Business funding for ecommerce businesses

An online seller pays for stock weeks or months before a marketplace or payment provider pays out the sales, and ecommerce funding is built to fill that gap. Trade finance pays the supplier, a revolving facility or revenue-based finance carries the stock until it sells, and equity pays for growth that profits cannot yet cover. Lenders read your sales data directly from your platforms and bank, so clean records count for more than a long history.

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The stock and payout cycle

  1. 1

    Order and deposit

    You place an order with a manufacturer, who may ask for a deposit with the order and the balance before the goods ship. Your cash goes out first.

  2. 2

    Shipping and import

    The goods travel, clear customs and reach your warehouse or the marketplace’s fulfilment centre. Freight and customs duty are paid now, and import VAT too unless you account for it on your VAT return.

  3. 3

    Selling

    Customers buy over weeks or months. Each sale is paid to the marketplace or payment provider, which holds it until its next settlement date.

  4. 4

    Payout and returns

    The marketplace pays out on its own schedule, less its fees. Customers can cancel up to 14 days after delivery, and you refund them no later than 14 days after the goods come back.

Add up the weeks from the first payment to the last payout and you have the length of time your cash is out. The cash cycle calculator does it from your own terms.

One stock order from deposit to payout

Illustrative example

A limited company selling homeware on a marketplace orders a season’s stock from an overseas manufacturer. The payment terms, timings, payout schedule and finance rate are assumptions.

Order value
£50,000
Deposit with the order, an assumed 30%, week 0
£15,000
Balance before shipping, an assumed 70%, week 6
£35,000
Goods arrive and go on sale (assumed)
week 13
Last of the stock sold (assumed)
week 23
Last payout, paid fortnightly in arrears (assumed)
week 25
Trade finance on the £35,000 balance for 90 days at an assumed 1.5% per 30 days
£1,575
Weeks from the first payment to the last payout
25

Before the first sale this business has £50,000 out, plus freight, duty and import VAT. Paying the balance with trade finance keeps £35,000 in the bank for the next order and for advertising.

What a lender can rely on

An online business owns little that a lender can register a charge against: no building, little equipment, and stock that may sit in someone else’s warehouse. So lenders lend against the sales themselves. They connect to your accounting software, your bank through open banking and, for some products, your marketplace or payment provider accounts, and read months of daily sales, refunds, fees and advertising spend. How open banking is used in a loan application.

Revenue-based finance is built on that data. The funder advances a sum and takes an agreed share of your sales until a fixed total is repaid, so repayments rise in a strong month and fall in a weak one. It costs a fixed amount set at the start, and you should compare the total repaid with a loan or a revolving facility before you sign. Working capital finance sets out the products.

A debenture over the company and a personal guarantee from the directors are common on unsecured lending to online businesses. Read what you are giving before you accept. What a personal guarantee means for a director.

Two cleaners loading a vacuum into their van

The rules that move your cash

Under the Consumer Contracts Regulations a customer who buys online can cancel up to 14 days after delivery without giving a reason, and you have to refund no later than 14 days after you receive the goods back or proof that they were sent. A lender will read your return rate, because returns come straight out of the cash a sale was meant to bring in.

If you sell goods that are outside the UK at the point of sale, the £135 limit decides how VAT is collected: it applies to the value of the whole consignment, and consignments of £135 or less sold direct to UK customers have VAT charged at the point of sale. Where an online marketplace is liable to account for the VAT, it does so in place of the seller.

Import VAT on stock is due when the goods arrive, before you sell any of them, unless your VAT-registered business uses postponed VAT accounting to declare it on the VAT return. A lender modelling your cash will check which you use.

Funding that fits an online business

Trade finance

The funder pays your overseas supplier and you repay once the goods sell. Trade finance.

Revolving credit

A limit you draw for stock and repay as payouts arrive, then draw again. Revolving credit facilities.

Revenue-based finance

An advance repaid as a share of your sales, priced as a fixed total. Working capital finance.

Recurring revenue finance

A subscription business borrows against its contracted monthly income. Recurring revenue finance.

Business loan

A term loan pays for a warehouse fit-out, a new website or a brand purchase. Business loans.

Equity

Investors buy shares to fund growth that profits cannot yet pay for. Angel investment and crowdfunding.

Marketplace holds and suspensions

If the marketplace stops paying out

A marketplace can hold back payouts or suspend an account under its own terms, and when it does your income stops while the repayments carry on. Lenders ask how much of your sales comes from one platform. Keep your own website and a second channel selling, keep the account’s performance figures clean, and do not borrow to the limit of a single platform’s payouts.

Selling the business or taking investment

Online brands are bought and sold on their sales data, so the records a lender reads are the same ones a buyer or an investor will. If you take investment, decide first how much of the company you are prepared to give up. How much equity should I give away?

On a sale, Business Asset Disposal Relief taxes qualifying gains at 18% up to a lifetime limit, which falls from £1 million to £500,000 for disposals on or after 6 April 2027. Selling your business.

Working capital calculator

The days between paying for stock and being paid by customers, and the working capital that gap ties up.

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Questions people ask

How do Amazon sellers get funding?

Through products that read their sales: revenue-based finance repaid as a share of sales, a revolving facility for stock, or trade finance that pays the manufacturer. Lenders connect to the seller’s accounts and bank and read months of payouts, refunds and fees. A funding search through Swoop is for limited companies and LLPs, and for sole traders and partnerships borrowing more than £25,000. A smaller sole trader can look at Start Up Loans or their own bank.

What is revenue-based finance?

An advance repaid as an agreed percentage of your sales until a fixed total is repaid. In a strong month you repay more, in a weak one less. The cost is set at the start and does not fall if you repay sooner, so compare the total you repay with a loan or a revolving facility. It suits online businesses with steady, data-backed sales and few assets to secure.

Can I get a loan for stock with no trading history?

It is hard, because lenders to online businesses rely on sales records. A new seller is judged on the founder’s own money in the business, any personal track record and the supplier terms. Start Up Loans lend to individuals starting a business, and can a new business get a loan? covers the rest.

Do customer returns affect a business loan application?

Yes. Returns reduce the cash each sale brings in and push refunds into the months after a peak. A lender will read your refund rate from your platform or bank data and model it into your forecast. Customers buying online can cancel up to 14 days after delivery, and you must refund them no later than 14 days after the goods come back.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

Funding by sector

Trade finance

Finance that pays your suppliers for stock and imports, repaid when the goods are sold.

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Revolving credit facility

A limit you draw, repay and draw again over a fixed term, with interest only on what you use.

Read more →

Business funding for retailers

Shops fund stock before the season with facilities they draw and repay, and fund shopfits and premises with loans and mortgages.

Read more →

Recurring revenue finance

Lending against subscription or contract income, for software and subscription businesses.

Read more →
All business funding

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Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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