When you think about financing, you likely think about your bank first. After all, it makes sense to consider your financial institution as a potential partner for your financing and business growth needs. But if you’ve ever actually approached your bank to discuss and pursue financing, you’ve likely seen just how difficult it is to actually get a loan. While bank loans and traditional financing may work for some ecommerce businesses, when it comes down to it, banks just don’t understand ecommerce sellers.
But why? Here, we break down the key reasons why banks might not be the best fit for your financing needs.
Long application processes
The bank loan application process is long, often taking weeks or months. There is seemingly endless paperwork involved and the actual review process is done manually. In some cases, bank reps have to make site visits to see your business in person.
This process is quite a contrast to the immediate financing needs you face as a marketplace seller. In ecommerce, you could wake up tomorrow to a sudden surge in sales and need cash ASAP to buy more inventory so you can meet demand and avoid a stockout. Or, your supplier could run a flash inventory sale that, if leveraged, could help you maximize your margins and increase profits. Whatever the case may be, you need cash fast in order to take advantage. You simply don’t have the weeks or months it takes banks to determine if they can lend to you or not.
Pro Tip: Ecommerce businesses who qualify for traditional loans can also benefit from alternative financing to jump on big opportunities. Instead of asking your bank for an extra $50,000, for example, when you see an opportunity to stock up on inventory cheaply, you can apply for an Instant Advance and get your money in 24 hours with no credit checks. Or turn your Amazon store into a liquid asset to seamlessly make payroll and cover daily expenses with Instant Access. These products can help you scale your business alone or alongside traditional financing options.
Low approval rates for small businesses
Banks are set up to lend $1 million loans to $20 million businesses — but not just any $20 million business. They are more inclined to lend to businesses with actual storefronts or physical locations. They simply don’t have the efficiency in place to evaluate small and medium sized businesses who might need a five- to six-figure loan and who also conduct business online. Part of this is because smaller businesses don’t have the history or credentials banks need and part of this is because banks run a mostly manual review process that requires site visits. This all leads to low approval rates for small and online businesses.
They don’t consider Amazon an asset
Even if you’re doing $300,000/month on Amazon, a bank is not even going to give you $20,000. As we’ve mentioned, banks rely on an antiquated review process that values large, established brick-and-mortar businesses. They don’t understand why your inventory is spread across FBA or the potential of an ecommerce business — even one leveraging Amazon’s immense reach.
Business metrics are misunderstood
Banks rely very heavily on credit to make their lending decisions. This goes for both your business credit and the personal credit score of you as the owner. They will look at the health and metrics of your ecommerce business, but only secondarily to your credit. So if you have a low FICO score and have minimal or low business credit, don’t expect a good outcome — even if you have a consistently healthy business.
They assume ecommerce businesses are too risky
At the end of the day — and because banks don’t understand ecommerce or your business metrics — your business is deemed too risky in a bank’s eyes.
Pro Tip: Did you know that Amazon often takes more than 14 days to pay? Learn how Amazon payouts actually work and how you can speed up the payment process.
A better financing option
Tired of banks not taking you seriously? Through with leaving money on the table? Payability’s financing solutions are designed specifically for the needs of ecommerce sellers. Approval is based on your sales performance and account health so there no credit checks and you can be approved in as little as 24 hours.
Since 2016, Payability has helped 2,500+ marketplace sellers maximize cash flow and grow their businesses. Payability’s solutions are designed to help you scale your ecommerce business fast — whether you need a large lump sum of cash to invest in big opportunities (Instant Advance), want to get your payouts daily and in real-time (Instant Access), or are looking to access your own income on weekends and holidays (Seller Card).
Marketplace sellers who use Payability have been able to grow their businesses 2.5x faster than their competitors. In fact, Gina Goldring grew her Amazon business by 50% in one month after her first Instant Advance, while Jump City Toys has been able to buy more, sell faster, and grow tremendously with Instant Access.