Loans for Online Traders
July 9, 2019
What are the needs of online traders who usually need funding?
Loans for online traders can include various expenses related to e-commerce businesses as follows:
The best opportunity to buy inventory such as when a supplier offers a special discount can sometimes appear suddenly. To be able to react quickly to such changes, you need financial flexibility and this is where loans can be useful.
Growth & expansion
You may have started selling online with several products and you have reached the stage where there is demand for new products. However, the addition of products requires no small cost. You have to invest to do market research and get additional resources needed to promote the new product. Your cash flow may not be enough to fund the expansion effort and this is where loans can be useful to help cover the costs needed.
Overcoming seasonal effects
E-commerce businesses in all industry categories and products are greatly affected by the season. In an article by eIQ aCommerce e-commerce service providers highlighted the highest period of the year for online traders in Southeast Asia: year-end holidays where “almost 40 percent of online sales were generated in the past three months” as well as online shopping festivals such as Single Day conducted by Alibaba.
If you know when your business will go up and down, you are in a better position to be able to implement various steps to help overcome fluctuations in cash flow and income. For example, if a year-end celebration is an important period for your business, you need to make sure that your finances are sufficient to fund the additional workforce, marketing, and logistics efforts that usually begin in early August or September.
Build a strong digital presence
In the digital era, having a comprehensive online marketing strategy is the key. Content marketing, re-targeting, collaboration with influencers, social media marketing and email outreach are examples of strategies commonly used by e-commerce businesses.
A strong online presence is not only important for selling products but also important for brand discovery, interacting with consumers, analyzing, and getting feedback.
Mr. Lee Yee Fung, director of the lifestyle business group in International Enterprise (IE) Singapore explained: “This knowledge can then enable sellers to create the right shopping experience for consumers by balancing offline and online strategies. This will distinguish them from other sellers in this competitive industry. “
What types of loans are common for online traders?
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As can be understood from its name, unsecured loans are not guaranteed by collateral. Borrowers do not need to risk assets to get a loan; on the contrary, this loan is approved based on other factors such as credit scores and the strength of business cash flows.
Credit limits allow you to withdraw a number of previously agreed funds when you need them. This is different from other loan options which usually provide the total loan amount in advance (for example with a term loan). Interest is only calculated from funds withdrawn and the amount that has been repaid will be available to be withdrawn. Credit limits are flexible financing options and can be used for a variety of short-term business needs, such as funding unexpected expenses, increasing cash flows and paying inventory costs.
Merchant cash advance
With a Merchant Cash Advance (MCA), lenders provide financing and you will repay the loan along with costs taken from a portion of the proceeds of the sale using a credit card on a daily basis.
One of the biggest advantages of MCA is the flexibility offered. This option can be used for various business needs such as purchasing inventory, unexpected payments, and marketing costs. And because payments are based on daily income using a credit card, you will not be burdened when the business is quiet because you will pay a smaller amount.
Tips to help you prepare loan applications for online traders
To maximize the chances of your loan application being approved, here are some tips that you can apply:
Explain your payment strategy
To increase your chances of getting a loan, you must show that you can make payments in a timely and consistent manner throughout the duration of the loan.
One way to do this is to collect documents that describe your payment strategy. The document must include estimates of income and cash flow projections for the next one to three years; this is one indicator that you will have enough money to make payments.
In addition, you can include an alternative payment plan that will function as a backup plan in the worst case scenario where you have difficulty making loan payments.
Use a strategic approach
By planning and identifying short-term and long-term needs of your business, you will be in a better position to implement strategies that can ensure that you will have sufficient funds throughout the year.
Start by reviewing your business plan for the coming year. Your goal here is to evaluate your needs over the next six months, and outline strategies for achieving your goals.
Next, you should focus on the details and answer questions such as: “What is the purpose of my loan? How will getting this loan help my business?” This will give you a clear picture of your capital needs and help you make decisions based on various factors such as loan amount what you have to take, the type of loan option that is most suitable to meet your needs and the cost of a loan that is still convenient for you.
Finally, make it a habit to review your credit profile every month. By doing that, you will have a clear understanding of the strengths and weaknesses of your profile and can take regular and consistent steps to make improvements.
Don’t underestimate the importance of this seemingly simple step because it can determine whether your loan application will be approved. Leon Munder, co-founder and CEO of Mund’s financial services site stated that “businesses that regularly monitor their credit have a 41 percent higher chance of being approved when applying for a small business loan”.
Where can I get a loan for my e-commerce business?
E-commerce businesses often find challenges in obtaining financing from traditional banks and lenders. These businesses tend to have seasonal sales patterns, and banks consider inconsistency in income as a weakness. In addition, traditional lenders often require borrowers to have a credit history that is blameless and a good track record in the last two or three years. Such requirements are difficult to fulfill by businesses that are just starting to climb.
With online loan platforms like Astro, the loan application process is easy, simple and fast. Submitting a loan application only takes a few minutes and you will be informed about the status of your loan agreement within 24 hours.