Finance for eCommerce Businesses - Loans, Equity, and Grants

With so many finance options out there, it can be tricky understanding what the differences are and which will be best for your eCommerce business. Even when you do find the time to speak to an expert, it sometimes feels like they’re talking in a different language. Given the specific jargon, the hundreds of options and the confusing fee structures, wouldn’t it be great if there was a guide that could break down the basics of business funding for you?

We hear you.

Here’s a quick breakdown:

Most business finance falls into three categories: Loans, Equity and Grants. Each of these options come with their own pros and cons that you need to consider in order to choose the right funding that will allow your business to thrive.


A loan is the most common type of finance for small businesses as it offers flexibility, control and growth opportunities. Depending on what sort of loan you go for you can benefit from: cash when you need it quickly, stability, clarity in planning around exact amounts to be repaid and when, flexibility in repayments to accommodate high and low trading months, short funding terms, unlocking money owed earlier.

eCommerce Businesses seek out loans for 2 main reasons:

1) Funding for Growth: Often loans can be used to provide the finance necessary to accelerate the growth of your business. Typically there are 2 types of growth-loans that are available:

  • The Business Loan aka “The Traditional One”: A lump sum of money which is repaid (with interest) over a fixed time.
  • Amount: Up to 25% of your annual turnover (CBILS & BBLS)
  • Typical Cost: Between 4-20% APR (CBILS & BBLS)
  • The Revenue Based Financing aka “The Flexible One”: A loan where you only pay what you can afford. Repayments are taken as a percentage of your sales until the loan is repaid. If you have a good month, you pay more, if you have a bad month, you pay less.
  • Amount: 1-2x your monthly revenue
  • Typical Cost: Tends to be called a factor rate I.e If you borrown £10,000 at a factor rate of 1.3, then your total repayment would be £13,000 (20-50%)

2) Funding for Working Capital: Often you need extra funds in the short term to keep your business running - perhaps you are waiting for a few invoices to be paid or you need to buy reserve stock for a period of increased sales. This type of finance can come in 3 forms:

  • The Trade Finance Loan aka “The IOU”: This is a loan provided to buy inventory or stock from a supplier in order to fulfill an order.
  • Up to 100% of your order value
  • Typical cost: Case by case basis
  • The Line of Credit aka “The Buffer”: Similar to a bank overdraft, this option is a prearranged revolving credit amount that can be used when needed. And the best part? You only pay interest when you use it.
  • Amount: Typically 10% of annual turnover on your last filed accounts
  • Typical cost: 1 - 4% per month  
  • The Invoice Finance aka “The Chaser”: If you have unpaid invoices, you can borrow a sum against their value to unlock funds in the short term.
  • Amount: Up to 95% of your invoice value
  • Typical cost: Service fee between 1 - 3% per month    


When you hear stories of founders raising millions of pounds from large investors, they are usually referring to equity funding. Typically, there are three categories of equity funding:

  • Angel Investment - Individuals put their own money into your business. This can range from friends and family to high-net worth individuals to serial investors.
  • Venture Capital - A form of private equity financing that is provided by Venture Capital firms. This is typically for startups, early-stage and emergying companies that have been deemed to have high growth potential or have already demonstrated high growth.
  • Equity Crowdfunding - This is where you use a crowdfunding platform such as Seedrs or Kickstarter where different people come together to invest in your business. Equity crowdfunding is a great way for a new eCommerce business to gain not only a lump sum of money, but also some early customers who will champion your brand.

One of the major benefits of equity financing is that investors will provide strategic advice, connections and publicity in addition to cash. However, as the name suggests, this often involves selling a share in your business in return for the investment. As the level of risk is a lot higher, investors may want information and even an active presence in the day-to-day running of your company.

As you can probably see, there is a wide variety of funding options available to help businesses. Each one has their pros and cons and due to their unique requirements, not every one will be suitable for you and your situation.


These are funds that you do not have to repay - in other words, free money! However, they are usually given for specific reasons such as:

  • Your business produces something of societal importance (e.g. Grow It Award)
  • The government provides discretionary grants linked to certain circumstances (e.g. the Small Business Grant Fund in response to the COVID-19 shutdown)
  • Incentivised schemes to boost specific industries or types of businesses (e.g. Innovate UK aimed at developing and realising the potential of new ideas).
  • Providing discounts/tax relief to certain businesses/industries (e.g. The Business Rate Relief).
  • Boosting growth and jobs within a certain area (e.g. Chorley Council’s Relocation Award).

Grants like these can be exactly the sort of freebie cash-injection that your business is looking for - but you need to do your research. There are plenty of opportunities out there - you just have to take the time to find them!

Here’s a list of 226 grants to start you off

It’s really important to gain a full and thorough understanding of the options available to you. It can all be a bit confusing can’t it? That’s why we’re here to help you navigate your way through. To chat through your unique situation give Business Score a ring on 020 331 812 63.

We look forward to speaking!

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