.
# 3: Government Grants
This may be a surprise to many people, but there are also government grants available in some cases that can help business owners launch their ventures. The types of grants available is dependant on a wide variety of reasons. For instance some states and councils try and encourage certain businesses to open shop in remote or rural towns. There may even be subsidies for employing people or students in high unemployment areas. Funding can come from multiple sources that have an interest in the success of the cyber store; talk to your local Chamber of Commerce to find out if this is an option for you. Grants.gov is also a good place to start.
# 4: Just in Time Inventory
People that cannot find any other ways to pay for their initial inventory should consider an option called JIT, or Just in Time, inventory. This is a business concept in which the business owners holds off on buying a significant amount of inventory. Instead of stacking a warehouse with tons of items, the business owner simply orders just enough inventory to fill orders as they are placed. This may involve doing some research on what products sell and how soon the supply will have to be replenished. This also allows business owners to conduct business with much less warehouse space. There are now plenty of software solutions, like Tuppas.com, that can help assist growing businesses to implement JIT.
??# 5: Peer to Peer Loans
You can even find networks of other individuals that lend money to business startups in need of funding. The setup is similar to that of a bank loan, but the source of the funds is usually another individual who has the money to lend. This is referred to as Peer to Peer or Person to Person lending. It has become popular for people who are turned down by banks. You need to be prepared to show your businesses potential with documentation the process of peer to Peer funding can be similar to a bank loan. This concept is now sweeping the web and new websites like Embarkons.com are offering these kind of services.
# 6: Drop-Shipping
There are inventory warehouses that are happy to deliver products directly to your customers door. The range of products may be limited however this is fast changing as drop-shipping is becoming more widely accepted. Basically the concept is that you promote a certain product through your cart. When a purchase is made, you are billed a set price for the product and the order and delivery is fulfilled by the drop-shipper. Music, books and DVDs are the most popular items drop-shippers deal with.
# 7: Kabbage
This relatively new financing option gives users fast and flexible financing for their online businesses. Kabbage will provide you money you need without the need to deal with other methods of small business funding. Simply pay back your cash advances in equal monthly payments without any hidden fees or charges that you might see from other financial institutions. This is flexible funding at its finest.
Guest post contributed by Hayley Spencer for EasyFinance.com Credit Reports. Hayley is a freelance writer after a long standing career as a business advisor. Her articles appear on various online blogs.