Is your store ready to finance?The key you need to know

Financing is an important part of the business world -whether it is the first entrepreneurial or an experienced entrepreneur You may feel scared. However, as your idea of \u200b\u200bjust starting becomes reality, or your part -time job needs to pay attention to full time, financing demand may become the focus of attention. This is an exciting moment!

There are many ways to obtain financing -crowdfunding, personal savings, credit cards, friends and family members, etc. We will study the three most common types of financing and some things you need to consider.

Please note that the decision to obtain financing is an important decision. It has profound and long -term effects and can extend to your personal financial security. Woocommerce will not make any official suggestions to the store, because every situation is unique. Consider and seek independent and objective suggestions for financial professionals.

Common financing methods

Debt financing: This is when you get loans from banks or other institutions. Usually, you will agree to pay the loan in an equal amount within a period (a period of time). The bank charges interest as a fee. You may need to provide some form of collateral (with relatively stable, predictable and tangible value, such as buildings, equipment, vehicles or other forms of property). Repair the loan, their costs.

Equity financing:

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shark tank ] During such a show, most of the transactions they did were based on equity. Here, you give up some business ownership in exchange for cash and other valuable things, such as the professional knowledge or connections of new business partners. Increase -based financing:

This refers to the organization with unparalleled loans based on your previous sales history (means you do not provide any mortgage, such as debt -based financing). Before repaying debts and expenses, the loan will be repaid to the lending party through a certain percentage of each purchase.

Why consider financing?

Most companies get financing to help them start or expand quickly. However, when they try to continue their operations or reverse their efforts, some people seek financing. This may be a landslide.123]

Suppose you are opening a new store or developing a shop that has taken a successful road, financing may be wise. The following is a common reason for financing:

You need to provide funds for the main procurement orders [123 ] Your dream is come true, and a trusted buyer wants to buy a lot from your store. Once you are excited, you may encounter such a question: how you will fulfill such a big commitment. This is one of the most ideal financing scenarios, because you have a relatively secure source of income to wait for each other. Since you will be able to repay the loan quickly (a few months instead of), you may be able to find financing at a low cost.

You are ready to welcome growth

You have considerable sales records, and your number is constantly growing. You find it difficult to keep up with the order. Maybe you even have to limit the number of daily orders, because you do not have appropriate systems or resources to handle all orders. This is an entrepreneur’s dream problem, but it is still a problem. Fortunately, this can be resolved through financing.

You want to raise profit margins

In the e -commerce brand, inventory is usually purchased in advance. Yes, some e -commerce solutions printed on demand, when you start, these solutions may be perfect.

But most of the stores, with their growth and confidence in forecasting sales, like to do it in advance in advance Purchase a lot. Why? The profit margin may be much better. But this is where the pain of growing becomes worse. When you place a big order, your profits will increase, but you spend a lot of money for a long time before you retail. The time from paying production expenses to balance of income and expenditure may require . If you want to grow, your account will become thin. Financing can help solve this problem because you can make more investment in larger inventory procurement. This means higher profit margins and more (final) profits.

Common considerations for e -commerce financing

If you decide to make financing, you need to choose between several options. Each form of financing has its advantages and disadvantages. Evaluate based on the most important factors (ownership, control, risk, etc.), and find a solution suitable for your situation.

Below, we discussed how each of the three major types of financing affects common considerations. ownership and control rights Advantages: debt and income -based financing

Disadvantage: Equity financing

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123] When you provide funds for your needs through debt or income -based models, you can retain all ownership of the company, but if you make equity financing, you will give up part. There is no single calculation method to determine the company’s value, but common indicators include past income, proprietary technology, etc. If you are confident in your future, every percentage of ownership is important. Although you may want to give up 10% for a $ 10,000 check now, if these 10% are worth 10 million in a few years, you may regret this decision. This also means that you will be the final decision maker. You are the boss. Take the entire team to participate in a random and expensive reward dinner. Or use every penny locked on the water cooler. You can call, no one blocks your way. If you have vision, this is an important reason for keeping your equity. For companies with a lot of subjective decisions (such as those companies involved in design), control is second to none.

But please remember that unfortunately, 100% of owners responsibility. Each field of business will eventually depend on you. If you are the only person to have all rights, then you will be sweating late at night to spend a downturn or complete a busy season.

Personal risk Advantage: Equity and income -based financing

When you cooperate with equity partners, they promise Share returns, but they also share risks. If you fail, you personally do not need to repay their investment from partners. Although this is an unfavorable arrangement for them, they look infinitely in the investment period -one day it may be worth billions of dollars.

Income -based financing is also conducive to the owner who wants to minimize risks to the lowest. Because the loan is repaid through each separate sales, if the order becomes slower, the repayment amount will become slower. If the store is completely closed, the owner has no obligation to pay the loan party.

Disadvantable factors: debt -based financing

If you use traditional debt -based loans, the agency will \”guarantee\” loans in a form of mortgage. If the enterprise bankruptcy, they can ask mortgages to help repay the loan. Most business owners provide some form of personal property, such as houses, cars, or other things with great value. A debt -based agreement will bring huge personal risks to borrowers.

Other professional knowledge

Advantages: Equity financing (sometimes) and Wayflyer

If you Employed equity partners, according to partners and agreements, you may benefit from additional professional knowledge and business experience. In fact, many agreements explain this. There may be some cash exchange, but some equity exchange investors’ personal value. If your new partners can introduce, reach transactions or provide suggestions in a valuable way, this may be very powerful. In fact, this may be something you can’t buy from others.