E-commerce financing: all the solutions to support your growth

How can financing help you optimize your business?

Financing is the lifeblood of any Internet business.

A number of growth levers can be activated when a company has sufficient financing:

• Reinforce product inventory . Optimizing inventory is essential to improving your customers' shopping experience. Product availability is a key factor in customer satisfaction.

• Investing in marketing . By increasing your advertising budgets, you can invest in channels like Google Ads or Facebook Ads. You can also rely on long-term acquisition strategies such as influencer marketing or SEO.

The result: more customers and a potential increase in sales.

• Developing innovative products . With the right funding, you can invest in research and development to strengthen your market position.

• Use software to automate certain tasks . Several types of software can help you automate customer relationship management (CRM), logistics management (WMS), payment management and more. You'll be able to concentrate your efforts on high value-added tasks. This is the key to greater efficiency and productivity.

Financing solutions for your e-commerce store

Here are the most common financing solutions for stores:

Traditional financing

Today, more and more alternative financing solutions are emerging. However, they have not overshadowed traditional financing solutions:

• Bank loans . This is the preferred method of financing for all investors.

• Public grants and subsidies . Certain companies developing innovation or digital transformation projects can benefit from financial support from the government.

• Crowdfunding or participatory financing . This type of financing involves calling on the public via a specialized platform to finance a project.

Bank loans

They can also be categorized as traditional financing methods. These are loans of money granted by banks to finance their needs or investments.

The benefits:

• Competitive interest rates

• Flexible repayment terms and conditions depending on the type of loan (short-, medium- or long-term).

Disadvantages:

• The need to offer guarantees

• Cumbersome formalities, especially in the most competitive sectors.

Equity capital

Equity financing also remains a traditional form of financing. It involves the company use shareholders' own resources or call on outside investors to finance its activities .

The benefits:

• Less financial risk

• Fewer reimbursement constraints .

• No interest payable

Disadvantages:

• A procedure that can be complex . Raising equity capital involves formalities such as drawing up a business plan, negotiations, financial audits and so on.

• Capital dilution . Receiving third-party financing means transferring shares in the company to its investors. This reduces the founders' control over the company's management.

Subsidies

There are a number of subsidies that e-commerce companies can use to develop their business:

• Grants for digital transformation . This is the case, for example, with the Digital Recovery Plan, designed to help businesses go digital in the event of a pandemic.

• Innovation grants like Horizon Europe or BPI France, which support innovative projects such as the development of logistics or artificial intelligence tools.

• Subsidies for business start-ups and takeovers etc.

The benefits:

• No repayment obligation . These are non-refundable government grants and subsidies.

• No dilutive effect . You retain total control over your business.

Disadvantages:

• Strict eligibility criteria

• Complex formalities to obtain them

• Heavy management and reporting commitments

Le revenue based financing

Revenue-based financing (RBF) is a financing method that originated in Anglo-Saxon countries, but is now gaining ground in France. In French, it is referred to as "financing in exchange for royalties".

How does it work? An online business receives fast business financing and then commits to paying a percentage of future profits to the lending institution.

Its advantages:

• More flexibility than a bank loan . It's a financing method that requires no guarantees.

• A non-dilutive financing method . Unlike equity financing, for example, you don't sell a share of your capital to investors.

• Flexible reimbursement . Repayment adapts to the pace of the company's business.

Disadvantages:

• Short repayment terms . RBFs remain short-term loans with maturities of 6 to 24 months.

Hero propose a financing system for very small businesses which is similar to revenue-based financing.

The platform can advance payment of your supplier invoices. You then reimburse it, while benefiting from payment facilities such as the deferred payment after 60 to 90 days or payment in 3 or 4 instalments.

Factoring

Factoring is a financial mechanism that enables a company to assign its receivables to a specialized company in return for immediate payment of the corresponding funds.

Hero offers this method of financing. In fact, the platform can help you advance payment of your customer receivables . For example, if you sell your products on marketplaces where there is a certain delay before payment is received.

Its advantages:

• Fast financing . As with Hero, you can expect payment within 24 hours.

• Reduce pressure on cash flow and the harmful effects of late payments . Factoring enables a company to benefit from positive cash flow, enabling it to continue its normal operating activities.

Disadvantages:

• Commissions can be high . At Hero, on the other hand, rates are completely transparent and among the lowest on the market.

How do you combine financing solutions?

Mixing different financing solutions allows you to diversify your sources of financing and reduce risk . It also allows you to leverage the advantages of each solution.

Here's how to do it:

• Identify your needs. Are your needs short, medium or long term? That's how you'll decide which solutions to combine to meet your financing needs.

For example, you can combine equity capital with a bank loan to finance the company's growth.

• Assess your financial situation . Financing means repayment. It's all about assessing your ability to repay.

• Identify financing methods that are compatible with each other. For example, FBR debt is not compatible with a bank loan.

• Compare fees and interest rates . Make the operation as inexpensive as possible.

• Staggering financing by combining short-term solutions to finance immediate needs with long-term solutions for capital expenditure.

Hero finances your e-commerce!

Hero is a payment solution and financial ally for very small businesses.

His offer? A factoring method that enables you to receive payment for your receivables customers without any delays in payment. Once the claim has been validated and verified, the platform immediately disburses the funds (D+1).

The platform also offers advance payment for inventory purchases. You can then repay it in 3 or 4 instalments or after 60 to 90 days.

This means you can benefit from positive cash flow to cover your running costs.

In short, e-commerce businesses can be spoilt for choice when it comes to financing solutions these days.

In fact, you can even combine them for optimum financing. To do this, you need to take the time to analyze the advantages and disadvantages of each and choose according to your needs.

Hero offers financing solutions to help you your e-commerce.