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Ecommerce Inventory Financing – Credit Cards, MCAs & More!

Business people shaking hands over a table in the context of ecommerce.

Isn’t it great when a rich family member bails you out of a bad business situation and gives you one million dollars to get back on track? Hmm, I may have lost some of you there! 

Indeed, how many entrepreneurs can count on family loans for business? Very few. After realizing that your savings are gone, your family and friends can’t help out, and that you’ve exhausted all “angel investor” scenarios, what are you supposed to do?

If you’re thinking failure is not an option, then congratulations! You’re already on step one to staying in business

But here’s a new thought: why not look into eCommerce inventory financing – a rising star in the world of fintech? 

eCommerce Inventory Loans -the Best Choice for Online Stores

If you own an online-exclusive business then you already have a few things going for you. You don’t have to worry about business property rent, taxes, or insurance. All you have to do is pay your bills, keep your cash flow out of the red, and buy new inventory so you can make a profit ASAP. 

That’s exactly why we have eCommerce inventory financing contracts – lenders that help small or even mid-range businesses out by providing short-term and secured financing. 

How is this secured financing? Because the collateral is your future inventory. Depending on the institution, this can be a loan or a line of credit that you can use to buy new inventory for your business. 

Online lenders like SoFi even give consumers incentives like cash back, rewards points in crypto, and no annual fees. It’s not just about the lowest interest rates anymore, but finding the lowest interest rates AND taking advantage of new opportunities. 

eCommerce Inventory Financing vs. Traditional Loans

Traditional bank loans might be the gold standard, but they aren’t exactly easy to come by – nor are their terms always fair to the new business owner. When you’re continuing a small business in those crucial first years, you will always need a lifeline for business expenses and new inventory. 

With bank lending, perfect credit and collateral are a must. With eCommerce loans, good credit helps, but you have more options. Most importantly, you don’t have to put up your house, vehicle, or business property just to get more funding – the inventory you buy is the collateral.

Banks take weeks to months. But waiting time for a short-term online loan could be just days. No wonder many new business owners admit that eCommerce lending kept them afloat even in the worst downtime or in a fluctuating market. 

No wonder over 65% of Americans are already using online banking and see what eCommerce institutions can do for them. 

The Ideal Scenario for Inventory Financing

No, this type of funding is not ideal for every scenario. The word inventory is key. It’s really only useful if you have large quantities of inventory to buy – and so, can make the profit back in a short amount of time by selling most of it. 

It’s not going to save a sinking ship! 

But it’s going to help a great deal when you run out of stock and lose those sales that you could be making. If you’re just a week or even a few days before peak season, when you know products are going to sell out, it’s an ideal scenario for inventory financing. 

If you’re not selling as much as you hoped, don’t give up yet. Maybe you just need to redesign a product detail page!

eCommerce Financing vs. Credit Cards

Naturally, not every scenario favors this type of loan or credit line. The short-term and high-priced nature of an inventory loan will ensure that you have high monthly payments – not to mention higher interest rates. 

A traditional credit card comes with higher interest rates, but you can wait a longer period of time to pay the balance without a penalty. 

Then again, credit card lines could reflect poorly on your credit, especially if you don’t make payments on time. 

What Do You Need for Inventory Financing?

That’s not to suggest that any online business can qualify for a handout. If your inventory comes at a high price, the inventory-as-collateral-deal might not fly with the lender. You may need to provide extra collateral depending on how much of a risk the company is taking. 

Also, despite the nature of online transactions in general, the lender isn’t going to be as generous as, say, some of the people on GoFundMe or Kickstarter. The lender will probably want to see the product(s) in person. 

There are other prequalifying terms like: 

  • You must own an already existing business
  • You must sell products or retail online
  • You must maintain proof of all inventory records
  • You must show proof of market research, specifically product demand and other data
  • You must show your sales records and they have to be great!
  • You have to have reasonably good to OK credit

Depending on your business records, as well as your credit score, the lender will figure out the interest rates. Find out more about how credit score affects all aspects of your financial future, including interest.

Can I Use the Money for Any Business Purpose?

In general contracts, no, because the funding is directly related to the collateral inventory. The lender usually has specific terms as to what business purchases qualify as inventory. But there are a few types of inventory financing contracts to consider and depending on the type of contract, your limits might change. 

Remember you also get a loan based on the liquidation value of your product inventory – and the lender determines that amount. Some will not give you the total price. 

But you will have enough funding to make the purchase, between your assets and the loan, and that’s what matters. However, other lenders might fund the entire value, and will probably want an appraisal of the inventory either way. 

Inventory Loans vs. Lines of Credit

Traditionally, inventory loans are based on the value of the retail products, not the overall business. Once the terms and repayment periods are set, you will start making minimum payments – or a lump sum payment after you sell all the products. 

If you opt for lines of credit instead of one loan sum, then you can get regular financing from the lender on an ongoing basis. 

The term loan gives you the advantage of more money at once, while the revolving credit arrangement would work like a credit card – although not all lenders issue a credit card. But you do pay interest on the portion of the credit you draw, as well as the full balance. 

Revolving credit lines might be the more practical solution for you in the short-term – especially if you don’t want to buy inventory four or five years in advance for a higher loan amount. Paying off a smaller balance every six months may be a more convenient option, especially since you will also have a more flexible schedule for repayment and for getting more credit later on. 

In short, you can plan for unpredictable situations and expenses when you have revolving inventory credit. But since revolving credit tends to have high-interest rates, if you can’t pay the loan back quickly, it would be a bad move to leave a high balance and fall into greater debt. 

That brings us to the next option. 


Another option to consider for additional sources of income is the MCA – or Merchant Cash Advance. This is a smaller type of loan that is also short-term and mainly used for emergencies or even unpredictable shifts in your business – like an increase in product demand.

Unlike revolving credit lines, however, MCAs take hours to approve, as opposed to days, and also want repayment as soon as possible – we’re talking days and weeks. 

The MCA lender may even take some of your sales profit until they have been fully paid. MCAs are known for having high-interest rates, with a fixed or floating rate. Find out more about MCAs and other avenues of financing in our Entrepreneur’s Guide to Small Business Finance

Vendor Financing

Lastly, you could consider working with the vendor directly, if the company has financing arrangements in place. Knowing their clients may use an online inventory lender anyway, it may serve the vendor to offer its own payment terms to business owners. 

The lender might let a small business owner buy products now and then pay for them a few months later after they’ve had the chance to sell them and make up the investment.

Use All of Your Available Resources

There is a whole world of eCommerce lending options out there, even beyond the competitive world of traditional loans. If your business is product-oriented and the product is in high demand then you’re in a situation where it’s fairly low risk for a company to give you an inventory loan. 

Ecommerce inventory lending is also an option for business owners with less-than-perfect credit, or who lack (or don’t want to put up) personal assets for collateral. 

The only real qualification here is if your product is selling. If you’re low in stock but still getting many inquiries about new products coming in, reach out to the online eCommerce community and get the help you need to not only stay afloat – but push your small business to the next level of success.

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