Financing Your E-Commerce Vendor Business

E-commerce Invoice Factoring Company

E-Commerce Seller Financing Choices

With global e-commerce sales expected to exceed $5 trillion in 2022, entrepreneurs and startups have flooded the market to sell products. Capitalizing on the e-Commerce opportunity is a significant venture. Still, you must have adequate inventory, payroll, taxes, and marketing funding. Due to inconsistent cash flow and financial management, between 80-90% of e-Commerce businesses fail without e-commerce financing.

Bankers Factoring works with e-Commerce wholesalers and importers, offering purchase order (PO) and A/R business financing to fuel growth and avoid failure from lack of cash flow. Our invoice factoring programs provide flexible lines of funding that grow as your business grows. Entrepreneurs and small business owners can focus on improving margins, new market expansion, and new product development.

E-Commerce sales are dominated by third-party marketplaces such as Amazon, eBay, Etsy, and Walmart and social media platforms where sellers list their products for sale. These types of sales are direct-to-consumer (D2C), but each marketplace has various holding requirements for funds disbursements.

You can also read our article on wholesaler factoring.

E-Commerce sales are different from business-to-business (B2B) sales directly to big-box retailers such as Walmart, Dollar General, Target, Five Below, or Bass Pro Shops. These types of sales are wholesales with extended payment terms up to 60, 90, or 120-days.

This article covers avoiding sleepless nights of funding your e-Commerce business and what financing companies look for when assessing your business.

What is e-Commerce Factoring?

Invoice factoring, or Accounts Receivable (A/R) factoring, is a form of business financing that provides a cash advance of up to 92% of the outstanding invoice value. E-Commerce factoring is when a seller, for example, on Amazon, sells their outstanding invoices to Bankers Factoring for immediate cash funding.

Factoring is a tool that speeds up the receivable process enabling sellers to meet payroll, purchase more inventory, run marketing campaigns, or cover overhead. Once a client (seller) sells their invoices to Bankers Factoring, we provide an initial cash advance of up to 92% of the AR value.

E-Commerce factoring is a strategic tool for sellers as they can focus on their business rather than how to pay bills. Entrepreneurs can focus on generating sales, order fulfillment, and business development rather than collecting or waiting for payments.

Most small businesses fail within five years due to cash flow struggles. Let Bankers Factoring remove the burden of poor cash flow.

How does e-Commerce Financing or Factoring Work?

Invoice factoring is an easy process that enables business owners and entrepreneurs to secure efficient cash funding.

You can qualify for factoring if your business has invoices for goods sold.

1. Sell goods on a marketplace and generate the invoice and statement from your account
2. Sell the invoice or receivables to Bankers Factoring
3. Receive a cash advance of up to 92% of the value of the receivables the same day after approval
4. Receive the remaining invoice balance once Bankers Factoring receives the payment from your customer (account debtor)
5. Repeat this process once you are ready again. As your business grows, so does your factoring line with Bankers Factoring.

Visit our previous article, Non-Recourse Invoice Factoring for Startups, to learn more.

What is e-Commerce PO Funding?

Purchase order financing, or PO funding, is when your e-Commerce business has an opportunity to take on a wholesale account from a big-box retailer. For example, Walmart has approached your business with a large PO. Still, your company lacks the finances to buy the inventory.

In this scenario, Bankers Factoring buys the material or uses our credit to arrange terms with your supplier. PO Financing and Invoice Factoring or invoice discounting work hand in hand. Bankers Factoring offers the financing for your inventory, and then we factor your invoices to reduce your payment receipt time.

Visit our PO Funding Guide to learn more!

How to Qualify for Financing

Your numbers matter whether your business is searching for invoice factoring or PO funding solutions. There are differences between factoring and PO funding, with factoring considering your customers’ creditworthiness (the account debtor). PO funding does consider the business or business owner’s credit score.

For entrepreneurs and business owners lacking the financial strength or credit to obtain traditional bank lending, invoice factoring and PO funding can help your business keep its doors open. To learn more about the invoice factoring qualifying process, visit our Due Diligence Process for Factoring.

Essential Metrics for e-Commerce businesses seeking traditional or non-traditional funding.

The following metrics gauge the overall profitability and efficiency of operations.

1. Cost of Goods Sold (COGS)

Refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the final product sold. It excludes indirect expenses, such as distribution costs and general, sales, and administration costs.

2. Gross Margin

Equals net sales less COGS. This is your profit from your sales before operating expenses or your overhead. Typically, gross margins above 25% can qualify for financing. If your gross margins are lower than 25%, it is critical to find ways to decrease your COGS and create new cash efficiencies.

3. Cost of Customer Acquisition (CAC)

A marketing metric that demonstrates how much it costs to convert a customer to purchase a good or service. Suppose your company is leveraging digital marketing tools such as advertising spending, social media influencers, or other campaigns. In that case, it is critical to track these costs and returns.

4. Pay per Click (PPC) or Cost per click (CPC)

The Internet advertising model is used to drive traffic to websites, where an advertiser pays a publisher when the ad is clicked. PPC or CPC models can be costly in saturated markets and yield minimal results. It is essential to have internal controls to limit wasteful ad spending.

5. Conversation Rates

Records the number of consumers that have completed the desired actions from the company initiative or marketing campaign. Suppose your business is spending on general marketing, but it is not converting new sales or customers. In that case, it is time to evaluate your methodology.

You can also read our article on PO funding for small business.

Wholesale vs. e-Commerce

As entrepreneurs and business owners, we must be ready for the big deal. More importantly, knowing your customer and the type of account are critical for financial planning. Wholesale accounts have different terms than e-Commerce accounts.

For example, a wholesale account with Dollar General as the customer (account debtor) will have credit payments from 60 to 120 days. Whereas e-Commerce accounts typically receive payment ASAP; however, each marketplace has different account reserve requirements and may send payouts bi-weekly.

Businesses have different distribution interests. Amazon sellers or e-Commerce businesses can have multiple distribution channels in their supply chain.

• Brick and Mortar: some clients selling on e-Commerce also have their physical storefronts for the general public. Even with brick-and-mortar locations, the business can still have e-Commerce and wholesale accounts.
• Amazon Marketplace: Many of our clients only sell their products on the Amazon marketplace, which has over 15 countries to sell in. Amazon is the leader in e-Commerce. Sellers can benefit from Fulfillment by Amazon (FBA) if they want to reduce their operating activities. FBA offers a way for our clients to enter into other wholesale agreements with suppliers for goods and brands.
• Other e-Commerce Marketplaces: eBay, Walmart, Etsy, and social media platforms
• Big Box Retail through Wholesale: some of our clients started with wholesales to big-box retailers such as Dollar General, Walmart, Kroger, Costco, Walgreens, Home Depot, and many other major retailers. Sales to big-box retailers are wholesale and come with extended payment terms of up to 120-days.

How to Acquire Wholesale Accounts

Working with large commercial clients on wholesale accounts comes with many unknowns. Initially, acquiring the account to get paid and meet vendor requirements can seem scary. Bankers Factoring removes the burden of managing the receivable process with your wholesale accounts with our accounts receivable financing.

Acquiring big box retail (wholesale) accounts is like any other sales opportunity. Your business must demonstrate an established sales history with another retailer or your D2C sales. Entering the big box environment will be hard without a solid customer base.

You can become a supplier to retailers through a variety of relationships:

1. National Product Supplier
2. Local Product Supplier
3. Direct Imports
4. Website Supplier
5. Last-Mile Delivery Services
6. Service and Non-resale Supplier

Minimum Requirements for wholesale accounts:

• Federal Tax ID Number
• Dun and Bradstreet Registration
• Responsible Sourcing Requirements and Expectations
• Certificate of Insurance: requirements vary by customer
• Distinct and unique UPCs (GTIN)
• Global Data Sync Network to create and setup items and communicate orders and order fulfillment

Read our article on funding for big-box retail suppliers.

Why Bankers Factoring

Invoice Factoring Advantages

Bankers Factoring bridges cash flow gaps, takes the credit risk, and manages your A/R process with our factoring service. We enable entrepreneurs to grow their businesses in both e-Commerce and wholesale environments. Get e-commerce financing with us today.

• Same-day funding after approval up to 90% advance on unpaid invoices
• We take on the credit risk
• Total A/R Management
• Flexible line of financing
• No hidden factoring fees with an easy-to-understand factoring agreement
• Deep experience among e-commerce invoice factoring companies
• Rates as low as .75% with a low factoring fee.
• Payroll Funding
• PO Financing

Ready for the owner-employees of Bankers Factoring to fund your e-Commerce venture via our invoice factoring services? Call 866-598-4295 or go to Bankers-Factoring-Application.

• Facebook
• Twitter
• LinkedIn