How alternative finance can improve poor cashflow in an eCommerce business
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How alternative finance can improve poor cashflow in an eCommerce business

Earlier this month Capify founder and CEO David Goldin spoke at Amazon Q4 Mastery, SellerApp’s premier event for Amazon sellers. Capify are official partners of the event, which offers advice to eCommerce retailers across the UK. During David’s session he examined the role of cashflow in eCommerce, and the options available when you need a little boost in your finances.

With more than 20 years’ experience in the alternative business finance industry, David is considered as an industry pioneer and has been featured in various media outlets including The New York Times, Wall Street Journal, Bloomberg TV, Fox Business and Sky Business. His knowledge of SME finance is extensive and over the years through Capify, he has helped thousands of businesses around the world with their cashflow needs.

In this article, we’re looking at the highlights from David’s presentation, examining the common causes of poor cashflow in eCommerce businesses, and looking at some different options to help you solve them.

What causes poor cashflow in eCommerce companies? 

“Only 13.5% of small businesses can secure bank loans”

Cash is king, and cash flow is the lifeblood of pretty much every business. Despite the best efforts of eCommerce business owners, there will undoubtedly be rough patches in the lifecycle of the company that will have an impact on cashflow.

If you’re an eCommerce business owner and you’re having problems with cashflow right now, you need to take the time to examine the reasons behind it.

During his presentation, David highlighted six common causes behind poor cashflow. Take a look at the list below and see if any of these issues look familiar to you.

Six common reasons for poor business cashflow

1. Poor financial planning

Without detailed business plans, you are operating in the dark. Working to a detailed financial plan and budget will mean that you can foresee any potential cash flow shortages and take action to ensure they’re well managed.

2. Declining sales or profit margins

The cause of headaches for business leaders around the world is when sales figures show a downward trend. If your overheads stay the same against declining sales, you’re very likely to find yourself in a dangerous financial situation. Even when overall sales are growing, if your margins are shrinking, your profitability will ultimately be affected.

3. Consistent late payments

It can put a considerable strain on your cash flow if your customers consistently miss your payment deadlines. Consider tightening your credit control processes and looking at ways to encourage your customers to pay on time.

4. Poor inventory management

A large collection of excess stock means that valuable cash is tied up in product that’s sitting with you rather than your customers. You should have a robust inventory management system in place to avoid this, helping to free up valuable working capital.

5. Inflexible funding facilities

Where will you turn if you have a need for short-term or long-term finance? Continually assess whether it’s the right solution for your business. A solution that worked for you as a start-up won’t necessarily be the best choice if your business is in the expansion or maturity stages of its lifecycle.

6. Seasonal variation

It’s important to understand your company’s seasonal sales cycle, and also to appreciate these can be disrupted due to a change in weather, supplier terms, or other external factors. Ensure you hold a cash reserve for when times are tight. It’s also worth considering applying for a funding solution where the repayments mirror your revenue flow.

Understanding the cause of your poor cashflow performance is one thing, but sometimes this isn’t enough to fix the problem.

Why eCommerce businesses should secure finance for the future

“Many eCommerce sellers may have access to bank capital or credit lines, or other types of lending products that do not operate well with their business. They may not be able to scale up to peak or move fast enough when demand kicks in or there is a big growth spurt.”

David Goldin, Capify CEO

For eCommerce retailers, traditional sources of finance are not always the best option, which is why opening the door to alternative financing solutions is a popular route for many. There are a number of alternatives to traditional bank loans, which are a form of business financing that many SME owners struggle to access.

From crowdfunding to peer-to-peer lending, small business loans to merchant cash advances, every alternative financing avenue has benefits to consider, but to identify which is best suited to you, David suggests looking at your own operations first.

He said, “The best way to figure this out is based on the ebbs and flows of your business. The amount of credit card sales your business takes in every month may determine whether a traditional business loan or another product is right for you. Some eCommerce sellers prefer to have a fixed daily, weekly, or monthly repayment so they know exactly how much cashflow to manage.”

There are five key questions eCommerce businesses should ask themselves when it comes to finance:

  1. Do I need multiple funding solutions to meet the current (and future) needs of my business?
  2. Which funding options offer me flexible repayment options?
  3. What’s the credit impact of applying for this type of loan?
  4. Are there any prepayment penalties associated with this type of funding?
  5. How quickly do I need the funds?

The most popular form of alternative finance offered by Capify are small business loans, which are designed to work with the needs of each business.

Small business loans for eCommerce businesses

Small business loans provide SMEs with capital based on their monthly gross sales and offer a number of benefits. Starting from £5,000, you could secure financing the same day as applying with no need to provide business plans or have face-to-face meetings.

The total amount repayable is fixed and agreed at the start of the arrangement, while the repayments themselves are made daily, weekly, or monthly in small amounts to match the needs of each business. They’re deliberately structured into small, manageable and regular repayments as we know this is what SMEs find works best for them.

Capify can help boost your cashflow

If you need assistance managing cash flow, or you’re looking to fund growth, Capify is proud to offer a range of alternative finance options.

You can check your eligibility for a small business loan in as little as 60 seconds with our online loan calculator. All you need is at least 12 months’ trading records, to be processing more than £10,000 a month through your business account and to be based in the UK as a limited company.

There’s lots of great information in our newsroom for eCommerce business owners too, including our guide to 7 free tools that every eCommerce business owner should be using, so make sure you take a look for more information and support to help your business grow.