How revenue-based financing can power eCommerce growth

This year, eCommerce businesses have a huge opportunity.

eCommerce businesses have seen truly huge changes in customer behaviour over the past year with shopping for everything from beauty products to groceries and trainers shifting quickly online. The effect? More people shopping online boosted the U.K.’s eCommerce market considerably, adding £5.3 billion in sales for 2020 and taking the total market volume to £78.9 billion.

Those are some seriously impressive numbers, but what do eCommerce leaders need to do now to take advantage of this new shift and unlock greater value for their eCommerce businesses?

Opportunities for growth and building better value in this new business landscape will centre on eCommerce businesses being able to fund paid marketing activity where return on ad spending (ROAS) is proven, targeting opportunities like regional holiday sales, Black Friday deals and event-based promos.

Unlocking this value requires fast, reliable, flexible access to financing and right now traditional financing options just don’t cut it.

That’s why more and more eCommerce businesses are using a revenue based financing (RBF) model to power growth. RBF can help increase business agility, provide greater clarity to help drive better decision-making and can be used to encourage rapid growth through things like targeted digital marketing funding, special promotions, digital architecture upgrades and stock inventory.

Let’s look at exactly why revenue based financing suits eCommerce businesses so well, especially as we move forward in a year that could see several big opportunities for the sector.

Seize growth opportunities.

As we move into 2021 and a wider economic recovery, it’s important to remember that the UK’s online shopping habits have now changed for the long-term. Buying online is the new norm and will only become more popular in the future.

So what can eCommerce companies do to make the most of this surge and unlock greater value for their business?

As the economy recovers, paid marketing activity where ROAS has been proven will be a huge part of pushing up sales and generating sustainable revenue.

72% of British shoppers think that retailers should offer more promotions in a time of financial uncertainty so funding targeted promotions and special offers is incredibly important and a real opportunity for companies wanting to grow and increase brand awareness. Revenue based financing is ideal for eCommerce businesses looking to run targeted sales and promotions. Business can get fast access to finance worth up to 1.5x monthly revenue and, with performance linked repayments, they can repay on a flexible, short term time scale.

This means founders, business leaders and marketing teams can target specific holidays, times of year or events to run promos around. For example Valentine’s Day, Spring Bank Holiday and Black Friday are all great examples of opportunities for eCommerce platforms to dial up marketing spend to drive growth.

And because RBF repayments are performance linked, business growth can help pay back financing faster or scale with the business as it grows.

“Revenue based financing is the perfect way to finance a promotional campaign, without the risk of fixed future repayments."
-

Businesses can also use revenue based finance to finance inventory purchases and broaden product bases to increase appeal for a broader range of customers or to ensure stock of popular items over specific periods. This is especially useful when competition is higher and additional stock may be required to meet demand.

By using revenue based financing, eCommerce businesses can be more agile too as reliable access to financing helps provide greater clarity to support better decision-making.

This means founders and decision-makers can improve business agility with performance linked payments which allow their company to capitalise more quickly on opportunities and be bolder in fuelling short term growth.

The more flexible nature of a RBF model helps increase focus on planning and reacting to events without the need to worry about penalties, late fees or complex payment terms.

Growth finance without the downsides.

A revenue-based finance model is undoubtedly a fairer, faster way to finance growth for eCommerce businesses.

Repayments are always based on performance so when the business does well companies can pay back faster and when performance dips, so do the repayment amounts. There is only ever one fixed fee and RBF means no equity, personal guarantees, late fees or penalties. Pretty refreshing change, isn’t it?

Remember, traditional avenues of financing can take months before actual capital is released but with revenue based financing, eCommerce businesses can access funding far more quickly. Most decisions are given in days so businesses can move faster and act on opportunities as they arise.

Shorter financing terms, typically between 1 – 12 months, make RBF perfect for eCommerce platforms looking for fund growth and take their business to the next stage of development without having to give up equity or control over decision making.

And because repayments scale based on a fixed percentage of Monthly Recurring Revenue (MRR), founders and business owners’ goals and investor goals are also more closely aligned with everybody focused on stable business growth without unrealistic expectations. All in all, RBF just makes… sense for eCommerce businesses.

See how effective revenue based financing could be for your business.

Revenue-based financing is becoming increasingly popular with UK digital businesses of all sizes, and particularly eCommerce businesses looking to fund next stage growth in 2021. The ability to access flexible, reliable funding and the greater options an RBF model offers for repayment means it offers plenty of opportunities to fund ambitious marketing and targeted advertising campaigns to make the most of the UK’s shift to online shopping channels.

Speak to the team at Forward Advances about how we deliver a smarter, fairer way to finance your business' growth. With flexible finance and performance-linked repayments from £10k - £1m, with a simple, one off 6% fee, we’re the choice of businesses looking for a smarter way to finance growth.

Get funded in as little as 48 hours.