The growth and success of any Amazon business hinges on one thing: access to working capital. It doesn’t matter how talented you are at sourcing high-quality products, optimizing listings, or maintaining healthy profit margins– your competitors are just as good. In an increasingly saturated marketplace, Amazon sellers have to find a competitive advantage beyond expertise, that will allow them to scale quickly and sustainably. That’s where funding for Amazon sellers comes in.
Your business will always be limited by the amount of cash available to reinvest, meaning that high, positive cash flow is key. The less working capital that you have at your disposal, the longer it will take your business to scale– giving your competitors time to get ahead. In order to avoid falling behind and outpace the competition, it’s wise to consider taking on funding for Amazon sellers.
Although working capital has historically been challenging for Amazon sellers to obtain, the funding landscape is evolving. Alternative funding solutions, designed specifically with Amazon sellers in mind, now exist to help businesses grow. However, with the innovation of funding for Amazon sellers, comes the concern of predatory loan companies. To ensure that your business finds the best funding to grow successfully and avoid the pitfalls of high interest rates, it’s important to review all your available options before committing. Additionally, having a plan prepared for how you’ll implement extra working capital will help guarantee that you’ll get the best return in sales and cash flow.
In this blog we’ll cover the benefits of funding for Amazon sellers, as well as several of the most popular options available today.
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Benefits of Funding for Amazon Sellers
While external funding has received a bad reputation, funding for Amazon sellers can open up a wide range of opportunities for growth when used correctly. Although each Amazon business is different and requires a unique allocation of funds, most businesses can benefit from using funding to:
Purchase More Inventory
It might seem obvious, but one of the best ways to turn your working capital into profit and improve cash flow for your Amazon business is to stock up. Once you’ve established your business and identified bestselling products, it’s simply a matter of getting your hands on enough inventory to meet demand. By taking advantage of funding for Amazon sellers, you can increase your sales and profits to scale at a quicker rate than competitors. Additionally, by purchasing more inventory at one time you’ll likely be able to negotiate better terms with your suppliers to improve profit margins.
Although ecommerce funding comes at a fee, improved margins along with significant increases in sales, help guarantee that you’ll still be scaling your business profitably. With more inventory stocked, cash flow will be better streamlined, ensuring no stressful crunches that halt sales.
Paid advertisements, especially PPC, are rapidly becoming a requirement for successful listings on Amazon. To stay competitive against rival sellers and reach your target audience, it’s important to invest in the right types of campaigns. Whether you’re hoping to get an ad for your product among similar search results on Amazon or find an influencer to help you expand your audience on social media, funding for Amazon sellers can help make these goals possible and start generating greater traffic.
Streamline Operations and Logistics
When your Amazon business is in the early stages operations and logistics tend to be simple. Many sellers utilize Amazon FBA, eliminating most of the packaging and fulfillment process and streamlining the prepwork for sales. However, this service is costly and can become a massive cost as your business grows. Eventually you’ll need more space, more labor, and more scalable processes to handle business logistics – but you still need time to run your business.
While many Amazon sellers elect to have their own warehouse space or utilize Fulfillment by Merchant (FBM), others invest in 3PL Services to take some of the pressure and responsibility off of themselves. Either way, a huge chunk of capital will need to be set aside in order to pay for them upfront– and if you’re not prepared this can cause your cash flow to take a hit. Funding for Amazon Sellers can provide the capital necessary for key investments including storage, shipping, logistics, and fulfillment, without impacting your cash flow at all. This will ensure that your business can continue to scale and operate successfully long term, without those high fees from Amazon FBA.
Launch New Products
Product launches are one of the biggest drivers of growth for your ecommerce business. By expanding your product catalog you can reach a greater audience, drive sales, and even develop new top products. However product launches require a large time and financial investment to be successful.
Funding for Amazon sellers can be used to pay for many of the moving parts that come with a product launch, such as large inventory purchases or ad campaigns to generate interest. While it takes some time for this money to be recovered, in the long run product launches have the potential to dramatically increase your sales and improve cash flow for your Amazon business.
Funding Options Available for Amazon Sellers
Many Amazon sellers prefer to avoid taking on external funding, instead electing to “bootstrap” and fund their business through personal savings and cash flow. For smaller, early-stage businesses bootstrapping can be useful as it ensures that you’re not taking on unsustainable and unnecessary debt. However, it’s very rare that bootstrapping is sustainable long-term, especially if you’re hoping to scale the business.
Most ecommerce businesses will require some level of external financial support in order to grow their sales and audience. Most Amazon sellers have to periodically make large initial investments, like inventory, that won’t be recovered in sales for extended periods. These lulls in sales or between payouts can create cash flow hiccups, stunting growth and creating crunches that ultimately put pressure on your business financially.
For Amazon sellers who begin building their business with little to no capital on hand, especially if they don’t have a history in business, credit cards can be a solid initial funding strategy. Credit cards provide convenient and quick funding for Amazon sellers, allowing you to make purchases swiftly and take advantage of time-sensitive opportunities. This expedited access to capital can open up doors for your business and allow you to grow rapidly. Many credit cards also offer reward systems or cash-back that can be reinvested into the business, helping streamline cash flow even more.
However, credit cards are unlikely to be a sustainable solution for long term funding for Amazon sellers. Unlike other funding options for Amazon businesses, credit cards can quickly become incredibly expensive if you ever carry a balance from one month to the next. Additionally, even business credit cards require a personal guarantee that can impact your credit score if something were to go wrong.
If you’re an experienced Amazon seller, you might be eligible to apply for a traditional banking loan. Banking loans often feel more secure and comfortable compared to newer funding options for ecommerce, thanks to their established nature and low-interest rates. Since banking loans are typically inexpensive and allow for flexible repayment schedules, they can often provide a very low cost of capital to help your business grow.
However, banks have a wide range of loan options that all have unique terms and conditions that have to be deciphered and weighed. These options can quickly become overwhelming and confusing, delaying an already lengthy process to deploy capital even more. On top of that, banks have stringent requirements for loans and many ecommerce sellers don’t qualify. If you’ve struggled with sales at any point or have been selling for less than a year, traditional banking loans are almost impossible to obtain.
Ecommerce Funding Solutions
In recent years, a wide variety of ecommerce funding solutions have been developed and entered the market. These ecommerce funding providers fill a gap in the marketplace by bringing Amazon sellers affordable capital quickly and conveniently. Ecommerce funding solutions also tend to have more understanding requirements, taking into consideration the evolving nature of an ecommerce business and the ability to rapidly scale.
One of the most important factors in choosing the right ecommerce funding for Amazon sellers is finding a provider that truly understands the challenges of your business, and can offer sustainable capital to help you grow. The best providers will take the time to truly understand the challenges your business faces and help provide you with the cash flow to solve them. Companies like Viably offer comprehensive solutions to banking, forecasting, and funding, along with personalized plans to help you succeed.
There’s no definitive answer about which funding option for Amazon sellers is the best for your ecommerce business, but it’s crucial to understand all the options available to you. No matter what you choose, supplementary working capital has the potential to boost your business to even greater heights and allow you to scale successfully. Ensure that you grow sustainably by having a plan in place for how funding will be allocated and what your financial goals are in order to truly maximize success and growth.
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