Most online sellers need funding for the gap between paying for stock and receiving their marketplace or payment payouts. The main options are supplier terms, stock finance, revenue-based finance repaid as a share of your sales, funding offered by the platform you sell on, and business loans or lines of credit. Lenders will look closely at your sales data, your margins after fees and returns, and how dependent you are on one channel.
An online shop selling homeware orders a container from an overseas factory in February. It pays a deposit with the order and the balance before the goods ship. The stock lands in April, sells through May and June, and the marketplace pays out a week or two after each sale. The business is profitable, but for months its cash is sitting in boxes, on a ship and in a marketplace's account.
That's the central funding problem for ecommerce. This guide explains the options, how each is repaid, and what lenders look for when the business lives online.
Why online sellers run short of cash
Selling online removes the shop, but not the cash cycle. Three things stretch it:
- Paying for stock early. Overseas suppliers often want a deposit with the order and the rest before shipping, months before the goods can be sold. Shipping and customs add more time.
- Stock sitting before it sells. Goods held in a warehouse or a marketplace's fulfilment centre are cash you can't use, and storage fees mount while you wait.
- Payout timing. Marketplaces and payment providers usually pay out on a cycle, often every week or two, and some hold back a reserve to cover refunds and disputes. Your sales figures can look strong while your bank balance lags behind.
Growth makes it worse. The faster you grow, the more stock you buy ahead, and the bigger the gap. Many sellers run short of cash in their best year, not their worst.
Supplier terms and stock funding
Start with your suppliers. Paying on 30 or 60 days, or paying a smaller deposit, often costs nothing and shortens the gap before you borrow anything. Long-standing relationships and larger orders give you more leverage to ask.
Beyond that, stock finance (or inventory finance) pays your supplier directly and you repay over a few months as the goods sell. Some providers specialise in importers and will pay overseas suppliers before goods ship. Expect questions about what the stock is, how quickly it sells, your margins and where it's held. Our guide to stock and seasonal finance covers stock finance, purchase order finance and how to time it.
If you import, check how import VAT affects your cash. VAT-registered businesses can usually use postponed VAT accounting, which lets you account for import VAT on your VAT return instead of paying it when the goods arrive. Customs duty is still payable. The current rules are on GOV.UK.
Revenue-based finance
Revenue-based finance gives you a lump sum that you repay as a fixed percentage of your online sales until an agreed total has been paid back. The total is set at the start as a fixed fee on top of the amount you receive. It works much like a merchant cash advance, but it's collected from your online revenue, often through a connection to your store or marketplace account, rather than from a card terminal.
Its strengths are speed and flexibility. Decisions can be quick because the provider reads your sales data directly, and repayments fall in a slow month. It's often used for stock and for advertising, where the spend should produce sales within weeks.
The cautions:
- The fee is fixed. If you repay quickly, the cost in annual terms is high. Compare the total repayable, not the percentage.
- It takes a slice of every sale. On thin margins, the share can leave too little to run the business.
- It's easy to stack. Taking a second product before the first is repaid can take a large share of your takings.
- Check whether it's regulated. Often it isn't, either because you trade as a limited company or because of how the product is structured. That means fewer protections than a regulated loan, so read the agreement carefully.
Marketplace and platform seller funding
Some marketplaces, ecommerce platforms and payment providers offer funding to their own sellers, sometimes through a partner lender. It's usually by invitation, based on your sales history on that platform, and repaid automatically from your payouts, either as a fixed amount or a share of sales.
The appeal is convenience: an offer can appear in your dashboard and be paid quickly, with no separate application. Before accepting, check:
- The total cost, set out in pounds, and how it compares with other options.
- How repayments are taken, and whether they can leave you short in a quiet week.
- What happens if your account is suspended or your sales on that platform drop. Repayment is usually still owed.
- Whether it ties you closer to one channel. Funding repaid from one marketplace makes that marketplace's rules even more important to you.
Business loans and lines of credit
A business loan gives you a lump sum repaid in fixed instalments over an agreed term. It suits a planned, one-off need, such as a large seasonal order or moving to a bigger warehouse, and is often cheaper than revenue-based products if you qualify.
A revolving credit facility or overdraft gives you a limit to draw from and repay as needed, paying interest only on what you use. For sellers with several stock orders a year, it can fit the cycle better than repeated loans. Our guide to overdrafts, revolving credit and loans compares them.
Unsecured lending to limited companies usually comes with a personal guarantee from the directors. If you trade as a sole trader or small partnership and borrow £25,000 or less, the lending is regulated by the FCA, so fewer business lenders offer it.
Comparing the options
| Supplier terms | Stock finance | Revenue-based finance | Platform seller funding | Loan or credit line | |
|---|---|---|---|---|---|
| How you repay | Pay the supplier later | Over a few months, as stock sells | A share of online sales | From your payouts | Fixed instalments, or as you choose |
| Typical cost | Often free if paid on time | Fees linked to each purchase | A fixed fee set up front | Varies by platform | Interest and fees |
| Speed | Depends on the supplier | Days to weeks to set up | Often quick | Often quick | Days to weeks |
| Main watch-out | Straining the relationship | Checks on the stock | High cost if repaid fast | Tied to one platform | Fixed payments in slow months |
An illustration. A seller orders £40,000 of stock, paying a £12,000 deposit with the order and £28,000 before it ships six weeks later. The goods arrive in week ten and sell over the next ten weeks, with payouts arriving a week or two after each sale. The seller needs roughly five months of funding, not two years. Stock finance or a short-term facility that clears from the payouts fits that cycle. A long loan would leave the seller paying for this season's stock when it's time to order the next. These figures are illustrations, not quotes.
What lenders look at
Lenders to online businesses lean heavily on data. Expect them to look at:
- Connected sales data. Many ask for read-only access to your store, marketplace or payment accounts, or to your bank account through open banking. That lets them see sales, refunds and payouts directly.
- Margins after all costs. Not just the product margin, but marketplace fees, fulfilment, postage, advertising and payment fees. A seller with high sales and thin real margins is a weaker case than it looks.
- Returns and refunds. A high return rate reduces the cash each sale really brings in.
- Channel concentration. Selling almost entirely on one marketplace means a suspension or a fee change could hit your income overnight. Lenders notice.
- Trend and seasonality. Twelve months of data shows your peaks and troughs, not just your best month.
- Stock position. How much you hold, how fast it sells, and whether any of it is slow-moving.
Your bank statements, accounts and VAT returns still matter, especially for larger amounts.
Common mistakes
- Funding growth with the most expensive money. Quick revenue-based funding is convenient, but repeated use on thin margins can consume the profit you're growing for. Our guide to what a business loan really costs shows how to compare totals.
- Forgetting payout delays and reserves. Plan from when the money reaches your bank, not when the order is placed.
- Over-ordering because funding is available. Unsold stock still has to be paid for, and storage fees keep running.
- Stacking products. Two revenue-based agreements on the same sales can leave too little to run the business.
- Relying on one channel. If one marketplace is your only income and your only lender, one change can hit both.
Questions people ask
How can an online seller get funding for stock?
The main routes are longer supplier terms, stock finance, revenue-based finance, funding offered by the marketplace or platform you sell on, and business loans or lines of credit. The best fit depends on how long your stock takes to turn back into cash and what your margins can bear.
What is revenue-based finance?
It's a lump sum repaid as a fixed percentage of your future sales until an agreed total is paid back. The cost is a fixed fee set at the start, so repaying faster makes it more expensive in annual terms. It works much like a merchant cash advance, but is collected from online revenue.
Is marketplace seller funding a good idea?
It can be convenient, because offers are based on your existing sales and repaid from your payouts. Compare the total cost with other options, and check what happens if your account is suspended or sales fall. It also ties your finances more closely to one platform.
Can a new online shop get a business loan?
It's harder without a trading history, because lenders rely on past sales data. Some revenue-based and platform providers will consider younger businesses with strong recent sales, and supplier terms help too. Directors are usually asked for a personal guarantee.
What do lenders look at for an ecommerce business?
They look at your sales data, often through a direct connection to your store or bank account, your margins after fees and advertising, your return rate, how dependent you are on one channel, and your seasonal pattern. Accounts and bank statements still matter for larger amounts.
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This guide is general information, not financial advice. Rates, rules and lender criteria change, so check the details with your broker or lender before you sign anything. Lending Lenny is not a lender.