E-commerce financing includes solutions that provide funding for web-based businesses that sell either physical or digital products. These solutions commonly include lines of credit, microloans, direct investments, business credit cards and invoice factoring.
E-commerce Financing Through Invoice Factoring
Invoice factoring (also known as invoice trading, invoice financing, or invoice discounting) is an excellent and simple way of financing an e-commerce business. It might also be a cash-flow solution for online stores that offer (or wish to offer) payment plans, allowing their customers to pay after they’ve received the product or service.
By factoring their unpaid invoices, e-commerce businesses can get quick cash advances based on their account receivables.
Here is an example:
An online store sells school uniforms. They receive a rather sizable purchase order from a local high school worth $50,000. However, even though the school needs the uniforms immediately, they want to pay for the uniforms in 90 days. The supplier accepts the terms, delivers the uniforms, and issues an invoice for $50,000, due in 90 days.
Understandably, if this type of purchase is repeated by several other clients, the supplier might run into a cash flow shortage while waiting for payments to be made, thus jeopardising the company’s ability to function.
The supplier, who wants to avoid cash flow issues, decides to sell the invoice to an investor through an invoice factoring company or marketplace, such as Velotrade. Velotrade could instantly advance them around $44,000 and the remaining $6,000 (minus fees) will be released when the school pays the invoice.
By doing this, the supplier gets access to cash immediately after the purchase, the client receives the goods it needs and gets to pay later, and the factoring company profits from the factoring fees. It’s a win-win situation.
How To Apply For E-commerce Financing With Velotrade?
If you have or represent a registered company that has been in business for at least 12 months generating turnover of over USD $1,000,000, and your client has a solid credit history and has been in business for at least 3 years generating turnover of over USD $20,000,000, then you can apply for e-commerce financing with Velotrade today!
All online processes through the Velotrade platform work as follows:
- Register your company (first time only)
- Create a new auction for the invoice you want to discount
- Velotrade verifies the details
- Investors buy your invoice
- Funding is transferred to your bank account after the auction is complete