E-commerce financing is a funding solution that provides working capital for web-based businesses. The solutions for your eCommerce needs include: lines of credit, micro-loans, direct investments, business credit cards and invoice factoring.
Why Do Companies Use E-Commerce Financing?
Firms use E-commerce Financing in order stabilise the cash flow and to cope with payments obligations such as staff’s wages, tax and utility bills. eCommerce financing is also used to make investments like buying more stock or invest in structural transformation. In recent years, a continuously growing number of businesses are using alternative financing services to access working capital. Those alternative services are part of the trade finance products available to SMEs. For example, alternative funding sources are: Invoice discounting, Invoice Financing and Supply Chain Finance. Moreover, the digitalisation advancement accelerates the process of which alternative sources of financing are available to enterprises.
What are the Participants Involved In E-Commerce Financing?
There are four parties involved in the process of e-commerce financing:
- The Seller also known as the supplier, is usually the applicant requesting to access the Financing Service. The seller could be a trading firm, a manufacturing company or a service provider.
- The E-Commerce Marketplace Platform (the warehouse used to store the goods) is a world-wide & well-known digital platform. For example eBay, Amazon or Alibaba.
- The Financing Platform is a reputable financial institution that provides liquidity by advancing funds to the seller, Velotrade.
- The End Consumer also known as the buyer, purchases the product from the seller through the e-commerce platform.
How Does E-Commerce Financing Work?
The Financing Company advances capital to the seller and gets paid back every 15 days from the revenues generated on the e-commerce platform.
Firstly, the eCommerce Financing Platform grants credit limits (credit allowance) to the supplier. To do so, it analyses the business history of the applicant (supplier) taking into consideration several variables:
- Yearly turnover
- Cash flow (for example the past 12 months)
- Stock analysis (flow of goods, materials management..)
- Sales performance
In order to guarantee a direct and continuous exchange of information, the financing company through API (Application Programming Interface) accesses the e-commerce marketplace platform. In other words, the finance provider is able to monitor the seller’s activities such as the payments record and the stocks available at the e-commerce warehouse. In conclusion, the risk of human error and the interaction with the seller is limited.
Since the systems are linked up, the platforms are connected and can exchange information. An estimated Advanced Payment (based on the credit allowance) is transferred to the supplier’s bank account.
The consumers purchase the goods and the revenues generated are collected by the E-Commerce Marketplace platform.
E-commerce marketplace platforms usually repay the sellers on a bi-weekly basis. Therefore, the funds are credited directly into the financing company’s account. After that the original Advanced Amount is fully repaid, the algorithm analyses the performance of the seller. As a consequence the funding process can start again. In conclusion, the dynamic renewal of the funding is a completely automated process.
How To Apply For E-commerce Financing With Velotrade?
Your company must be registered and in business for at least 12 months with a solid credit history. It must sell products through an E-Commerce Marketplace Platform. Then you can apply for E-Commerce Financing using Velotrade today!
All online process through the Velotrade platform works as follows:
- Register your company on the Velotrade platform (first time only)
- Velotrade verifies the details of your company (fully digital, no paper documents)
- You are granted a credit line
- The API are set-up between the E-Commerce Marketplace platform and Velotrade
- Funding is transferred to your bank account