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Funding Options for Your Amazon Business: Which Is Best?

This is a guest post from Viably.

Recently, Amazon announced that they would no longer underwrite seller loans, an option that’s been in place for more than a decade. Yet seasoned Amazon sellers understand that running a successful business on the marketplace requires significant financial support. To maintain smooth operations, keep inventory stocked and well managed, and fuel sustainable growth, you need healthy, positive, and consistent cash flow — something that not even the most profitable businesses can guarantee.

Historically, Amazon and eCommerce sellers have struggled to find working capital solutions that fit the needs of their business, but the landscape has changed. Even without Amazon’s help getting a loan, sellers can explore various other funding options. In fact, there are many funding alternatives designed specifically for eCommerce sellers and the platforms they use to run their businesses.

With so many options now available, it’s important to vet each one thoroughly and take into consideration their advantages and potential drawbacks. In this guide, we’ll assess five of the most popular types of funding for Amazon businesses so you can determine which is the best fit for your brand.

1. Bootstrapping

Many Amazon sellers want to fund their business without taking on debt, whether from negative associations or simply wanting to maintain control of their storefront. This option leads sellers to do what’s called “bootstrapping,” which is funding their business from personal savings or cash flow from the company itself.

For many Amazon sellers, bootstrapping may be their initial funding strategy, but over time it becomes unsustainable. Not only does bootstrapping require you to take on a large amount of personal financial risk and responsibility, but it also typically stunts your business growth. Since steep financial investments are necessary periodically to buy inventory or run ad campaigns for an Amazon business, you’ll always be limited in terms of cash flow. If your brand doesn’t sell rapidly and order frequently, you’ll likely get caught in a cash flow crunch where sales stall as you wait for payouts, causing you to lose money.

2. Traditional bank loans

If your Amazon business is well established, you may qualify for a traditional bank loan or small business loan. The latter, whether secured through a bank or the Small Business Administration (SBA), typically comes with a lower interest rate and longer repayment terms.

While this is a more traditional route and can make many sellers feel more comfortable about taking on external funding, getting approval can be difficult without a pristine business history and strong credit. Banks are much stricter about their requirements for loans, so many eCommerce sellers don’t qualify. If you’ve struggled with sales at any point, haven’t been selling on Amazon for a long time, or don’t have a well-documented business plan, it can be almost impossible to obtain this type of funding.

3. Credit cards

Part of the appeal of selling on Amazon (and eCommerce in general) is the low barrier to entry. It’s incredibly easy to start selling, regardless of your past business experience or expertise. If you have little capital available for your business or lack the credit to obtain a loan though, credit cards are often a good source of funding for Amazon sellers. They’re easy and convenient to obtain and place purchasing power in your hands so you can take advantage of time-sensitive opportunities. Many credit cards also have a rewards system or cash-back program that makes them even more attractive to sellers.

While useful for your Amazon business, it’s important to remember how rapidly they can rack up debt and become expensive. If you carry a balance, interest rates skyrocket, creating alarmingly high bills. Additionally, it’s easy to go over budget on credit cards when you don’t see money coming out of your bank account, so be vigilant if you choose this option.

4. Crowdfunding

In the digital age, it’s become incredibly simple to source support from online communities and peers. As a result, some Amazon businesses look to crowdfunding or peer-to-peer lending platforms like Kickstarter, Fundable, or SeedInvest to raise money. Historically, crowdfunding was seen as an option only for startups, but with increased access and convenience, it can be a great avenue for people who believe in your eCommerce business to invest and see a return.

However, by electing to raise money through crowdfunding, you’ll be held accountable for your financial decisions. While that doesn’t necessarily lose you full autonomy over the business, it does mean you owe something to those who contributed. Additionally, to acquire the amount of capital you need to run an Amazon business, you’ll need a promotional strategy, transparency, and often the willingness to give up some of your equity in the business. Crowdfunding can be a useful tool for temporary support, such as for a big marketing campaign, but for day-to-day operational costs, it’s largely unsustainable.

5. Viably

While many funding solutions exist for eCommerce sellers, very few take the time to truly understand the challenges your business faces. The best providers not only offer funding options that fill in gaps in your cash flow but also help your company grow sustainably in the long run. Viably is an alternative funding provider designed to integrate funding, forecasting, and banking into one tool so it’s easy for you to visualize your financial health.

With a personalized funding plan, you can be certain you’re taking on the right amount of working capital to expand without putting pressure on your business. Additionally, Viably customers enjoy unique advantages like virtual credit cards thanks to the company’s integrated platform.

Wrapping up — The right funding choice for your Amazon venture

There is no one-size-fits-all funding option for an Amazon business. The best strategy for your brand depends largely on your unique financial circumstances, your business’s stage of growth, and your overall goals. Regardless of which funding option you choose, assess the pros and cons of each thoroughly before making a commitment.

In eCommerce, financial flexibility can be the difference between staying afloat and sinking, so learn your business’s financial requirements and align them with the most suitable funding option to bolster your entrepreneurial journey on Amazon.