What Are the Benefits of eCommerce Loans?

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The rapid adoption of the Internet and e-commerce has created opportunities for small businesses to thrive. However, many small businesses find it challenging to secure financing in an environment where loan standards are extremely tight. To meet the growing demand for financial services that target this segment, more lenders are offering eCommerce loans as a niche product.

An eCommerce loan is a business loan specifically tailored to businesses operating exclusively or predominantly online. These loans offer unique benefits not found with traditional business loans, including faster funding and lenient collateral requirements. Let’s take a closer look at the benefits of an eCommerce loan and how you can benefit from one.

Easy Application Process

As with any type of loan, eCommerce loans start with a process to determine whether you’re approved. However, the application process is much less complicated with an eCommerce loan. This is because the lender will focus on your business’s revenue and cash flow, not on the value of your assets. Since the loan is secured against your business’s revenue, the lender will want to make sure you’re in a position to repay the loan. This is done with a standard revenue and cash flow repayment analysis. The application process is also streamlined because the application is typically completed online. In most cases, you can apply for an eCommerce loan in less than an hour.

Fast Funding

One of the biggest benefits of an eCommerce loan is the speed of funding. Many eCommerce loan providers offer funding within 24 hours of submitting a completed application. This is due to the fact that eCommerce lenders fund loans based on your business’s existing revenue and cash flow. If you have a legitimate business with sufficient revenue and a positive cash flow, a lender is much more likely to fund your loan quickly.

Borrowers should keep in mind that although eCommerce lenders can fund loans quickly, they may fund a smaller amount than what you request. This is because lenders reach their comfort level after evaluating your business’s revenue and cash flow. As with any loan, eCommerce loans also have an expected timeframe for funding.

No Collateral Requirements

Due to the ease of approving eCommerce loans, many lenders don’t require the borrower to use collateral to secure the loan. This is something you’d typically see with SBA loans. If a lender approves you for an eCommerce loan and you don’t have collateral, the lender is going to look at your cash flow and revenue to make sure you can repay the loan. This is why eCommerce loans are great for new businesses that don’t have assets to secure traditional loans with collateral.

Even though you don’t have collateral to secure the loan, the lender will likely have stricter repayment requirements. Unfortunately, no loan is risk-free, and eCommerce loans are no exception. This is because if you don’t repay the loan, the lender doesn’t have anything to go after except your business. Since the lender doesn’t have any collateral to collect against, they’ll most likely go after collecting the debt directly out of your business’s bank account.

Unrestricted Use

Many traditional business loans restrict how you can use the money. For example, you may need to use the money to build out your business’s inventory or purchase equipment. An eCommerce loan doesn’t place restrictions on how you use the money. This is because the loan is based on your business’s revenue and cash flow. While it’s important to repay the loan, it doesn’t matter what you use the money for. This gives you the freedom to use the loan money to expand your business, hire new employees, or whatever is needed for your business to succeed.

E-commerce specific benefits

Unlike traditional loans, an eCommerce loan doesn’t require you to submit a business plan. While a business plan can be helpful, it isn’t always necessary for small business loans. This is because eCommerce lenders focus on your revenue and cash flow to determine whether you’re approved for a loan.

Another advantage of eCommerce loans is that they generally have more liberal terms as compared to traditional loans. For example, eCommerce loans typically have a longer loan term (up to 36 months) and a higher loan amount. Since lenders fund loans based on your monthly revenue and cash flow, they’re more likely to offer longer loan terms and larger loan amounts. At the same time, traditional lenders may offer shorter loan terms and lower loan amounts.

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