eCommerce Loan Guide 2022: How To Use a Loan For an eCommerce Store

August 22, 2022

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Even though fully online businesses often have lower startup costs and less overhead than traditional brick-and-mortar locations, eCommerce business loans are still an important part of every online store’s business plan.

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eCommerce companies are defined as any company or companies that conduct sales over the internet. These days, customers don’t just buy books and food online. You can get groceries delivered, right along with lumber or pants or board games. So for many small businesses, jumping into eCommerce simply makes more sense than shelling out thousands for a physical space. Plus, the internet never closes: your business can earn money 24/7.

On top of all that, consumers are turning online more and more every year. American eCommerce revenues stood at $424.9 billion as recently as 2017, and are expected to top $1.3 trillion as soon as 2025, according to Statista. The COVID-19 pandemic changed consumer habits too. McKinsey and Company reports that retail-oriented spending is up 30% over the March of 2020, and that nearly 70% of consumers consult the internet in some fashion before making a purchase.

Participation in the online market requires funding. Regardless of what type of business you’re running, you’re going to need cash flow to make things go. eCommerce financing can help.

eCommerce Business Expenses

While eCommerce companies are able to bypass the expenses of a brick and mortar retail location, there are also several unavoidable business needs for owners to consider.

Licensing, Permits, and More: the Paperwork

A lot of your licensing and permit needs will depend on your specific products and industry. Are you going to deliver liquor? You’re going to need the necessary alcohol licensing. In addition, you’re going to need inspections and certifications for food products, and more. If you’re operating your business as an LLC or corporation, that paperwork will also cost several hundred dollars.

Website Expenses (Domain Names, Hosting, Design)

First thing’s first: every eCommerce company needs a website, and websites are not free. It’s not as simple as starting a basic WordPress blog and pressing “publish.”

First, you’ll need a domain name. Domain names can be incredibly cheap – you’ll pay as little as $10 or $15 for a highly specific domain. A quick search shows that, a wonderful domain name for a Cat Cafe in Sacramento is currently available for just a penny. On the other hand,, an excellent domain name for a cafe found on Main Street, costs $6,000. There are many more cafes on Main Streets than there are Cat Cafes in Sacramento. Keep that in mind as you choose and purchase your domain name.

But it isn’t just the domain. While some domain sales platforms will also host your website, many do not. If you need to pay for a third-party host, you’re going to be looking at varying costs depending on storage needs, expected traffic, and your customer service expectations.

And if you want your website to look great and drive sales, you might want to consider hiring a designer to build it up. That can also cost a pretty penny.

Payment processing

You’re also going to need to choose an eCommerce platform to take and process payments. eCommerce companies are built on accepting credit cards, and cash is fully off the table. Shopify, Amazon, SquareSpace, and Wix are four of the most prominent examples. You’ll pay these companies a monthly fee, and typically a percentage of your transactions. Depending on the volume of your transactions, these prices can also add up.

As the eCommerce sector continues to grow, many of these platforms also offer domain name purchasing and even hosting. You can save startup costs by bundling some of these necessary costs together.


To sell things, you need things to sell. One of the most common uses for business funding is simply purchasing inventory. Many inventory suppliers offer steep discounts to companies buying in bulk. So as you’re buying more and more inventory, you’re absolutely going to save money in the long term even though those purchases will cost more up front.


Online advertising takes many forms and can be very expensive. That advertising can take the form of paying influencers in your local area or industry to endorse your product (43% of Americans follow at least one online influencer, per Statista). It can also mean paid advertising on Facebook, Twitter, or Instagram. You might hire a full-time social media marketer, or pay to have your business appear on the top of Google’s first page.


Even without an in-person retail location, you’re still going to need staff. While you can certainly handle the use of accounting software, you may need an accountant on a full or part time basis. Plus you may need to hire warehouse workers or shippers, website professionals, and more.

Working Capital

Your business needs cash on hand to operate. It’s difficult to maneuver or otherwise take advantage of short-term opportunities if your company is struggling to keep money in its bank account.

Types of eCommerce Financing

Depending on the size of the expense and which type of expense they’re looking to pay for, small business owners can opt for any number of types of small business funding. The following list is a great starting point as you build out your business plan and determine how much money you’ll need and what you’re going to be spending it on. Be sure to consult traditional banks, credit unions, and online lenders like iCapital Funding.


Long-Term Loans

Long term loans are often used for major physical asset purchasing. They’re the loan you think of when you think of loans: a financial institution, be it a traditional bank, online lender, credit union, examines a potential borrowers creditworthiness, business plan, and intention for the loan. A lump sum is deposited and the borrower agrees to repay that loan with interest. The borrower then makes monthly payments on the loan until it is repaid.

Long-term loans typically refer to loans with repayment terms longer than three years. Some go as long as 25 years, though those are often associated with real estate purchases, construction, or major upgrades.

Short-Term Loans

Short term loans work much like long-term traditional loans, with a major difference: they’re shorter. Typically, repayment terms last less than three years. They often come with smaller loan amounts and higher interest rates.

Remember, the lender’s goal is to make the principal back with interest. In a 10 year loan, a small interest rate on a larger loan amount will lead to a larger pay day for the lender and likely smaller monthly payments for the borrower. A short term loan then creates a situation where a higher interest rate makes more sense for the lender.

SBA Loans

SBA loans are guaranteed by the United States Small Business Administration (SBA). These loans function exactly like a normal term loan with one important difference: the US government has guaranteed a large percentage of the principal (typically up to 75%).

That protection against losing money means that lenders are able to offer lower interest rates to the businesses that qualify. They have less of a need to protect their loan since even if the borrower defaults, the government will step in and repay such a large percentage of the money.

However, taxpayer guarantees mean that lenders are very careful about the companies that receive SBA loans. You’ll need a higher credit score to receive an SBA loan and the application process can be a bit more complicated than other financing options.

Lines of Credit

A business line of credit is a loan option in which the borrower only makes payments (including interest payments) on money they’ve spent under a particular credit limit. These business lines of credit are perfect funding options for emergencies. If the worst happens – an essential piece of equipment breaks, a supplier offers a remarkable discount on inventory – a line of credit means that you’ll be able to jump on the opportunity without having to pay interest beforehand.

Business Credit Cards

Business credit cards function just like your personal credit cards – and much like business lines of credit, for that matter. One area in which a business credit card can be particularly helpful for a small business is with reward programs. If there are recurring expenses for your company, having them paid with a business credit card means taking advantage of cash back, discounts on essentials, and building your company’s credit.

Equipment Financing

In equipment financing, you’ll borrow money specifically to purchase, upgrade, or fix a piece of equipment. The lender will, in turn, hold that piece of equipment as collateral. If your eCommerce business involves manufacturing a specific product, equipment financing helps you finance the manufacturing necessities.

Because the lender is holding the equipment as collateral, borrowers are often able to receive low-interest loans that they may not have been qualified for otherwise. If they default for some reason, the lender simply repossesses and resells the equipment.

Alternative Financing: MCAs

Merchant Cash Advances

Merchant cash advances are not loans. However, they’re a type of financing particularly helpful for eCommerce companies.

In a merchant cash advance, the lender purchases a percentage of future debit and credit card sales. Unlike bank loans, a cash advance moves very quickly – sometimes borrowers receive their funding within a business day.

The other helpful thing about merchant cash advances is the variation in size of payments. While a typical loan requires regularly-sized monthly payments, merchant cash advances are repaid using a percentage of each day’s transactions. That means that if your business has a slow day, week, or month, you’ll have a smaller payment. In other types of loans, you’ll be making the same size of payment no matter how many transactions your company has processed.

Getting Ready for eCommerce Financing

Once you’ve decided what type of loan works best for your eCommerce company, you’ll need to decide how much to ask for and get ready for the loan application. Make sure that you’re asking for a large enough loan. If it’s too big, lenders will question your ability to repay them in full. On the other hand, if the loan is too small it may not lead to additional sales or revenue and also lead to repayment issues.

Finally, remember that the loan application process can take time. Gather your documents and make sure they’re complete and accurate. Then choose the most appropriate type of loan and get the process started.

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