Need A Loan For Amazon Business? 6 Things To Consider
Starting or expanding your business requires financial resources. This includes your e-commerce Amazon business. More often than not, your business might experience a financial hitch in the course of its operations. You’ll need to acquire a loan to sustain your e-commerce business. This article will highlight the factors you need to put at the forefront as you make a financial decision.
Consider the following:
- Available Financing Options
Besides getting a loan from the bank, there are other financial options that suit a variety of business models, including yours. Some options available are business line credits, business term loans, business credit cards, and inventory financing, among others. Business line credit offers you a loan you can periodically use as long as you don’t exceed the amount given.
On the other hand, business term loans provide you with lumpsum capital that you pay for monthly. A business credit card works like a personal credit card that finances your business. Inventory financing aims to help you acquire business assets. If you need to purchase a conveyor belt, this loan will pay for a percentage of the value of the item.
Lending institutions, such as Sellers Funding, have different interest rates. Therefore, you need to do your research before settling on a given choice for your e-commerce business. Look out for interest rates, repayment options, monthly payments, terms, penalties, availability of grace period, the percentage being lent out, and the return-on-investment viability.
Choose an option that your business can afford and one that suits your e-commerce needs.
- Amount Of Needed Funding
It’s critical to know how much you need before starting the loan application process. To determine the amount of funding, you need to identify the aspect of your e-commerce that needs to be funded. Do you want to finance a new marketing strategy, expand your business, or buy bulk inventory? Answering such questions will point you in the right direction.
Ensure you get the exact amount of money you need for your business. If you apply for a much bigger loan than you need, your business revenues might not be sufficient to fund it, considering the high interest rates. If less, you might be forced to apply for another loan within a short period, which isn’t viable.
- Credit Score
Credit scores show your financial capabilities and behavior. It’s determined by how you file your tax returns and pay up debts, among other factors. A good credit score proves to your potential lender that you’re financially responsible and you can repay the loan on time.
Before applying for a loan for Amazon business, get your credit score report. Various platforms offer this service. If you haven’t been in business for long or you’re just starting, use your personal credit score for a loan application.
On average, a high credit score of more than 700 increases your chance of acquiring a loan at a lower interest rate. If the score is between 550 and 700, there’s also a chance of funding but at a higher interest rate. A low credit score not only makes it challenging for you to get a loan but also imposes a very high interest rate if you do secure a loan.
It’s also essential to check for any mistakes on your credit score report and rectify them before your loan application.
- Time Available
In this case, time available refers to the period you need to acquire a loan.
It’s advisable to give yourself ample time before applying for the loan. This extra time allows you to do extensive research on available financers and loan types. It also lets you improve your credit score, putting you in a better position to acquire an e-commerce loan.
On the other hand, having less time compels you to choose the available option upfront without doing adequate research. This might cost your business in the long run, especially if the terms aren’t favorable and if the loan type doesn’t suit your business type. You might end up regretting getting the loan.
- Available Collateral
Most financial institutions will ask for collateral in case of non-payment to safeguard themselves. In case of failure from your end regarding payment, the lender will seize the given asset, but not without express permission from the courts of law. Collateral refers to assets that belong to your business or are personally owned if you’re just starting in business.
Before you pledge an asset as collateral, it’s crucial to know beforehand the value of each of your assets. Knowing the value will help you determine which asset is suitable for collateral depending on the amount of financing you need.
At any rate, it’s advisable to repay your loan on time to avoid losing your assets to lenders.
- Business Plan
A majority of financial lenders will require a business plan from you. The plan should include a description of your company and its financial statement, showing the history of its finances as well as financial projections, along with sales and marketing strategies. It should also show where you’ll get the resources to repay the loan. By reviewing your business plan, your lenders will be able to gauge the viability and sustainability of your e-commerce.
Getting a financial institution to grant a loan for your Amazon business isn’t a challenge with the tips given in this article. Remember to do adequate research on available options, prepare your business before acquiring the loan, and choose an option with the most favorable terms.