The financing of an e-commerce site is a crucial element for the launch and development of a merchant site. Securing funds can help online entrepreneurs cover the initial costs of creating and setting up their site, such as buying a domain name and hosting, developing a attractive and functional website, and the initial stock purchase.
But how to find funds and financing to push the growth of its E-commerce?
How to find funds to finance your E-commerce?
1- Self-financing
This is obviously the No. 1 solution, but self-financing remains the basis of any business creation. Whether it's 1 € or several million, depending on the wealth of each, each euro that you can invest in your own e-commerce will be taken.
Self-financing is a criterion that will be looked at by all other investors and lenders. You might as well try to consolidate it as much as possible from the start.
Of course, if you have little money, then you don't have to risk everything in this investment. This is why there are fortunately many other solutions to find funds to create your e-commerce site .
2- Professional financing
Professional financing is all the people whose job it is to finance projects. Understand by this: the banks.
Going to see your bank first to explain your project and obtain financing is an almost essential step for e-merchants. Indeed, operating an e-commerce site is expensive, such as the purchase of stock and goods.
If you are afraid that a bank will refuse your project, don't panic! it will happen. Several times even. The goal is to find one that will fund the creation of your e-commerce business. Even if 99 banks tell you no.
What matters is that at least one says yes to you.
It's up to you to create an attractive, realistic and efficient business plan to reassure the banker. Even if the business plan is above all a tool to help entrepreneurs, it should not be hidden that without a business plan, there is little chance that a banker will lend you money to create your activity, e-commerce. or not.
Be careful, out of habit, bankers often finance the purchase of machinery and equipment but are often hesitant to finance advertising, stock or external e-commerce agency services, for example.
3- Borrow from family or friends
Another solution to finance your online activity: go see friends and family. Even if you don't have a wealthy family, each $50 or $100 loan can help you get started on better terms.
Of course, if you have a rich uncle in America, it's even better because it will facilitate your research and your budget.
But contrary to popular belief, people love to fund projects. In addition, it will be an opportunity to discuss it with other people, to obtain feedback and to consolidate your project with the help of questions and comments from those around you.
Don't be afraid to present your project to your loved ones! The less you want to show your project, the more it says a lot about your own insecurity to present a concrete project.
4 - Public funds
there may be grant and scholarship programs available in your area for entrepreneurs starting an online business. Look for these opportunities and apply if you are eligible. We can cite Pôle Emploi, for example, which often finances, following a contractual termination, entrepreneurs on their unemployment benefits.
It is also possible to transform your unemployment benefits into an asset contribution with the employment center agreement and to come and consolidate the social capital of your company.
The higher your social capital, the more your suppliers and collaborators will see your company in a favorable light.
It's obviously a bit simplistic but it gives an idea of the solidity of a company.
In the other public funds that you can request, there are all the layers of decisions in France:
- City hall
- Department
- Region
- State
- Public and parapublic
It will not be possible to have public subsidies from a region other than your head office, of course, but many town halls have pro-entrepreneurship programs.
The site les-aides.fr lists the various public and semi-public aids by region and sector of activity. A must have for any entrepreneur.
Note that contrary to popular belief, the more you are “in the countryside” the more you will generally benefit from assistance. Why ? Because all elected officials often see past projects from the same cities.
Outside, as soon as we address the department or the region, there is a desire to energize the whole region and not to favor the metropolises.
Again, everyone who has received help has asked. It doesn't cost most of the time, apart from a little time of course and being a little rigorous on the administrative part.
Note that in almost all cases, the aid cannot be greater than your share capital. No chance of obtaining €10,000 of non-refundable public aid for your e-commerce site if you arrive with €1 of social capital.
Hence the importance of having more family or friends or own funds, or quasi-own funds, to boost possible aid.
It should also be remembered that non-refundable public aid is sometimes backed by a compulsory bank loan. Make sure to maximize the different sources to present a concrete project.
No elected official will fund a private activity 100%.
5 - Crowdfunding
This solution, which appeared a few years ago, is an excellent way for communicators to create a community and “validate” their concept.
Not content with raising funds, crowdfunding above all makes it possible to confront first buyers and early adopters.
The success of your crowdfunding can say a lot about the possible success of your project.
If your fundraising campaign does not find the right one or you cannot interest them, this can help you better build your project to make it a boosted version and thus limit your future losses.
Be careful unfortunately, a successful crowdfunding is unfortunately not always a sign that you are on a project for the future. But at least it's a great starting point.
It requires a lot of work and organization to be successful in crowdfunding and will put your communication skills to the test, but it is on the contrary a good sign because it will cost you nothing except time.
The sums to be raised on collaborative financing are very variable and can range from a few hundred/thousands of euros to several million euros for the greatest successes.
6 - Business angels
Another solution to find money: go see who has it! In other words, business angels. Still unknown a few years ago. This professional has managed to create a real place for herself in the business financing ecosystem, start-ups or not, in France.
A business angel is often an entrepreneur who has successfully sold his company, usually for a good sum, and can therefore freely reinvest his money in new businesses and advise them.
It obviously takes time to raise money with a business angel, but the results can allow your project to grow and take on a new dimension.
To go faster, there are sometimes networks of business angels who can jointly invest in a project or even share files according to the appetite of each investor for a particular sector.
Indeed, each business angel is not sensitive to each sector of activity. It is therefore necessary to first identify the most important people or groups in your field.
It can be the web of course, there are a lot of business angels in this sector but it can also relate to ecology, B2B, SaaS, industrial companies etc... Some are even e-commerce experts and you will help you choose the best E-commerce CMS according to your needs.
There is no official list of business angels in France or by region, but very often the CCI or local business organizations can provide you with information to get the first contacts.
Often a little less formal than the bank and more open and understanding, business angels are not there to “give” you money either and will challenge your project from all angles.
7- The venture capital fund
The venture capital fund is a bit above the level of business angels. In any case often in terms of the amount of money to be raised. Generally, the funds do not finance the first fundraisers, called seeds or priming, but more often fundraisers greater than 1 million euros. Once again, there are many counterexamples and the universe of investment funds is diverse and very varied.
Be careful, however, to properly identify the profile of the fund because the files received are very often very numerous for a few elected representatives.
How to make the difference ? By working as much as possible on the substance of your project and showing your first positive results and the potential for growth.
Yes, the bottoms are still in suits with a glass of champagne in hand. That's how we recognize them.
Often, the projects lack ambition and the funds are not interested if the business cannot quickly go very high.
They are there to massively finance rapid growth and exit the business after a period generally between 5 and 10 years.
The worst for them? Getting stuck in a business that isn't taking off but isn't really dying.
8 - Customers
We often forget this source of financing but it remains essential in the growth of any business! Customers are indeed the number one source of revenue and cash flow generation.
Of course, when you're starting out, it's difficult to rely solely on customers to fund 100% of your business. And yet, in e-commerce we already have a big advantage: the vast majority of customers pay cash and even with payment solutions in several installments, we often obtain all the amounts from when ordering or on D + 2 .
If you do B2B, it is also possible to offer your professional customers to pay all the amounts in advance, even if it means offering a reduction on the amount of the purchases.
Of course, do not hesitate to see all the additional margin opportunities that can be offered on a merchant site with upselling, cross-selling, the sale of additional products, gift cards, etc.
Even though customers can't always finance 100% of growth, the more you rely on them, the healthier the business.
In the quest for funding sources, we sometimes tend to forget this obvious fact.
9- Funding startups
Big news on the market, some startups manage to finance the growth of e-commerce sites by lending money to help you finance advertisements, stock and even subscription fees for certain platforms like Shopify Plus.
This is the case, for example, of the SilvR company which, under certain conditions as often, can advance up to €50,000 for a Shopify Plus license and finance up to €10 million (all the same!) for the growth of merchant sites.
This remains a form of bank credit even if the terms are not exactly the same.
Indeed, unlike a bank which will be based on balance sheets, SilvR-type companies will be based on monthly sales and your growth to estimate the amount you will be able to benefit from.
In the end, which source of financing should be favoured?
As we have seen, financing a business , and an e-commerce site in particular , presents many opportunities and it will be rare to rely solely on one source of financing.
In the vast majority of cases, it will be a set of these different funds that will constitute your capital and allow you to develop your merchant site serenely.
The ideal cocktail will depend on your ambitions and of course on your project and the interest it arouses for the various players in the world of finance that we have mentioned.
And you, what is the preferred source of financing that you will like or that you have set up for your e-commerce?
