Financing for Your Startup – Part 3/3: Growth with Inventory Financing

This is part 3 of 3 in the series Financing for Your Startup. Read the earlier parts below:

You’ve launched your company. Your new product is a huge hit among early adopters. Now, the demand for your product is picking up. It’s selling faster than you can keep inventory in stock on Amazon. Your startup growth strategy might not have included a plan for this kind of success.

When you achieve product-market fit, you need working capital to accelerate the growth trajectory of your Amazon business startup. There’s more than just a product to your company now: you need to invest more into marketing and sales to scale your business.

There are three primary options for Amazon inventory financing that can power your startup growth strategy: merchant cash advances, business credit cards or inventory financing through Payability.

1: Merchant Cash Advance

A traditional merchant cash advance is based upon your future sales from credit card payments. This is a type of funding that is not a loan: there’s no need to spend time and energy applying for funding that your company might not be qualified for. The approval process is straightforward and easier if you have a good credit score.

Merchant cash advances also don’t have fixed monthly payments, maturity dates or interest rates that you’ll find through a traditional or online loan. Instead, your company repays the lender with a percentage of you daily credit card sales. As a result, merchant cash advances often have higher fees and are relatively expensive in terms of overall cost to borrow.

While merchant cash advances are accessible forms of inventory financing that carry little to no risk, the high fees could curb the growth of your Amazon business startup, so take the time to assess if this a funding option that makes sense for you.

2: Business Credit Card

With a business credit card, you can immediately make inventory purchases using this card so you don’t run into inventory problems and can’t fulfill orders. Unlike some other forms of inventory financing, you only need to apply once for a business credit card to get approved for basically a line of credit that you can tap at any time. Unlike merchant cash advances, however, this financing method carries substantial risk.

Costs associated with credit cards can also be high – between interest rates, late fees and annual rates. The interest rates charged on the balance of a business credit card are high if you carry a balance from month to month. Using low introductory credit card rates and periods for inventory financing can inject rapid growth into your startup, but becoming reliant on this method could endanger the viability of your company for the long term.

A routine business hiccup like inventory damaged in transit can become a business-threatening problem if you use business credit cards as your primary means of inventory financing. And, failure to pay credit card bills could hurt your business for years by burying it in debt and potentially destroying personal credit if you use it to guarantee business cards.

3: Online Inventory Financing

At Payability, we leverage our online, digital platform to quickly advance payment to you based on the invoices that you’ve already fulfilled on Amazon. The average wait time to receive payments from online marketplaces like Amazon is at least 60 days. In the startup world, that’s an eternity for a business owner. In the time that it takes to receive money from the marketplace, competitors could be working on introducing a new product into the market to drive up costs and prevent your success.

Payability works with Amazon and other leading digital marketplaces to pay your company in advance so that you can reinvest your earnings into your business to really execute on your startup growth strategy. You also get to choose your payment schedule: daily or weekly. If you’re interested in learning more about how you could finance your Amazon business and grow using Payability, visit our How It Works guide or contact us with your questions.


Read other parts in the series “Financing for Your Startup”


Keith Smith
Keith Smith is the Co-founder and CEO of Payability, a FinTech company that provides financing and payment solutions to eCommerce sellers. Its patented technology utilizes machine learning algorithms to underwrite customers based on sales quality and historical eCommerce performance - rather than simply looking at personal credit scores. Previously, Keith founded and ran multiple startups, including; CyberMortgage, Zango, and BigDoor. Keith lends his time to early-stage startups via Techstars and serves as an adviser, investor, and board member for multiple tech startups.

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