Growing Online Income

Is Your Startup Stuck Between a Rock and Growth?

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Every day, thousands of Americans are setting up online businesses.  These virtual storefronts are redefining small business as all you need is a domain name and a website.  Actually having an online store makes a lot of sense.  Why pay rent and other expenses for a physical location that can only serve a small trading area when you can sell to anyone with an internet connection.

While setting up an online business is easy, getting a loan for the business is a different story.  In fact, it is easier for online retailers in China get loans than it is for sellers in the U.S.  This is a shame.  Besides the fact that large banks are not well suited to service the needs of small businesses many lenders don’t feel confident online retailers.  This largely has to do with the lack of a physical presence.

So what can an online retailer do?  The right loans can help you grow your business faster, but knowing where to turn can be tricky.


Before we go any further, let’s start with some key steps for any online business looking to get a loan.  The first step is that you need to have your business established.  This means registering your business in the state where you are located.  Next, you need to set up a separate business banking account.    This is a good idea as it helps to separate your business from your personal expenses.  Doing so also shows any potential lender that you treat your online business just like any business.

From there you will need to know how much money you need. I realize this is self-evident, but you would be surprised how many small businesses ask for a loan without knowing exactly how much they will need. If you are not sure then a good idea is to apply for a revolving credit line instead of a loan. At this point, consulting with one of the best cpa’s in Los Angeles, or the best startup accountants in your area, could be a wise move, to ensure your books and finances are all in order.

One of the advantages to a line of credit is that when you pay down the principal you can reuse the funds.  These lines can be instrumental in growing any business fast.  Think about it, would you rather have to apply every time you need extra cash, or would you want to have the funds available to you at a moment’s notice.


When should an online business get a loan?  Well, there are three times when it makes the most sense.  The first is when you need some extra cash to finance growth.  Usually, this means buying more inventory.  The second is when you need to overcome a short-term downturn in liquidity.  While the third is when you need to finance a large order.  This could be an opportunity to work with a much larger organization who really likes the products that you are offering.  As such you don’t want to say know just because you could not pay for the order.

While some online companies provide working capital solutions, this might not be the right solution for you.  In addition, you want to understand how the loan will be paid for and if there are any hidden fees.

For example, some lenders to online businesses require customers pay into a special account or use a certain payment service.  While this might make sense if most of your customers are using something like PayPal, it might not.

When talking to potential lenders, you want to find out what program they offer.  Some only offer merchant account advances, while other offer a full range of loan programs depending on your needs.  For example, lenders such as Mulligan Funding have a number of flexible loan programs that can meet your needs – even if you have poor or no credit.

In addition, you want understand the process to get a second loan with the same lender while the first loan is still open.  After all, we are talking about growth and this can be a useful option.   In the end, these loans should not be an anchor around your business.  Instead, they should be a tool you use to accelerate the growth of your business.

Congratulations on your online business and I wish you the best of luck as you pursue your dreams.