It’s no surprise that ecommerce now represents the future of consumer buying. As computer use has become more widespread, and as large virtual retailers such as Amazon have paved a path, the natural result would be a proliferation of acquiring goods and services online. The explosive growth is so profound that economists have forecast worldwide sales revenues of $4.5 trillion in 2021 from online shopping – a hike of more than 240 percent over a 7-year period.
With opportunities like that down the horizon, the number of individuals and entities looking to enter the ecommerce sector will be equally grand. And while the playing field may not be level, there are ways to capitalize an ecommerce business from the ground up. Despite an obvious concern over a glutted market and competition, the number one factor causing ecommerce startups to fail is funding. Second to that is a lack of a tangible market.
Understanding scale, competition, risk, and creditworthiness, potential and new ecommerce merchants should conduct in-depth research on how to conjure up enough funding to launch a startup or pour more fuel on a fledgling business that hasn’t quite taken off.
The usual methods of financing a new or newer business are still there, although instability in world and domestic markets due to multiple factors in 2021 may temper those opportunities. Banks are still underwriting small business loans through government programs, and if you have success in that area, it’s a great option. But criteria have tightened because of constraints imposed during the global pandemic, making liquidity an issue.
Unique to 2020 (and now 2021) is the rush to provide stimulus relief funding that will salvage businesses after the Covid-19 pandemic threw a monkey wrench into the economy. A massive package from the spring of 2020 dispensed billions of dollars in grants and loans backed by or given directly from the Treasury and state governments. Despite widespread fraud, the next stimulus bill making its way through Congress will also offer funding help. Here are some details on how to apply.
Also in this category are venture capital investors targeted to ecommerce firms, and even ecommerce grants. Some examples of grant programs and other funding sources may be found here.
Private financing is a great deal—if you can get it. Typically an existing relationship with a banker is a prerequisite, but not always. Explore your options, beginning with connections you currently have.
This is where it gets interesting. And fun. As a natural byproduct of commerce and its digital evolution, investors of all stripes have developed new vehicles for making money. Some of those involve funding small business startups. One niche is known as “crowdfunding,” and it has taken off as a legitimate mechanism for raising capital. Though it has some kinks to iron out, it looks promising. An entity sponsors a campaign to raise funds for a particular startup (or new biz), and individuals may hop aboard with the anticipation of making money down the road. Those individuals may include family, friends, small investors, customers, and former colleagues. The obvious risk there is the extra pressure to perform based on the personal associations with your investors. Forbes has compiled a list of go-to crowdfunding sources, and it’s instructive.
Another option sounds straight from heaven, and if it materializes, it may well be. “Angel investors” are singular monetarized people who believe in offering fresh starts and seed money, and if they are impressed by a sales pitch (with a fully developed plan), they may pull the switch.
To be successful in any business, flexibility, research, and staying ahead of the game is a must. If you’re hoping to secure funding for an ecommerce business, these are ever more important. Do the leg work by researching options, consulting with acquaintances and even other businesses, and evaluating your existing financial and banking relationships. But before you strike out with your hand out, be certain that your business plan is strong and realistic; nail down a marketing strategy and a vision of what you’d like to be as you grow.