An online seller can fund stock and ads before payouts arrive in one of three ways: an inventory loan for a product run, a credit line for repeating ad and reorder costs, or a share-of-sales product such as revenue-based financing or a merchant cash advance. The right one depends on how long the money is out.
An article from Eastgrove Business Loans in Meridian, Idaho on funding an online store's stock, ads and fulfillment between payouts, with Ada County, ID counts and an invented product run priced three ways.
Inventory purchases ahead of a launch or a busy stretch
An online seller buys stock weeks or months before it sells, and a launch or a busy stretch makes the order larger than usual. A product run with a known cost, a known landing date and a sell-through estimate fits a fixed inventory loan: the seller borrows for the order and repays as the units sell. The term should run a little longer than the sell-through, so the last payments are not due before the last units are sold.
Inventory financing explains how partners value stock and set terms. Stock held at a marketplace fulfillment center can be harder to lend against than stock in the seller's own space, because the partner cannot inspect it directly.
Ad spend and fulfillment costs between marketplace payouts
Ad spend runs ahead of the sales it brings, and fulfillment costs, packaging, postage and storage fees, run every week. Marketplace payouts arrive on the marketplace's schedule, sometimes with part held in reserve. The result is a gap that repeats every month rather than once, which is the pattern a revolving line is built for: draw for the month's ads and supplies, pay down as payouts land.
A business line of credit only charges interest on what is drawn, so a seller whose gap is large in some months and small in others pays for the money only when it is out.
Revenue-based options for online sellers
Revenue-based financing and merchant cash advances tie what the seller pays to sales. Revenue-based financing is offered under several structures; some are loans with payments set as a share of revenue and a cap on the total, others are purchases of revenue. A merchant cash advance is a purchase of future receipts, not a loan, collected as a share of sales until an agreed total has been remitted.
Both can suit a seller with lumpy sales, because collections fall when sales fall. Both can also cost more in dollars than a loan for the same period, so set the totals side by side. Factors and holdbacks are worked through on the merchant cash advance page.
What lenders review from an online store
A partner reviewing an online store reads the same core records as for any business, plus the data the store's platforms produce. Payout reports show what actually reached the bank and when. Sales by product show which lines carry the business. Ad spend and its return show whether marketing pays for itself. Supplier invoices and terms show when money leaves.
A seller with a year or more of steady payouts and margins has the widest choice. A newer store may find a share-of-sales product or a smaller line the realistic starting point.
Electronic Shopping Employers in the Ada County, ID Counts
County Business Patterns counted 176 electronic shopping and mail-order employers in Ada County, ID for 2023, with 2,570 paid employees and about $170.9 million in annual payroll. Electronic shopping ranked among the top 25 six-digit industries in the county by employer count, and 71.6% of those employers had fewer than five employees. ZIP 83642 had 33.
Those counts leave out sellers with no paid employees, which Census tracks in a separate program. Ecommerce business loans has more on the trade.
An Invented Online Store: A Product Run Financed Three Ways
Illustration only, invented figures: a Meridian, ID seller orders a $30,000 product run that will sell through in about three months. On an inventory loan at an annual rate of 13% over 6 months, each monthly payment comes to about $5,191, and the six payments add up to about $31,148, or about $1,148 in interest (our arithmetic).
On a credit line at an annual rate of 14%, drawing the full $30,000 and paying it down over roughly 100 days as payouts arrive, interest would run to about $1,151 if the whole balance stayed out that long, and less as it is paid down (our arithmetic, simple daily interest, before fees).
On a merchant cash advance at a factor of 1.28, the seller would remit $38,400, a cost of $8,400, whatever the pace of sales (our arithmetic). The method, not these numbers, is the point: compare the dollars over the same period.
Before an Online Seller Calls: Five Records to Export
- Marketplace payout reports for the last six to twelve months, with reserves shown.
- Sales by product and by channel.
- Ad spend by month, and the sales attributed to it.
- Supplier invoices with payment terms and landing dates.
- Business bank statements and last year's tax return for the store.
With those in hand, call (208) 273-8536 or send the request form. Other articles cover different trades.
By Eastgrove Business Loans · Updated
