Mention the word “dropshipping,” and you’re likely to get a range of reactions. Some people will tell you it’s a scam, a loser of a business idea. Others, more tantalizingly, will tell you it’s a sure-fire success strategy that will lead you quickly toward a seven-figure salary. The truth lies somewhere in between those extremes, and your experience will be shaped mainly by how much you know going in and how well you’re prepared to succeed. Of course, there are people who won’t know what you’re talking about, because they have never heard of dropshipping.
Let’s start with those folks.
At the most basic level, operating a dropshipping business isn’t much different from operating a traditional, physical store. In both cases, you sell products you didn’t manufacture yourself. The key difference is that the brick-and-mortar store owner purchases directly from the manufacturer or wholesaler and keeps inventory on the shelf or in a storeroom until a customer wants to buy it. The dropshipper, on the other hand, waits until a customer places an order, then contacts either the manufacturer or a wholesaler and instructs that third party to ship directly to the customer. The dropshipper receives payment from the customer and then pays off the shipper, usually in advance.
Sounds simple, right? Well, it can be. The key is finding the right supplier partners. If you’re ready to explore some dropshipping options â or if you’re a dropshipper looking to find better partners â this article will show you the right way to proceed.
Dropshipping Suppliers VS Wholesalers
As you learn more about dropshipping, it’s important to understand a few basic terms — and the difference between them.
Suppliers
You can obtain merchandise from different types of suppliers, including wholesalers and fellow retailers. The difference between the types of suppliers will have an effect on your profit margin.
Wholesalers
Wholesalers purchase directly from a manufacturer and hold inventory. Wholesalers normally will sell directly to consumers or to retailers. Some wholesalers may prefer working B2B, while others specialize in B2C.
There are two other types of suppliers that you may consider working with.
Retailers
When you purchase goods for dropshipping from another retailer, your profit margins almost certainly will be lower. A fellow retailer serves as a middleman between you and another supplier, and every middleman needs to be paid.
Manufacturers
If you arrange to purchase directly from the organization making the products, you can cut out the middleman entirely. That in turn can increase your profit margin.
How To Tell If A Dropshipping Supplier Is Running A Scam
Dropshipping is a legitimate eCommerce model and many people and companies find success with it. Unfortunately, others will struggle or fail, and one of the primary reasons lies in their choice of dropshipping suppliers. If the information a potential partner gives you seems too good to be true, it probably is. Here are a few red flags to stay alert for:
Ongoing Fees
A legitimate supplier may ask you to pay some money upfront. The most common reason is to meet the supplier’s minimum order. Here’s how it works:
The supplier sets $500 as the minimum order, in order to ensure their own business model and profitability. Your average sale of the product may be only $100, so the supplier may ask you to pay up-front for the minimum order and hold your money while you make sales to meet that minimum.
If the supplier asks for continuing payments that are not related directly to purchasing merchandise, it’s probably not in your best interests.
“At Wholesale Prices”
When a potential supply partner uses these words in their advertising or on their website, it should alert you to the fact that they’re a fellow retailer, not a manufacturer or wholesaler. True wholesalers don’t advertise their wholesale prices, and they’re not usually advertising online for dropshippers. Not everyone who uses that phrase will be running a scam, but seeing those words should let you know you need to look before you leap.
No Physical Presence
Any legitimate wholesaler or manufacturer will have a physical address for their warehouse or production facility. If you’re considering a dropshipping supplier that has only an online presence, that’s a good sign that you’re actually looking at a fellow retailer. There’s nothing wrong with working with a retailer, if you so choose. A legitimate potential partner will make that status clear, though, rather than presenting themselves as a wholesaler.
What To Look For In A Good Dropshipping Supplier
Like any partner, the dropshipping supplier or suppliers you choose to work with will have an effect on your business. Here are a few traits and characteristics to look for.
A physical location
A good reputation and a long history (not a brand-new seller)
Positive online reviews, including for a reputation for fast, on-time shipping and product quality
Customer support, in case problems arise
Volume of sales adequate to meet your customers’ demands
Discount rates that allow you a decent profit margin
A convenient location. If the supplier is overseas or on either coast of the U.S., factor in longer shipping times so your customers won’t be disappointed.
Good communication. The best suppliers will allow you to submit and track orders online.
How To Find Dropshipping Suppliers
Now that you know what to look for, let’s talk about how to go about finding a good dropshipping supplier to start working with:
Step 1: Know Where To Look
It’s not always easy to find the best dropshipping supplier, and that’s because they’re not necessarily pounding the pavement looking for your business. Established manufacturers and wholesalers have established supply chains, and you can’t count on them to advertise online. So that leaves you with two options. First, once you identify a product you’d like to sell on your store, track down the manufacturer and contact the customer service or sales department. Don’t try to hide your intentions. Be upfront about who you are and how much you hope to sell via dropshipping. The more specific the plans you share, the more likely you are to capture the supplier’s interest. A manufacturer may direct you to a reliable wholesaler that can meet your anticipated sales volume. That wholesaler may not be interested in becoming your dropselling partner, but may have suggestions for where to look next. The key thing here is to be transparent.
If that route fails, there’s a second option that is less direct but can yield results. Find someone dropshipping an item you like and order it through that seller’s site. When the package arrives, look for the sender’s information on the package or packaging slip. You can contact that shipper yourself to try and set up a relationship.
Step 2: Evaluate Potential Partners
Once you’ve identified a good candidate for your dropshipping supplier, put them to the test. Place a few sample orders. Keep notes throughout the process. Are the items easy to order? Does the supplier have good communication that lets you know how the order is progressing, or are you kept in the dark? Does your order arrive on time, in good condition? Is the order exactly what you expected to receive, including quality? If something goes wrong at any stage of the trial, how easy is it to contact the supplier, and how efficiently and effectively does the supplier correct the problem?
Remember, your dropshipping supplier will be delivering products directly to your customers. That means your customers’ satisfaction ultimately lies in your suppliers’ hands. You will be the one to hear from dissatisfied customers, though, so make sure you choose your dropshipping suppliers wisely.
Step 3: Set The Right Prices To Protect Your Profits
Remember, your profit comes from the difference between how much money you can get for selling products and what you must pay your suppliers for those items. You control only one of the variables in that equation. You can set prices on your website to be whatever you want (although if they’re too high, customers aren’t likely to buy). Your dropshipping supplier probably has standard discounts that depend on sales volume; the more you purchase from them, the higher your margin.
Be aware that most suppliers will expect to be paid upfront for orders, probably via credit card. A few may invoice you. Just make sure you understand the situation before you establish a relationship so you can avoid surprises that may become dealbreakers.
Step 4: Consider Future Options
Starting with a limited number of items is the smart way to begin your dropshipping business. This lets you build your customer base, hone your advertising strategies, and cultivate your supply partnerships. That said, it costs you little in terms of time and money to simply keep future expansion options in mind from the start. The best dropshipping suppliers will offer a range of products that you might eventually be interested in offering to your customers. Nothing says you can’t work with a variety of suppliers, of course. But you can save yourself time and trouble by picking one now that offers versatility and variety.
Tips For Choosing The Right Dropshipping Supplier
Preparation and planning really are the foundation for success as a dropshipper. Don’t rush the process of finding the right suppliers, and remember that anything you hear from a potential supplier that seems too good to be true probably is. Once you’ve established a relationship with your dropshipping supplier, you must be ready to roll out a site for online sales and to start advertising to attract potential customers. Read more about dropshipping and keep learning to improve what you’re doing.
It’s never a bad idea to have a backup supplier, in case something goes wrong with your first choice. You can start your business relying on your preferred supplier, but you should also keep another supplier in your back pocket: someone you can turn to in case your primary supplier can’t come through for whatever reason. Diversifying your suppliers is a great way to diversify your offerings, too. You might find that your secondary supplier does a few things even better than your number one, leading you to eventually jump ship or split your business evenly between the two of them.
Once you’re up and running, you may start thinking about ways to expand your dropshipping business. You can partner with a marketplace site like AliExpress or, if your site is on Shopify, consider a service like Oberlo that lets you import a huge variety of products into your Shopify store and ship direct to customers. As long as you have built your dropshipping business on a solid foundation â by choosing good suppliers to partner with â you have many good growth options.
The post How To Find Reliable Dropshipping Suppliers appeared first on Merchant Maverick.
These days, we see delivery options everywhere. You can request on-demand delivery for your groceries, prescriptions, and take-out orders. With so many consumers turning to these options for convenience — and safety in light of the coronavirus crisis — you may be wondering: Is there space in the market for you?
Owning a delivery business is a great opportunity for many entrepreneurs. Depending on the niche you plan to serve, you can start your own business with just one vehicle and no employees. What’s more, you can quickly scale your delivery business as demand increases.
Are you considering starting your own delivery business, but you aren’t sure how to start? Keep reading for a step-by-step guide to starting a delivery business.
Why Start A Delivery Business?
One of the main reasons you should consider starting a delivery business is the steady increase in demand and market share.
According to the State of Logistics Report 2019, the market size of same-day delivery services in the US is expected to reach $7.4 billion in 2020 (up from an estimated $6.1 billion last year). What’s more, this report projects market size will increase to $8.5 billion in 2021.
The same report reveals how same-day delivery services are divided by delivery types. Fourteen percent of the market share of same-day deliveries are C2C deliveries (for example, transactions from Craigslist, eBay, and Facebook Marketplace), while 23% are B2B deliveries, and 63% are B2C deliveries.
By starting your own delivery business, you can take advantage of this demand for same-day delivery.
How Much Does A Delivery Business Cost?
Startup expenses for beginning a delivery business vary, depending on many factors. That said, you should plan for the following expenses:
Purchasing or leasing vehicle(s)
Fuel costs
Vehicle maintenance
Time (your time and your employees’ or contractors’ time)
Cost of operating a physical location (if you have one)
As you plan for your business, make sure you create a budget that accounts for all the expenses listed above as well as any other relevant expenses.
How Much Does It Cost To Become An Amazon Delivery Service Partner?
Perhaps you’ve seen advertisements online for Amazon’s Delivery Service Partner (DSP) program for entrepreneurs. These advertisements state that with Amazon, you can start your own delivery business for as little as $10,000 capital. These advertisements make running a delivery business look easy. All your business comes through Amazon, so there’s no need to find customers, and with very little startup cost, you can begin managing a team of 100 employees who drive a fleet of 10-40 vans.
Amazon makes this program look very desirable, stating that its DSP program is highly competitive and that you’ll profit $75K-$300K per year. However, I advise you to do your research before applying to become a DSP. I’ve seen numerous reviews that break down the costs of operating this type of business, revealing that according to Amazon’s numbers, you’re only likely to profit $7,500 per van each year. This is a very slim profit margin, and to earn this profit, you have to take on a lot of liability.
For more information on the potential downsides of becoming an Amazon DSP, check out this video from Franchise City.
Types Of Delivery Services
There are many possible niches your business can fill. We recommend that you consider partnering with local businesses that frequently need to deliver their products to consumers or other businesses. Here are a few niches you should consider:
Grocery delivery
Pharmacy delivery
Floral delivery
B2B delivery
Yard supplies delivery
Furniture delivery
Dry cleaning delivery
Starting A Delivery Service: The Step-By-Step Guide
Once you have an idea of the type of delivery business you want to start, it’s time to take action! Here are the first nine steps you should take to start a delivery service.
Step 1: Make A Business Plan For Your Delivery Business
The first step in starting any business is to make a business plan. We recommend starting with a one-page business plan, in which you list the following information about your business:
The problem your business solves
Objectives
Experience
Target market
Competition
Financial summary
Marketing strategy
For more information on writing a business plan, try our article: The ‘How-To’ For One Page Business Plans. You’ll even find a downloadable form on this page that you can use to create your business plan.
Step 2: Look For Funding
Every startup requires capital, and with a delivery business, you have to invest in a lot of equipment up front. If you don’t currently have the funds you need to start your business, we suggest looking into financing options. Here are a few options you might consider:
Business loans
Business lines of credit
Business credit cards
Merchant cash advances
Personal loans
Crowdfunding
Invoice factoring
Equipment financing
For more information on each of these financing options, read our article, 8 Ways To Finance Your Small Business.
Step 3: Find Business Software
Finding the right software for your business can streamline your day-to-day operations, and it can even reduce the number of people you have to hire to get your business started. Here are a few types of software that you should consider adding to your business, along with a few software recommendations:
GPS Software: Use this software to locate delivery pickup and drop-off locations. You can use a device such as Garmin for your GPS navigation, or you can use a free app on your mobile device (such as Google Maps).
Mileage Tracking Software: Mileage tracking software helps you bill clients accurately, and it can help you claim business expenses during tax season. One of our preferred accounting software, QuickBooks Self-Employed, has an app that you can use for tracking mileage. Or you can use an app such as MileIQ.
Accounting Software: Every business needs good accounting software. We like QuickBooks Online and Xero.
CRM Software: CRM (customer relationship management) software helps you track customers’ contact info and interactions. A couple of good options are Salesforce and Zoho CRM.
Website Builder Software: Build a website for your delivery business using an affordable and easy-to-use website builder. We recommend Squarespace and Wix to most business owners.
Time Tracking Software: If you hire employees or independent contractors to drive your vehicles, you’ll need a tool to track their time. Some time tracking software packages even include GPS tracking features. Check out our article, Must-Have Time Tracking Software Businesses Should Know About, for a few recommendations.
Step 4: Source Equipment For Your Delivery Business
One of the big startup costs you should anticipate is the cost of equipment. Depending on the types of products you decide to deliver, you’ll need to choose equipment that can help deliver shipments safely and efficiently. Here are a few examples of equipment you may need:
Vehicles (sprinter vans, pickup trucks, freight trucks, trailers, or refrigerated trucks, depending on your shipments)
Dollies
Ratchet straps
Moving blankets
GPS systems
Cell phones or radios for all team members
Tablets and card readers for processing payments and signing off on orders
As you create a list of the types of equipment you need, you should also consider how you’ll pay for that equipment. Will you purchase it outright or use equipment financing? Make sure you calculate the interest rates you pay for equipment financing into your business’s budget.
Step 5: Register Your Business & Get Insurance
To legally register your business, you first have to decide on a business structure. The business structure you choose depends on the amount of liability you are comfortable with and if you plan on hiring employees. Business structures include:
Sole Proprietorship
General Partnership
Limited Partnership
Limited Liability Partnership
Limited Liability Limited Partnership
C-corporation
S-corporation
Limited Liability Company (LLC)
Nonprofit
Cooperative
If you are just starting up, and you plan on working independently for a while, a sole proprietorship is a good option. However, if you plan on hiring employees, you should look into setting up an LLC. For more information on the pros and cons of each business structure, try our complete guide to business structures.
The next step is to register your business name. As you choose a name for your business, consider using keywords, such as “delivery,” “same-day delivery,” or even “floral delivery.” That will help your business appear in Google searches. During this step, you should also look into available domain names. Choosing your business name and domain name at the same time can help you create consistent branding and make your site easier to find online.
Your final steps are to register your business with the IRS, register for business licenses and permits, and register with your state’s revenue office. For more information on these steps, see our article, How To Register Your Business: The Complete Guide.
Purchase Insurance
As you set up the legal part of your business, make sure you sign up for any necessary insurance. These insurance plans protect you and your business, and they also protect your employees. Here are some types of insurance you should purchase:
General Liability Insurance: This insurance package covers delivery services and delivered products. This insurance protects companies against lawsuits related to delivery services. Learn more about small business liability insurance.
Commercial Auto Insurance: Commercial auto insurance covers damage or theft done to a fleet of vehicles, an owner’s vehicle used commercially, or an independent contractor’s vehicle. Also, commercial auto insurance covers bodily injury and medical expenses. If your business operates trucks, you may also need commercial truck insurance. Read What Is Commercial Auto Insurance & Do You Need It? for more information.
Garage Liability Insurance: If you plan on storing vehicles on-site, you’ll also need garage liability insurance.
Commercial Property Insurance: To protect your employees’ property (things they store in their vehicle while they are at work), you can also sign up for commercial property insurance.
Workers’ Compensation Insurance: Workers’ compensation insurance is required in most states. This insurance covers medical costs and lost wages for work-related injuries.
Step 6: Create Your Online Presence & Marketing Plan
The next step you should take in starting your business is to create a solid online presence and marketing plan.
Your business’s online presence is the overall impact of your brand’s website, review pages, and social media interactions. Essentially, your online presence is made up of everything your brand has done online. Work to create a strong online presence from the very beginning by building a beautiful and easy-to-navigate website and registering your business with business directories, such as Google My Business and Yelp. For more information on developing an online presence, read How To Build An Online Presence For Your Business In 9 Simple Steps.
Finding & Keeping Customers
As you build up your business’s online presence, you should also consider the ways you will draw customers to your business. Make a plan for acquiring and retaining clients. Will you purchase online advertisements or claim an ad spot on the radio? Will you place ads on billboards or in the local newspaper? Will you partner with local businesses and rely on them for new customers?
No matter what you decide, make sure you have a plan for your marketing approach. And if your attempt doesn’t pan out, adjust your marketing strategy, and try again.
Once you have found customers, do your best to draw them back to your service by giving them a great experience and having quality marketing strategies. We recommend using CRM software to keep track of your former customers and reach out to them again in the future. Learn more about how to retain repeat customers with our article, 11 Ways Businesses Should Be Using CRM Software.
Step 7: Determine Your Rates For Delivery
Your next step is to decide on how much you’ll charge for deliveries. There are a few different ways you can price your services.
Many delivery companies charge on a per-mile basis. Each mile driven costs a set amount. In another model, you can charge a base rate and then add per-mile costs on top of that base rate.
As you set your prices, you should also determine the boundaries in which you will deliver orders. You can choose to not make any deliveries outside of these boundaries or charge a distance surcharge.
Make sure that your prices account for your company’s total overhead (including fuel, vehicle maintenance, time, and other costs) to protect your profit margin.
Step 8: Set Up Payment Processing
As more businesses transition to accepting digital payments, you should also consider what your payment solutions will be. If you choose to accept digital payments (which we recommend), you need to set up a payment processor.
The payment methods that are best for your business depend on who your delivery business serves. If you deliver directly to consumers (and consumers pay upon delivery), you’ll need a good method for accepting credit card payments. A mobile device with a card reader would work well in this instance. A couple of good payment processors that allow you to accept payments this way are Square and Payment Depot Mobile.
If you serve other businesses, however, you should consider alternative payment methods. Businesses that sell B2B can often qualify for lower credit card processing rates, so it might be worth pursuing a processor that caters specifically to B2B companies. On the other hand, ACH (automated clearing house) payments are cheaper overall, and they are a good alternative to credit card payments. For additional guidelines on accepting payments as a B2B business, check out The Complete Guide To B2B Payment Processing: Credit Cards, ACH, Software & More.
Step 9: Manage Expenses For Your Delivery Service
As you operate your business, you should have a plan for how you’ll track and manage expenses.
Use good accounting software to track tax-deductible expenses, such as fuel, repairs, and new equipment. Take a look at our article about tax write-offs for more information.
In addition, you should make a plan for how employees will purchase fuel on the road. Will you give drivers access to the company credit card, or will you reimburse your employees for their gas purchases? Make plans for these expenses before you begin your first delivery.
Is Starting A Delivery Business Right For You?
Does starting your own delivery business still seem right for you? Are you prepared to handle the challenges of planning delivery routes, and are you ready to face the competition of the ever-popular delivery apps?
If you’ve answered yes, we’re here to support you as you begin! Sign up for our newsletter to get up-to-date information on owning and operating a small business. To read more about starting your own business, take a look at these articles:
The ‘How-To’ For One Page Business Plans
8 Ways To Finance Your Small Business
How To Register Your Business: The Complete Guide
Types Of Business Structures: The Complete Guide
How To Build An Online Presence For Your Business In 9 Simple Steps
The Complete Guide To B2B Payment Processing: Credit Cards, ACH, Software & More
The post How To Start A Delivery Business In 9 Easy, Hassle-Free Steps appeared first on Merchant Maverick.
There are many ways to build a successful business. Some business models involve selling lots of items each marked at a lower price, while others work by selling fewer things at a higher cost. With either path, the financial resources of your customers will come into play. You might soon realize that not everyone can afford the more expensive things you sell; similarly, not everyone has the resources or desire to buy a lot of small items in one purchase. Is there a way to solve this problem and increase your sales without cutting your prices?
Of course there is. In fact, there are many ways. One way is to advertise, so that a larger number of potential customers are brought to your door. Statistically, you should make more sales. Another way is to offer financing to your customers. Financing allows those who are wavering on a purchase because of the price to buy from you right away and then pay for the goods/services in installments in the future. This way, you don’t lose a sale to sticker shock. This is called customer financing or, sometimes, consumer financing.
Broadly speaking, you can provide customer financing yourself, or you can use a third-party financing specialist. As to how to do either, along with their pluses and minuses, read on to find out.
How Does Customer Financing Programs Work?
By customer financing, we mean any sort of buy-now-pay-later arrangement. Typically, the customer will have to pay a portion of the total cost before the goods/services are released. This sort of financing is usually a business-to-customer (B2C) arrangement instead of a business-to-business (B2B) arrangement.
If you want to offer customer financing, you can either provide that service in-house or you can work with a third party. We’ll discuss each option in more detail below.
In-House Customer Financing
By in-house financing, we mean that you, the merchant, take all the financial risk — and possibly reap all the financial rewards — when letting a customer walk away with your merchandise (or receive the benefit of your services) before you’ve collected in full. If you wish to consider this avenue, there are some items you might want to think through first.
Cash Flow
If you wish to tackle in-house customer financing, you’ll need to consider your business’s finances first. Understand your cash flow and maybe do some financial projections.
Know that when you actually start to finance your customer’s purchases, you’ll have a period of reduced income because you’re not receiving the full payment for the goods or services you sell. At the same time, your customers might be making a greater number of purchases, so you would need to pay out to replenish your inventory. You’ll need to make sure that you have enough money to run the day-to-day operations of your business while you wait for the installment payments to come in and become a regular part of your cash flow.
If you are right and your customers start to buy more than before because they can now finance their purchases, then your cash flow should eventually increase after an initial dip.
Legal Risk
When it comes to lending money and charging interest, both state and federal usury and debt collection laws may apply. If you fail to follow them, you might have to pay fines or be subject to other penalties.
When you provide financing to your customers, you might want to charge interest on the loan. If that is the case, be sure to check your state’s usury laws that govern, among other things, the highest interest rate you can charge. To complicate matters, if you sell online and a customer is in another state, you might be subject to that other state’s usury laws as well.
If your customer defaults on a loan, you might wish to collect that debt. Unfortunately, what you can and cannot do are also governed by federal and state laws. The laws typically restrict you on the amount you can collect per type of asset and how you are allowed to collect it. Again, the laws differ by state, so this can get fairly complicated fairly quickly. (Here’s an article from the consumer’s standpoint.)
If you wish to start an in-house consumer financing operation, be sure to talk to a lawyer specializing in this area first. They can help you design a set of best practices that are best suited for your type of business — and that stay within legal limits.
Operational Considerations
If you decide to start your own financing department, you’d probably have to hire new people. For instance, for every application, you might want to pull a credit report before deciding whether or not to lend. There would be additional paperwork and internal records to keep as the customer pays off the debt. If the customer fails to pay the debt, you would have to have someone to work on the failure to pay in some way, even if it’s just sending the account to a debt collection company.
Additional internal processes will have to be set up to smoothly move a customer through each step, from application to approval to installment invoicing. All this requires additional employee hours. So, whether you hire one person or ten people to handle the financing, you would have to consider these operational changes and expenses before making a final decision.
Bad Debt
Lastly, not every customer will pay off their loan. We covered the legal aspects of debt collection above, but the more important aspect of bad debt is the financial impact on your business’s cash flow. Know how much bad debt your business can absorb without running into cash flow issues before you decide if you wish to move forward.
Third-Party Customer Financing
It’s always nice to be able to keep your hard-earned money, but now that we’ve gone through some of the major considerations for providing customer financing in-house, you might start to see the headaches that are involved as well.
Fortunately, there is an alternative. There are companies specifically set up to do customer financing or just debt collection (if you continue to wish to keep a portion of the work yourself). Some of these companies charge you nothing for sending a customer to them for financing, but others want a fee so that they charge you for sending a customer to them. They will also keep all the fees/interest the customer will pay to obtain financing. In return, they take care of all the legal and operational complications of customer financing for you.
If you continue to be interested in working with a third-party financing company, be sure to understand the details of how the financing company works before signing a contract. Understand your expected sales increase and your expected profit. If you sell low margin items, make sure that these financing charges do not exceed your profit margin. Otherwise, you would have gone through all this trouble for nothing.
Is Consumer Financing A Good Fit For Small Businesses?
Many large businesses provide consumer financing. For instance, you can finance a car purchase through any one of the major car manufacturers. Consumer financing is also available from some chain store home furniture sellers or large electronics stores. These are all large businesses that can afford a separate department–and sometimes even a separate corporate subsidiary–to take care of consumer financing.
But you’re a small business owner. Maybe you have only a handful of employees, and each of them is already busy taking care of other things. You already work twelve-hour days and things are still not done. How do you provide consumer financing when you’re already stretched so thin?
You might want to consider using third-party customer financing companies. This doesn’t preclude you from trying in-house financing in the future, if you pick one with a contract with no early termination penalties. It’s a quick way to get started, and it introduces you to an industry that you can become more familiar with, so you can make a more informed decision in the future.
Below are some pros and cons for your consideration.
Pros To Offering Third-Party Customer Financing
No Need To Increase Staff: The most obvious advantage is that you won’t need to hire more people to run the financing. As a small business owner, you know how difficult it is to find the right person–one who has the knowledge needed as well as the proper “fit” for your business. It might take several tries to ultimately find the right person, but with third-party financing, you won’t need to do that.
No Need To Worry About How The Details Work (e.g. credit checks): There are a lot of things you would have to set up from scratch to start an in-house customer financing operation. You’ll have to have the application forms, know where to run credit checks, figure out how much risk you can take, and give the customer the credit needed to make the purchase. With third-party financing, you won’t have to worry about any of this. You just send the customer to the financing company, and they take care of the rest with their existing workflow.
Legal Compliance:Â As already touched on above, when it comes to lending money, there are a lot of legal issues that could arise. If you’re in the US, then not only would you have to understand federal laws that could affect your operations, you’ll have to understand multiple state laws as well, if you operate an online store. These laws change from time to time, so you can’t set up a process and forget it. It would be easier to let a third-party financing company worry about following the laws. They might still (hopefully only accidentally) violate these laws, but at least if they do, they would be responsible for it. (Be sure the contract clearly states they’re responsible for any legal compliance issues.)
Less Need To Worry About Cash Flow:Â While you might still have to invest more money into your business to have enough inventory for increased sales, you are less likely to have to worry about a healthy cash flow by using a third-party financing company. A lot of these companies will fund you within two to three days of purchase, so you shouldn’t have to worry about cash flow at all.
Cons To Offering Third-Party Customer Financing
The Reputation Of The Financing Company Will Affect Your Own Reputation: A company’s reputation, especially where money is concerned, matters. When you recommend a financing company to your customer, like it or not, you’re guaranteeing that the company is reputable. If this turns out to be incorrect, then the bad reputation rubs off on you too. A business’s reputation is everything, and a bad one will run customers away from you.
Customers With Bad Experiences Might Not Come Back: Even if customers clearly understand that the financing company has nothing to do with your business, a bad experience with the financing company could still prevent them from coming back to you. Their shopping experience is ruined, and it’s highly likely they will subconsciously connect that bad experience with you. It’s not difficult to imagine that they might go elsewhere to shop in the future.
Customers With Bad Experiences Might Blame You: Related to the above, we know that people don’t always notice things that they should. This is why there will always be a portion of the customer base that thinks you and the third-party financing company are one and the same. If anything goes wrong, it’s very likely that they will blame you for the financing company’s mistakes. They might go online to complain, giving you a bad reputation that you don’t deserve.
You Must Share Revenue:Â Naturally, these third-party financing companies can’t provide their services for free. In fact, in addition to keeping the interest and fees paid by the consumer for the loan, many will want you to pay them for their services as well. Maybe your margins are high and you don’t mind, but if you do mind, then you’ll need to pick the financing company carefully.
Possible Long-Term Contract: Some third-party financing companies will require you to sign a long-term contract. As with all contracts, you’ll need to look at the possible penalties if you need to get out of the contract early. One contract we reviewed when researching for this article allows you to cancel but requires a 12-month notice period, which is basically the same as not being able to cancel at will. Make sure you’re not stuck with a company that you won’t want to work with for one reason or another (e.g. bad reputation) for longer than necessary.
How To Offer Financing To Customers: Options For Online & Brick-and-Mortar Businesses
If you have decided to offer financing to your customers, the way you tell your customers that financing is available and invite them to apply will depend on whether you operate a physical store or an online store — or both. It also depends on whether you’ve decided to do this in-house or through a third-party specialist.
If you’ve decided to offer financing in-house, then you can advertise any way you want to, as long as you have the application readily available for an interested customer to sign up. However, if you’ve decided to go with a third-party provider, then there are several ways to deliver information about the financing offer and payment options.
Online Customer Financing
For webstores, customer financing is often offered at checkout. The customer sees a financing button, along with other payment choices such as credit or debit cards. If the customer clicks the financing button, they must respond to a few questions. A “soft” credit check is performed. With some companies (e.g. Affirm, Afterpay), a decision to lend is made based on the soft check. With other companies (e.g. Square), a hard credit check is eventually required. (If you’re curious, this article explains the difference between soft and hard credit checks.)
After this, the customer is presented with a choice of how they want to finance the purchase–i.e. how many installments, how much per installment, and interest or other fees. Once the customer makes a pick, the online merchant is paid by the financing company, typically within a day or two after shipping.
As to the rest of online financing, a merchant is often supplied with banners and buttons that they can place on their website to announce that financing is available.
In-Store Customer Financing
If you run a physical store, then customer financing is done a little differently, though you’ll still need a connection to the internet just like online financing.
There are several ways a customer at a physical store can apply for financing. One financing company offers free-standing kiosks that customers can use to apply. Tablets can also be loaded with financing application software for the store clerk to hand to the customer. Yet others simply have the store clerk ask a few questions of the customer at checkout and enter that information online. Lastly, a customer can apply for some specific amount beforehand, the financing company can issue the customer a single-use virtual card, and the card number can be keyed in by the merchant just like any keyed-in credit card charge.
How Much Does It Cost To Offer Customer Financing?
The cost to offer customer financing runs the gamut, from free to something similar to the swipe of a credit card. It’s not always easy to find this cost on the provider’s website, however. (It’s much easier to find out how much the customer will be charged for taking the financing offer.) Very often, the company simply does not disclose the charges to the merchant but instead tries to sell their services as a way to increase sales. You can only find out the cost after you contact them.
Ten Customer Financing Programs For Small Businesses
For this article, we did a quick survey of the companies currently providing customer financing services for small to mid-sized businesses. We briefly discuss the companies we found below, but we haven’t reviewed most of them, so please be aware that we pass no definitive judgment about the quality of service each provides. We hope to have some reviews for you in the future.
In looking through these companies, we find that they can generally be categorized into three groups. The first group contains more traditional financing companies. Financing applications may take a day or two to process and be approved. A second group includes the so-called fintech companies–they have their origins in the tech startup world, and they’re here to “move fast and break things.” These companies tend to do a soft credit pull and then give you a loan within seconds. These loans tend to be of a smaller amount and they typically must be paid back within a year. Some of them are fee-based and do not charge interest. The third group seems to be a hybrid, featuring some characteristics of both the traditional and the fintech companies. They also do a soft credit pull and sometimes can offer you a loan for a very small amount very quickly. Typically, larger loans are also available with these companies.
Grouping the vendors we found below into the three categories above, we have:
With some of these companies, it was hard to find merchant-related information–i.e. sign up cost, processing fee, contract terms, etc. These companies tend to try to sell their services by touting how much more a merchant can sell if the customer had the ability to buy more. Signing up with them might mean that you never get to see any income from the financing side. Still, they seem to be worth investigating, so we encourage you to find a few that you might be interested in and contact them for details.
Lastly, if you look at the way these companies work–especially the fintech companies–you’ll see that there’s a strong potential that they might replace the entire merchant processing side of the credit card industry. If you look carefully about the nature of the credit approvals, loan amounts, and repayment terms, you’ll see that they work like charge cards, where each charge is judged separately based on the person’s current debt load and creditworthiness. It’s very similar to the American Express model. From a merchant’s standpoint, it might be a good idea to understand how these financing companies work, in case they do replace some credit card company functions in the future.
With the above in mind, here are some of the customer service companies we found that you might wish to look into further.
Flexxbuy
Flexxbuy seems to fall into the more traditional side of the consumer lending business. It has a relationship with over 20 lenders in its backend and can quickly set a customer up with the right lender, depending on the customer’s credit score.
With Flexxbuy, the customer can get a loan of up to $50,000. The website isn’t quite clear, but the wording in various places suggests that smaller loans might be approved instantly, but the larger ones can take up to 48 hours. There is a formal application to be submitted by the merchant. The customer doesn’t have to pay a penalty for pre-payment, and loan payback can be from 12 months to a few years.
Flexxbuy says the cost to the merchant is “customized,” and, since they work with several lenders, this probably just means that the cost varies depending on the lender. To sign up with Flexxbuy, there is an enrollment/setup fee for the merchant.
LendPro
LendPro, like Flexxbuy, seems to fall towards the traditional lender side of the industry. They claim that they have lending relationships with more than two dozen lenders on the backend to provide financing for a wide range of amounts and for all types of credit scores.
When a customer finances through LendPro, the lending relationship is directly between the customer and LendPro. LendPro can integrate their financing application software with your website, so customers can see their financing options at checkout and file an application if they are inclined. They also have physical kiosks for physical stores, where a customer can apply for credit in person. A merchant can also buy a tablet and install LendPro’s software on it and then hand the tablet to the customer to apply for financing.
There are no other disclosures about how a contract with LendPro would work or how much they would charge the merchant per transaction.
Snap Financing
Snap Financing calls itself a “lease to own” company. This means that, as a merchant, you might be sending your merchandise out to consumers, but you still own the item until the lease term is up. Then, the consumer can either buy the item outright or return it to you.
Lease-to-own arrangements are typically used for large furniture, appliances, electronics, and computers. If the goods are damaged during the lease, they still belong to you. (Presumably, you can deduct the damage from the price.) With Snap Financing, you’re working with a somewhat traditional business model. While it’s not clear on the website, it seems from the nature of the business model that the merchant still owns the sales contract. If the customer defaults on the (unsecured and high-interest) loan, then the matter is between Snap and the customer.
Snap funds your business within 2-3 days once the leased goods are delivered, so you are fully paid.
Affirm
Affirm falls squarely within the fintech label, and it has the pedigree to prove it. The company was founded by Max Levchin, who was one of the founders of PayPal. Even now, it’s still taking money from venture capital firms, with the latest round of funding raising $300 million USD.
Affirm’s website is geared more towards the consumer than the merchant, so there are not a lot of details on how (or if) they charge the merchant to process a customer’s loan. On its backend, Affirm’s loans are financed by two banks: Cross River Bank and Celtic Bank.
The Affirm financing application can be integrated into various eCommerce shopping platforms and be shown to a customer at checkout as a push-button option. When a consumer applies, Affirm performs only a soft credit pull and then makes a decision to lend based on that pull. There’s no stated loan limit. If the purchase is made from an online store, then the payment can be applied at checkout. If the payment is at a store that’s not affiliated with Affirm, then Affirm issues the customer a single-use virtual card that can be used like a credit card.
Afterpay
Afterpay is yet another fintech company. It has a business model that looks very similar to that of Affirm, and it is also funded by venture capital investors. While Affirm seems to focus on providing financing for goods and services that cost a bit more, Afterpay seems to be focused on things that cost a little less.
Afterpay discloses a little more on their website on how they work with merchants. When the merchant makes a sale, the purchase is made between the merchant and the buyer. But the merchant immediately assigns the purchase contract to Afterpay so that Afterpay has the right to recoup nonpayment. After that, the merchant is still responsible for taking care of complaints and returns, but any questions on payments belong to Afterpay.
Afterpay’s services integrate with many existing online shopping carts. Consumers are presented with Afterpay as a payment choice at checkout, and they can apply for credit that way.
Afterpay checks the consumer’s credit with a soft credit pull and, once approved, the consumer is presented with several installment payment options and can see fees and the payment amount for each. The consumer picks whichever option that appeals to them. They can be charged a late fee, but there’s no interest or service fee on the amount borrowed, and of course, the customer can prepay or fully pay before the payment is due.
To borrow from Afterpay, the consumer will have to have an Afterpay account. A credit or debit card must be linked to the account, so Afterpay can automatically withdraw the installment payment from the account. (Which begs the question: why not just use the credit card instead?)
ViaBill
ViaBill is a European fintech startup. Merchants in Denmark, Norway, and the US can sign up with ViaBill.
Like Affirm, ViaBill focuses on bigger ticket items. They offer easy integration with online shopping platforms, easy and fast approvals, and installment payments linked to the debit or credit card used to set up the consumer’s account. The payment is broken into four installments, with the first installment due immediately at checkout. Afterward, ViaBill assumes the risk of fraud and credit risk. If the customer fails to pay, they are charged a late fee (but no “penalty fee”), and ViaBill handles everything related to non-payment/collections.
For merchants, ViaBill charges 2.90% + $0.30 per transaction, which is comparable to some credit card processing charges. After the goods are shipped, the merchant assigns the right to receive payments to ViaBill, but ViaBill may assign the right back to the merchant to deal with chargebacks, disputes, item returns, and some other conditions.
When a merchant signs with ViaBill, the contract can be terminated by ViaBill at any time for any reason or no reason, while the merchant can only cancel for any reason or no reason in the first three months. Thereafter, the merchant must give ViaBill 12-months notice before the contract can be canceled.
There is a setup fee to connect up to ViaBill. They fund the purchase five days after shipping. Be aware that if you sign with ViaBill, they don’t want you to work with any other consumer financing provider unless you both agree in writing that you can.
Vyze
Vyze is a fintech startup that began in 2008. It was acquired by Mastercard in 2019, so if you sign up with them, you at least know that they are backed by a reputable business. Vyze doesn’t seem to be doing anything too different from the other fintech startups, however, so there might not be any other specific benefits to working with Vyze.
Like other fintech companies, it seems Vyze only does a soft credit pull; consumers can apply with just a few quick personal details. A customer can apply online, or if at the checkout of a physical store, apply from the store’s tablet loaded with Vyze’s app.
Once Vyze has the customer’s credit information, the software queries a first lender for approval. If the first lender rejects the application, then the software automatically pings a second lender in the queue, and then a third, and so on until one lender approves the financing.
Vyze’s website does not have much information for the merchant, so it’s difficult to tell if/how much they charge you for each customer you bring them, how they would handle returns or chargebacks, or any other details of a merchant’s contract with them.
VIP Financing Solutions
VIP Financing Solutions has an interesting business model. It seems to be a credit card processor that also does consumer financing (or vice versa). You can get Clover POS stations from them (it’s unclear if they sell or lease them, so be careful). They also have multiple lenders in the backend to support their financing activities.
No matter what you do with VIP, whether it’s credit card processing or customer financing, you’re charged the same rate: a 3.0% “Merchant Fee.” The website also claims that you’re not charged a credit card processing fee, but that 3% seems to cover more than enough of the usual fees associated with credit card processing. Once the charge is cleared, you are funded within 48 hours.
As to financing, VIP offers three types of financing:
A Store-Branded Credit Card:Â The shopper can be instantly approved and walk out with a card, which basically is a revolving line of credit specific to your business.
A No-Credit-Check Loan: The amount can be between $500-$35,000. The repayment is divided into four installments, to be paid within a short period of time.
A Traditional Personal Loan: Approval can take a few days, with repayment plans of up to 60 months.
We couldn’t find a merchant contract on VIP’s site, so we don’t know other details about how VIP works with its merchants.
PayPal Credit
If you are already a PayPal merchant, then you can offer consumer financing through PayPal Credit. Just activate the service as a form of permissible payment. Then you can advertise that the service is available by adding promotional banners already prepared by PayPal to your website.
When a customer uses PayPal Credit, the merchant is paid upfront (i.e. no need to wait for the customer to completely pay back the loan to PayPal). PayPal does not disclose how much it charges per transaction, but it also doesn’t say that the cost would be different from other PayPal transaction charges. So, each transaction likely costs the same as other PayPal payment transactions.
From the consumer’s standpoint, PayPal Credit is a loan between PayPal and the consumer. Once PayPal’s underwriter approves the loan, the consumer has to make minimum monthly payments. For purchases over $99, as long as the consumer pays the loan back within six months, there’s no interest on the loan. However, if the loan is not paid back completely within six months, interest is charged from the date of purchase.
PayPal will pull a soft credit check before approving a loan. The minimum starting credit is $250, and this might be increased from time to time. You can use the money in PayPal Credit to send to family and friends, just like sending cash. And, just like sending cash, you pay 2.9% + $0.30 per this person-to-person transaction.
The service is available to US consumers only.
Square Installments
As with PayPal Credit, if you’re already a Square merchant, you can use Square Installments. Square Installments can be used from the point-of-sale or from your virtual terminal, and they cost 3.5% per transaction. You can also integrate Square Installments into your electronic invoice, and that service costs 2.9% + $0.30 per transaction.
For a merchant to sign up, navigate to your dashboard and look to see if you’re already approved for Installments (approval sometimes depends on industry or location, business type, and/or volume and price of goods sold). If you are, then you’ll have to watch a video and answer a few questions to make sure you understand the terms of service. That’s all you need to do. You can cancel the program at any time. There’s no added integration needed, and Square can provide all the buttons and banners you need to advertise online to your customers that the service is available.
For your customers to apply for financing, they follow a link customized for your business and then enter their information. They will quickly get an offer after a soft credit pull, and the offer will include various monthly plans and total fees. Square pulls a full credit check if the customer elects to go forward with financing. Square Installments are used for purchases of $150 and up and the repayment terms are for up to 12 months.
For physical stores, Square Installments can be used with a digital card, which can be keyed in like any other purchase. The merchant is paid right away, and if the customer misses a payment, it doesn’t affect the merchant.
Here’s a more detailed article about Square Installments, if you’re interested in learning more.
Should I Offer Third-Party Financing For My Customers?
There are a lot of data-based arguments out there that suggest that making financing available to your customers translates to more sales. As a small business owner, the easiest way to do this is to go through a third-party financing company so that you won’t have to deal with the paperwork, the possible cash flow issues, the legal aspects of lending, and the defaults when a customer refuses to pay.
Third-party lenders aren’t willing to do all this for free, of course. Some will charge you a fee, and it’s important to understand how this fee works. It’s also important to think through other issues, such as how chargebacks and returns will be handled. Of the companies we surveyed above, many do not disclose much about how they work with the merchant at all. If you decide that you’re interested in working with one of these companies and contact them, be sure to ask questions such as:
Do they charge you for sending a customer to apply for financing?
Do you get a finder’s fee for sending customers?
How do they deal with merchandise returns? Are you required to accept a return, or can you simply refuse? Do you have to return the money to the customer? Or is that handled between the financing company and the customer? And if so, will the merchant have to return the money to the financing company?
How do they deal with disputes/chargebacks? What about fraud, such as a customer claiming that you didn’t ship a product when you actually did?
How do they deal with defaults? Some companies assign defaults back to you and you’d have to deal with that, so that seems to create more headaches for you.
Who handles customer service? If this is divided between the merchant and the financing company, how do you share the responsibility?
How quickly are you funded, and at which point in the process does a sale count as a sale?
You might have more questions, so be sure to write them down before you contact a financing company. That way, you won’t accidentally leave out a question.
If you decide that providing customer financing is just not for you, but you still want to explore ideas on how to increase the cash you have at hand to grow your business, be sure to check out some of our lending articles. We have picks for the best small business loans, advice on how to get a line of credit, and even information on startup grants. You might also want to consider invoice factoring or invoice financing.
Lastly, if you have had any experience with any of the providers above or want us to do a detailed review of a specific provider, do let us know by leaving a note below.
The post The Complete Guide To Customer Financing For Small Businesses appeared first on Merchant Maverick.
I love living in the age of online reviews. Poring over personal testimonials and scanning star ratings feeds my obsessive need to optimize every decision. With rare exceptions, I won’t watch a movie unless it scored at least an 80% on Rotten Tomatoes. Why waste my precious time otherwise? I seldom read a book without checking reviews on Goodreads first. Every savvy bookworm knows exactly what I’m talking about.
Online reviews about anything and everything is so prevalent in today’s culture that most of us fancy ourselves not only as connoisseurs of the best goods and services out there but as consummate experts on reviews themselves. Most importantly, we can all spot a fake review a mile away, right?
Well, it’s not as simple as we might think. First of all, those who are out to game the system by soliciting or generating fake reviews are only getting better at doing just that: gaming the system. Fake reviewers are well aware that folks are on the lookout for illegitimate testimonials, so fraudulent techniques are only becoming more realistic and insidious. At the same time, our “BS meters” and sense of general skepticism run at full throttle in the modern era. This typically leaves us over-vigilant and even more confused, often resulting in no more than a 50-50 shot at separating the fake from the genuine.
A direct recommendation from a friend or a colleague will probably always be the gold standard for a reliable testimonial, regardless of the industry. In fact, a popular business management metric called the Net Promoter Score was developed based on what’s commonly known as The Ultimate Question: “Would you recommend us to a friend?” In the B2B space, however, personalized recommendations can be particularly hard to come by. You’re also wise to want the weight of a solid online reputation to back up such an important decision for your business. So while several of your friends may have read the latest NYT bestseller, you may be forced to turn to strangers on the internet to find relevant experiences with a particular credit card processor or point of sale system.
Let’s unpack the user review landscape in the B2B world, so you can increase your odds of spotting the fakes.
Are Fake Reviews Really That Common?
By now, you’ve probably heard of the massive fake review problem at Amazon.com, and the various ways Bezos and company have worked to combat the issue. Nonetheless, the problem of fake reviews is still rampant in all areas of B2C commerce. Once we leave the realm of consumer goods and shift focus toward B2B products and services, however, a slightly different set of rules can apply.
Business software and services are typically much more complex and nuanced than consumer goods. The stakes for making a poor choice are very high, and even real users often don’t understand the product well enough to make accurate evaluations. The mix of genuine, fake, and confusing user reviews in the B2B realm is frustrating.
The first step toward understanding the B2B product and service review landscape is awareness of the places fake testimonials may show up around the web. Typical spots include the provider’s website and third-party websites that aggregate the reviews of multiple products. Particularly brazen providers may even set up or manage a site of their own that looks like a third-party aggregate site as a place to collect fake reviews. Still, others may simply partner with companies that manage fake review sites or with sites that have extremely biased and unethical rating systems. Clearly, there are varying degrees of culpability on the part of the actual B2B vendor in question in each case. In other words, there’s plenty of blame to shift around!
Why Fake Testimonials Are A Big Problem For Small Businesses
Before we proceed any further, let’s acknowledge that managing an online reputation is no small feat. This is true for your average small business owner and also for any company that provides products and services to other businesses. Rare is the case in which a slew of glowing testimonials from customers simply falls into a vendor’s lap.
We must be abundantly clear, though: Soliciting and propagating fake reviews is illegal and could get a business in big trouble with the FTC. Even if that doesn’t happen, chances are the business will still eventually get caught and called out, only damaging the reputation it was trying to bolster in the first place. At Merchant Maverick, we won’t hesitate to highlight any suspicious user testimonial activity for the vendors we review.
Still, to be realistic about all of this, most companies end up asking a few clients for testimonials at some point. There’s nothing inherently wrong with that. A company may gather testimonials for its website or direct customers to an aggregate site to leave feedback.
However, you should know that some aggregate review sites solicit reviews by offering money, gift cards, free merchandise, or other perks. While the ethics of this practice remains debatable, the resulting user reviews can still be genuine in this scenario. Some even argue that incentives result in better-quality genuine reviews for B2B products — both positive and negative. The real problem is that whenever a reward system is in place, you’ll always find a set of enterprising people eager to exploit the system to make a quick buck. Even sites that are trying their best to stay above board in collecting genuine testimonials can still attract fakers.
Some Online Reviews Might Be Genuine But Can Still Be Misleading
In the quest to maintain the best public image possible, many companies enlist dedicated online reputation management services. The integrity and ethics of these services vary widely, but a user review “curation” component is almost always part of the package. The service helps its clients proactively generate more positive reviews from genuine customers while also mining the web for existing reviews.
It sounds like a great idea, right? You know exactly where this is going. To paint their client in the best light possible, only the positive reviews and ratings get pulled to display. This leads to an inflated, misleading rating and reputation for the vendor.
A related problem occurs when reviews are solicited from brand new customers at the time of signup. This is a common practice across many industries. With little-to-no-time to test the product or service, the vendor’s rating becomes inflated by these genuine — but largely useless — testimonials. And, speaking of unhelpful reviews, let’s not forget reviews from users who have had the product or service for a while but still don’t understand how the product (or the corresponding industry) works. Fortunately, these reviews are usually complaints — not the fake positives we’re most concerned about — and are pretty easy to spot as your knowledge of the product and industry increases. Unfortunately, all types of unhelpful reviews still muddy the waters.
How To Spot Fake Reviews: 10 Signs An Online Review Isn’t Legitimate
If the thought of all these fake reviews and fake review websites makes you want to give up on online testimonials, please don’t despair. User feedback on B2B software and services is essential data for Merchant Maverick in our research and rating process, so the last thing we want to do is give up on them entirely.
We’re now ready to look at a few telltale signs of fake B2B product reviews. Note that some are similar signs of fake reviews of consumer goods, while others have their own spin. Also, it’s more important to spot suspicious patterns across multiple reviews than to look at any single review.
1. Sketchy Review Site
Always consider the quality and reputation of the review site itself first before digging into individual reviews. Appearances aren’t everything, but if “vague” is the word that repeatedly comes to mind as you peruse the website, you’re probably on to something. Can you find any details about the company that runs the site? Any policies regarding how it collects or verifies its reviews? Any explanation of how the site makes money? Do links on the site lead where you’d logically expect them to? If the review site lacks substance, detail, and basic logic, put up your guard straight away.
2. Lack Of Information About The Reviewer
Enough information should be provided for you to identify that a reviewer really is who they say they are. When it comes to B2B product reviews, expect to see the full name of the reviewer and the business name, at a minimum. Basically, if you can’t figure out who this person is apart from their review, it’s a red flag. Testimonials on a vendor’s website should clearly display this information. Most of the better-aggregated review sites also gather identifying details about each reviewer. They may include additional specs, such as a job title, length of time using the product, or even a direct link to the user’s LinkedIn profile.
3. Reviewer’s Profile Doesn’t Quite Add Up
You’ve checked that the key identifying details of the reviewer are present, but you notice something is still off. Maybe you’re visiting a review site that features profile photos of each reviewer, but the headshot in question looks like a weird stock photo of something unrelated or even a picture of a random celebrity. Perhaps the reviewer’s job title is “Social Media Marketer,” but the review is for accounting software. The reviewer’s profile should add up to a believable (and verifiable) person and scenario.
4. Illegitimate Business
Related to the above, a fraudster may not only completely invent a reviewer’s persona but also may invent a business. Just because the information about the business is there doesn’t mean it’s true. You should be able to find proof the business exists or that it at least recently existed. Find the website for the business, see if it looks legit, and find out where it’s based. If you’re still suspicious, try contacting the business directly.
5. Unnatural Language
This one is tricky because we must first acknowledge that not all genuine customers of the vendor may be native speakers. However, lots of glaring typos, horrendous punctuation, and strange strings of words that add up to nonsense are still important warning signs, especially when combined with other factors on this list. Note the number and proportion of these oddly-worded reviews as well. A large volume of poorly constructed testimonials signals an offshore content farm is likely at play.
6. Repeated Or Formulaic Elements
In addition to unnatural language, watch for a large number of reviews containing repeated language and other elements. Hired fake reviewers are often instructed to include certain buzz words, phrases, or talking points. It could be one reviewer creating these testimonials en masse or multiple people being given the same instructions. Meanwhile, some reviewers are not provided any specific instructions but are simply lazy or incompetent, using the same stock wording each time with only minor changes.
7. Many Reviews Over A Short Time Period
As mentioned before, many vendors initiate targeted campaigns to solicit testimonials and ratings from real customers and may even employ a dedicated service to assist. This practice can lead to a spike in reviews over a few hours or days, even from genuine customers. Nevertheless, always check the date and time stamps of reviews and take heed if you notice this pattern. Especially if the reviews are also low quality, formulaic, or lack most of the reviewer details you’re already looking for, you’d be right to suspect the work of a fraudster cranking out bulk reviews for pay.
8. Extra, Unhelpful Details
We’re all pretty good at spotting bot-speak these days. Fake reviewers know this, so they often try to overcompensate in their efforts to sound like a real-life human. This just means that if they come across like they’re trying way too hard, they probably are. A common tactic is to include a lot of unnecessary scene-setting and backstory. In trying to sound relatable, the reviewer may also use a lot of “I” and other personal pronouns. By contrast, most legitimate testimonials cut straight to the chase with concrete, boring details. The review shouldn’t read like a flashy, flowery sales pitch or infomercial.
9. Suspicious Reviewing Patterns For A Given Reviewer
Many review sites allow you to see other products and services someone has reviewed simply by clicking on their profile. The obvious thing to check is whether the reviewer only doles out glowing 5-star ratings, but you can often unearth deeper patterns with additional cross-referencing. When researching a particular vendor recently (let’s call it Vendor A), I found four ratings within its Google profile. Each rating was exactly 5-stars, which already made me suspicious. As I clicked on each reviewer profile of Vendor A, I found each of the four reviewers had also reviewed the same two additional companies: Vendor B and Vendor C. By a miraculous coincidence, four reviewers somehow just happened to review the same three unrelated vendors and no others and gave them each 5-stars. Paid reputation management on behalf of all three companies was likely afoot here, at best. Fraudulent reviewing by professional reviewers could just as easily have been at play on top of this. Neither is ideal.
10. Extreme Reviews Only (The “Missing Middle”)
Due to our inherent tendency as a species to speak out only when furious, you’re likely to encounter plenty of complaints about most B2B products and services in existence. Positive reviews may be more difficult to come by, but the reputation management and fake reviewing industries have each done their part to fill in the gaps for mediocre and poor companies. For these reasons, you ought to be suspicious if you can’t find any middle-of-the-road feedback about a given vendor. You should be able to locate a least a few reviews that highlight both the pros and cons. These reviews will also help ground you in the patterns to look for in the more extreme reviews.
How Merchant Maverick Verifies Its User Reviews
Each of our B2B vendor reviews on the Merchant Maverick website includes a section for user comments. In managing our comment section, we adhere to a strict comment policy when publishing any reader feedback. For example, we require that each commenter includes their full name and business name when submitting their feedback. We also have internal systems in place to flag suspicious patterns, such as a group of reviews from different email addresses but the same IP address.
Most importantly, a real human being looks at every single comment before it gets published to our site. When checking each comment, we use many of the same signs and techniques we’ve already discussed in this article to identify suspicious activity. At Merchant Maverick, we believe effective technology, clear policies, and a discerning human touch are all necessary to combat the problem of fake reviews.
Go Forth & Don’t Fall For Fake Online Reviews & Testimonials
I know I said at the outset that I love living in the age of online reviews, but I also cringe at the overwhelming, befuddling mess of feedback generated via crowdsourced opinions. Perhaps “love-hate” would have been a better term.
Fake reviews will continue to compound the problem for the foreseeable future as small business owners struggle to cut through the noise and make sound decisions. There is no single, fail-safe trick to spotting fake reviews, but we’ll leave you with these key takeaways:
Place more weight in patterns and trends than any single user review
Watch for multiple signs and patterns at play at the same time
Learn about the place you’re reading user reviews in the first place (e.g., how the site makes money, its rules for displaying vendors and ratings on the website, its process for verifying user reviews, etc.)
Finally, while user recommendations are extremely valuable, we’d strongly suggest combining them with long-form, detailed analyses of the product or service you’re considering for your business. In Merchant Maverick’s reviews, we always aim to thoroughly cover both the negative and positive aspects of each vendor in a balanced, non-emotional manner. And if we’ve uncovered suspicious testimonial-gathering practices as we scour the web for user feedback about the company, we most definitely let you know.
To learn about how Merchant Maverick operates as well as tips for navigating the B2B world, check out these resources:
How This Site Makes Money
Our Vendor Rating & Scoring System
Understanding Negativity Bias
The post The Fake Review Spotter Guide: Everything You Need To Know About How To Check For Fake Reviews appeared first on Merchant Maverick.
You need to buy inventory for your company, but you don’t have enough capital to do so. Conventional financing is not a viable option for your business, but you know you can quickly sell the inventory you want to purchase. Is there a way to leverage your inventory and use that as collateral? What other options are available to you? Read on to learn about inventory financing and whether it’s a good fit for your business.
What Inventory Financing Is & How It Works
Inventory financing is a type of asset-based loan in which the inventory you’re purchasing with the loan is used as collateral to secure the loan. Depending on the arrangement, the lender may also require you to put up your accounts receivable as collateral. The amount of financing you receive is directly related to the value of the inventory in question, usually 70 to 80% of the inventory’s value. As you sell the inventory you purchase with the loan proceeds, you’ll be able to repay the loan.
Inventory financing is typically used by large upstream producers and distributors of tangible goods, such as manufacturing companies and product wholesalers. You’ll need to both carry a lot of inventory and be purchasing a large quantity of inventory to qualify for this type of financing.
Inventory financing products are sometimes conflated with “inventory loans,” which is a more general term. An inventory loan is simply a loan to purchase inventory, whereas inventory financing refers to a specific type of loan wherein the inventory purchased with the loan is used to secure the loan. A standard business loan to purchase inventory may instead require another type of specific collateral, a personal guarantee, or a general blanket lien on all of your business assets.
Unlike inventory financing, which is appropriate for large B2B businesses, other types of inventory loans can be used by small B2C businesses.
Types Of Inventory Financing
All inventory financing uses inventory as collateral, but there are still different types of financing agreements. In this section, let’s look at the types of loans used for inventory financing.
Inventory Loans
Inventory loans are typically structured as short-term loans, with the expectation that the inventory will sell quickly and pay for itself quickly. With an inventory financing loan, you will receive the entire sum up front and then repay the principal, plus interest, in installments.
Usually, the minimum loan amounts for inventory financing are on the high side, meaning the smallest loan you can take out could be $500,000 (or higher, depending on the lender). The amount you receive will be a percentage of the appraised value of the inventory you are purchasing, to account for the fact that inventory depreciates in value over time. For example, if you need to purchase inventory with a liquidation value of $800,000, the lender may lend you 80% of that, so you’ll receive a sum of $640,000.
An inventory term loan can be a good choice for large, one-time inventory purchases — if you have the opportunity to purchase a bulk amount of quick-turnaround inventory at a discount, for example. However, some loans may be easy to renew for repeat borrowing needs.
Inventory Lines Of Credit
A line of credit is a common loan structure for inventory financing and is more suitable for ongoing access to capital for inventory purchases. With an inventory-secured line of credit, the business owner receives a line of credit based on the value of their inventory, repays it as the inventory is sold, and borrows more funds as needed and the limit is replenished. The borrower only has to pay interest on the money they withdraw, plus any other associated fees.
Rather than one-time inventory purchases, an inventory line of credit can be useful for regular inventory replenishment needs due to cyclical cash flow issues, e.g., for a business that has slower sales certain times of the year.
Note that before you turn to an inventory financing lender for a line of credit, you may want to try to negotiate a line of credit with your vendors directly.
Accounts Receivable & Inventory Financing
Accounts receivable and inventory financing (ARIF) is when accounts receivable financing and inventory financing are used in conjunction. Businesses that frequently have a lot of money tied up in both invoices and inventory may be able to leverage both of these assets as collateral to secure financing.
Accounts receivable financing—also known as invoice financing—is a loan based on the value of your business’s unpaid invoices. You’ll usually get a line of credit based on the value of your receivables (invoices). Because A/R financing and inventory financing are both asset-based loans, they function similarly and may be used together to secure a loan or line of credit. As with inventory financing, with AR financing you’ll only receive 70-80% of the value of your unsold invoices; this is to account for the fact that some of those invoices may never be settled.
Invoice factoring is something slightly different, as you actually sell your unpaid invoices to a factoring company, but can also be used to leverage outstanding invoices to pay for inventory.
Purchase Order Financing
Purchase order financing can be a useful way for B2B companies to finance certain types of inventory purchases. With this type of financing, you receive an advance to buy the inventory you need to deliver on large purchase orders. PO financing works well for companies that resell finished goods and need to fulfill orders for these goods. The way this works is you receive a purchase order from a reliable (creditworthy) customer. The PO financing company will then front you the capital to pay your suppliers for the inventory needed to fulfill that order.
PO financing is similar to invoice factoring, except with PO financing you’re taking out a loan to fulfill an order; invoice factoring is a loan based on completed orders.
Expected Rates & Terms For Inventory Financing
Rates and terms for inventory financing, of course, vary depending on the lender and the type of inventory financing you’re applying for. But some things are true of inventory financing and asset-based lenders in general :
Loan minimums are high (usually $500K+)
You can only be approved for 70% to 80% of the assessed value of the inventory you’re purchasing
The value of your current inventory must be at least twice the amount you’re asking to borrow
Interest rates are typically in the high teens
Repayment terms are short (up to 3 months)
Time to funding may be as long as 30 days
The lender may do an on-site inspection of your inventory and your inventory management system, and you will need to pay the associated inspection costs
If you fail to repay the inventory loan or line of credit on time, your inventory will be repossessed
If these terms don’t sound like they would make sense for your business, you may be better served by an online inventory loan, which is more appropriate for smaller businesses.
When Inventory Financing Is A Good Choice For Your Business Funding Needs
As mentioned, inventory financing can be suitable for manufacturing and distribution companies. In some cases, it could also suitable for large retailers. Consider whether the following applies to your business:
You own a large company that deals with tangible goods (usually B2B)
You need to borrow at least $500K and have at least $1 million in current inventory
Your sales are outpacing your revenues
You are unable to get higher credit lines from your suppliers
You have outstanding purchase orders you need to fulfill
You have an efficient inventory management system
You’ve exhausted other possibilities for financing (such as a credit line with your vendor or a conventional business loan)
Compared to a standard business loan, inventory financing is more expensive but is usually easier to obtain, as long as you have a larger, established business and your inventory is selling quickly. You do not necessarily need to have good credit, but you will need to demonstrate a strong sales record that indicates you will be able to easily sell the inventory you are purchasing. You will generally be able to borrow up to 50% of the value of your current inventory.
When To Avoid Inventory Financing
If you have a newer business without a demonstrable sales history, or your current inventory is losing value and not selling, it’s unlikely that an inventory financing company would be interested in lending to you. This type of financing also isn’t suited for startups or smaller business-to-consumer companies such as independent retailers that only need to purchase $50,000 worth of inventory. In those cases, you’d be better off with an online inventory loan, such as a short-term working capital loan or business line of credit.
Even if you do qualify for inventory financing from an asset-based lender, you may still want to avoid this type of financing if there’s a chance you could qualify for a better loan, such as an SBA loan. This is because inventory financing loans are more expensive than traditional business loans.
Is Inventory Financing Right For You? How To Find An Inventory Financing Company
So, you’ve decided that inventory financing is a good option for your business, and you need to find a reputable company to work with. Due to the large sums of money involved, the complex nature of asset-based loans, and all the due diligence involved in securing inventory financing, you will likely want to find a loan specialist who can guide you to navigate your inventory financing options and find a suitable lender for your company. There are also online loan matchmaking services such as Lendio that you may be able to use to secure inventory financing.
One inventory financing option you might want to consider is P2Binvestor, as this lender has earned a 5-star review due to its easy application process and competitive terms and fees.
Donât Think Inventory Financing Is Right? Learn About Other Types Of Small Business Financing
Perhaps you’ve realized inventory financing isnât right for you because you run a B2C business and/or you have more modest financing needs. I’d like to point you toward some other loan resources that might be a better fit:
6 Small Business Loan Options For Purchasing Inventory
Types Of Small Business Loans
14 Types Of Alternative Financing For Small Businesses
The Best Small Business Loans For 2020
SBA Loan Requirements
Business Line of Credit Comparison
Invoice Factoring Comparison
If you’re looking for specific lenders that could offer smaller amounts of capital to purchase inventory, BlueVine and OnDeck are a couple of our top picks in the small business space. I encourage you to read those reviews and see if their lending products could work for you. And as with invoice financing loans, you can also find other types of loans on online loan marketplaces including Lendio.
Need more help? Let me know in the comments and I’ll see if I can guide you in the right direction.
The post How Inventory Financing Works & When Itâs Right (Or Wrong) For Your Small Business Funding Needs appeared first on Merchant Maverick.
Incoming cash flow is critical to your business. After all, if you donât have money coming in, how are you going to pay for inventory, daily operating expenses, or other costs associated with running your business?
Sometimes, cash flow shortages are due to circumstances beyond your control. A slow season, for example, could leave your bank account a little short. But maybe youâre facing a different challenge. You have plenty of sales, but one big obstacle thatâs obstructing your cash flow: unpaid invoices.
Depending on your companyâs payment terms, you could be stuck waiting for weeks (or even months!) to receive payment from your customers. When these unpaid invoices stack up and your business is strapped for cash, this can quickly become a big problem.
You probably already know about more traditional methods of financing that can help you out of this bind, like lines of credit, credit cards, and small business loans. Sometimes, though, these options just donât make sense. Maybe your personal credit score is low, you donât meet a lenderâs requirements, or you need funding fast.
What you may not know is that thereâs a unique financing option that gives you control of your unpaid accounts. Accounts receivable financing is a way to use your unpaid invoices to get the funds you need in just days. If you have a stack of unpaid invoices sitting on your desk and a bank account thatâs seen better days, read on to learn more about accounts receivable financing and how to put it to work for your business.
BlueVine
Fundbox
P2Bi
InterNex Capital
Riviera Finance
American Receivable
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ReviewVisit
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Review Compare
Review Compare
Credit Facility Size
$5K – $5M
Up to $100K
$500K – $10M
Up to $10M
$5K – $2M
Up to $3M
Average Approval Time
2 – 7 days
1 day
2 weeks
3 – 7 days
4 – 7 days
3 days
Minimum Credit Score
530
N/A
N/A
N/A
N/A
N/A
Minimum Annual Revenue
$100K
$50K
$500K
$1M
N/A
N/A
Required Time In Business
3 months
N/A
6 months
2 years
N/A
N/A
What Is Accounts Receivable Financing?
With accounts receivable financing, you receive the capital you need using your outstanding receivables, typically in the form of unpaid invoices. This is why accounts receivable financing is also known as invoice financing.
There are two common definitions used when talking about accounts receivable financing. The general definition is simply financing based around receivables. Invoice discounting and invoice factoring (more on that a little later) both fall under this umbrella.
More specifically, though, this type of financing uses your accounts receivables as collateral for an asset-backed line of credit. A lender provides you with a line of credit based on the quality and quantity of your unpaid invoices.
For small business owners, this type of financing has many benefits. Since accounts receivable is the qualifying factor, other criteria — such as personal credit score, time in business, and the financial details of your business — are often less important to lenders. If you fail to qualify for other types of funding, accounts receivable financing could help you overcome your financial challenges.
You also wonât have to jump through hoops to get the capital you need (unlike with traditional loans and other types of financing). In most cases, all you need to provide to a lender is basic information about yourself and your business and information about your unpaid receivables. You wonât have to worry about pulling old tax returns or other documentation thatâs required for traditional loans. If you have qualifying invoices, you can be approved for a line of credit with accounts receivable financing.
A/R Financing VS Invoice Factoring
Earlier, we mentioned invoice factoring. This is a type of financing that is slightly different from accounts receivable financing.
Accounts receivable financing provides you with a flexible line of credit that you can draw from as needed. Your invoices arenât sold to the lender. Instead, theyâre used as collateral to secure the line of credit.
With invoice factoring, you sell your unpaid invoices to a lender for immediate payment. Youâll receive a large portion of the invoice amount upfront — think anywhere from 80% to 95% of the invoice total. Once the customer pays the invoice, youâll receive the remaining amount, minus any fees charged by the lender.
Another difference between the two is how payment is collected. When you choose accounts receivable financing, you collect payment from your customers as usual. Your customers will not be notified that you are working with a third party.
With invoice factoring, your lender — also known as a factor — will be responsible for collecting payments from your customers. In most cases, your customers will be notified that a third-party is collecting payments.
Invoice financing is usually best for larger companies with many invoices. Invoice factoring is usually the better choice for small companies that donât have the time or resources to collect payments from customers.
Is invoice factoring best for your business? Learn more about invoice factoring, then compare rates, terms, and requirements of top factors.
Who Qualifies For A/R Financing?
One of the biggest advantages of accounts receivable financing is relaxed borrower requirements. You donât have to worry about having a perfect credit score, a long time in business, or high annual revenues — hard and fast requirements for most other lenders.
Some lenders do have credit score requirements, though. In general, youâll find that the minimum score needed to qualify for accounts receivable financing is much lower than the credit score requirements for loans, unsecured lines of credit, and other financial products.
For most lenders, the number of invoices you have and the creditworthiness of your customers are the most important qualifying factors. During the application process, youâll provide your invoices to the lender to determine if youâre eligible for funding. Some lenders may also look at your business bank statements to assess cash flow.
Most lenders only work with B2B or B2G companies, although some lenders will approve B2C companies with qualifying invoices.
How Accounts Receivable Financing Works
At this point, you should have a better understanding of accounts receivable financing, but you may still be on the fence as to whether itâs right for your business. Letâs explore exactly how accounts receivable financing works so you can determine whether or not to take this financial leap
1. Apply For Financing
Weâll go into detail a little later about how to choose the right lender for your business. For now, though, letâs assume that youâve already selected your lender. Begin by filling out the lenderâs application. Usually, this is a fairly short process that requires some basic information about yourself and your business, such as your federal Employer Identification Number, your full legal name, and contact information.
2. Submit Your Invoices
Once youâve filled out your application, some lenders require you to securely connect your accounting software. This allows the lender to determine if the quantity and quality of your invoices are enough to qualify for financing. Other lenders may require you to simply upload your invoices.
3. Get Approved
Once youâve completed the application and have submitted your invoices, the lender will make an approval decision. The lender will issue a line of credit based on the value of your invoices. Approval decisions may be given the same day, or you may have to wait several days for a decision.
4. Use Your Line Of Credit
Once youâve been approved, you can now make draws from your line of credit to pay for business expenses. Most lenders transfer funds to your banking account immediately after you initiate the draw. In most cases, you should have the funds in your account within 1 to 2 business days.
5. Collect Payments & Repay Your Lender
Youâll continue to collect payment from your customers as usual. As you collect payments on your invoices, youâll repay any funds youâve taken from your line of credit, as well as any fees charged by the lender.
Typical A/R Financing Rates & Fees
The rates and fees charged by a financer will vary based on a number of factors. Youâll qualify for lower rates if youâre in a low-risk industry, have multiple invoices with creditworthy customers, and bring in steady cash flow.
On average, expect to pay about 3% to 5% each month on the portion of used funds. Some lenders may offer rates as low as 1%, which is why itâs important to shop around for the best rate. This also highlights why itâs so important to get payments from customers as quickly as possible. The longer you have an outstanding balance with your financer, the more you end up paying.
You may also be required to pay additional fees based on the lender you select. Some of the most common fees that you may encounter include:
Servicing Fees
Application Fees
Setup Fees
Withdrawal Fees
Processing Fees
How To Choose The Right A/R Financer For Your Business
If youâve decided to move forward with accounts receivable financing, the next step is to find the right financer for your business. What works for one business may not work for yours, so make sure to do your research and apply the following tips when making your selection.
Understand & Meet All Requirements: Know what the lender requires before you even apply. While accounts receivable financing may be easier to obtain than other types of funding, some lenders have stricter requirements. Make sure that you meet all of these requirements. If the lender requires a minimum credit score, check your score for free online to make sure youâre a good fit. Also pay attention to annual revenues, minimum time in business, excluded industries, and other requirements.
Review Total Cost Of Borrowing: Sure, one lenderâs monthly rate is low, but add in fees and other costs and you may end up paying much more. Make sure to look at the numbers — all of them — to calculate the most affordable financial solution.
Consider Borrowing Limits: Assess the borrowing limits of each lender. For example, if a lender only issues lines of credit up to $50,000, but youâd prefer to have a higher line, you can immediately eliminate this lender from your list.
Recommended A/R Financers
With an idea of what to look for in an accounts receivable financer, youâre one step closer to scoring the funding you need for your business. Maybe youâve even started your search, but thousands of search engine results have your head reeling. To cut through the clutter and get you started, check out our recommended options for accounts receivable financers.
BlueVine
Fundbox
P2Bi
InterNex Capital
Riviera Finance
American Receivable
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Review Compare
Review Compare
Credit Facility Size
$5K – $5M
Up to $100K
$500K – $10M
Up to $10M
$5K – $2M
Up to $3M
Average Approval Time
2 – 7 days
1 day
2 weeks
3 – 7 days
4 – 7 days
3 days
Minimum Credit Score
530
N/A
N/A
N/A
N/A
N/A
Minimum Annual Revenue
$100K
$50K
$500K
$1M
N/A
N/A
Required Time In Business
3 months
N/A
6 months
2 years
N/A
N/A
BlueVine
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For invoice factoring:
Time in business: 3 months
Business revenue: $100,000 per year
Business type: Business-to-business
Personal credit score: 530
For business lines of credit:
Time in business: 6 months
Business revenue: $120,000 per year
Personal credit score: 600
Borrower requirements (click to expand)
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Through BlueVine, you can apply for accounts receivable financing lines up to $5 million. Rates begin at just 0.25% per week, and you can be approved as quickly as 24 hours after applying.
The application process is easy. Filling out the application takes less than 10 minutes. Once your application is reviewed, youâll receive a decision from BlueVine. If approved, you can sync invoices from your supported accounting software, or you can upload invoices right to your dashboard. Youâll receive up to 90% of the invoice amount up front, and youâll receive the rest (minus fees) after the customer pays. You select the invoices to submit, and there are no long-term contracts.
To qualify, you must operate a B2B company. You must have a minimum FICO score of 530, have $100,000 in annual revenue, and be in business for at least 3 months. If you need additional funding options, BlueVine also offers business lines of credit.
Fundbox
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No time in business requirements, but must have used a compatible accounting or invoicing software for at least 2 months, or a compatible business bank account for at least 3 months.
Business revenue: $50,000 per year
No specific personal credit score requirement
Borrower requirements (click to expand)
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Through Fundbox, you can receive up to $100,000 with accounts receivable financing. Advance fees start at 4.66% and repayments are weekly. One thing that sets Fundbox apart is that you can get 100% of your invoice value deposited into your bank account.
Registering with Fundbox couldnât be easier. Thereâs no credit check and no paperwork requirements. All you have to do is link your accounting software, and you can receive approval in just hours. Once youâve been approved, funds can be transferred to your checking account as quickly as the next business day.
To qualify, you must use a Fundbox-supported accounting or invoicing software. Your business must be based in the U.S. and have annual revenue of at least $50,000.
P2Bi
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Time in business: 6 months
Business revenue: $500,000 per year
Personal credit score: N/A
Business location: United States
Business type: All or mostly B2B
Borrower requirements (click to expand)
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Through P2Binvestor, you can receive an asset-backed line of credit up to $10 million. Through this lender, you can draw up to 80% of the value of your receivables.
There are several fees associated with a P2Bi line of credit. This includes a one-time origination fee equal to 1.5% of your credit line, an annual renewal fee of 1.5% of your credit line, and a daily discount cost. Annual rates average 8% to 20%.
To qualify, you must be in business for at least 6 months and have annual revenue of $500,000. You must also run a B2B business based in the U.S. There are no minimum credit score requirements, although personal credit is evaluated during the underwriting process.
InterNex Capital
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Type of business: B2B
Time in business: 2 years
Business revenue: $1 million to $25 million
Borrower requirements (click to expand)
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InterNex Capital provides asset-backed lines of credit from $250,000 to $10 million for qualified borrowers. Rates are between 7.99% and 18.99%. All lines of credit come with 12-month terms with the option to renew.
After filling out the application, youâll receive an approval decision within 3 business days. Once youâve accepted your revolving line of credit, you can make your first draw immediately.
InterNex Capital is more suited for large businesses. To qualify, you must have annual revenue of at least $1 million. There are no minimum credit scores required to qualify, but you must be in business for at least 2 years. InterNex Capital charges fees including an origination fee, draw fee, unused line fee, and renewal fee.
Riviera Finance
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Type of business: B2B
Borrower requirements (click to expand)
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When you work with Riviera Finance, it’s possible to get up to $2 million for your outstanding receivables. You can receive up to 95% of your invoice value within 24 hours after products have been accepted by your customers. Rates start at 2%. Standard terms are 6 months, but the company works with borrowers if different terms are needed.
Riviera Finance works with businesses in all 50 states. There are no annual revenue, personal credit score, or time in business requirements to qualify.
American Receivable
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Business industry: B2B (not in the construction or medical insurance industry)
Borrower requirements (click to expand)
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With American Receivable, you can receive funding up to $3 million for your unpaid invoices. This company will provide up to 90% of the value of your invoices within 24 hours after submission. Rates start at just 0.8% per month.
To qualify, you must have qualifying invoices to creditworthy customers. There are no time in business, credit score, or revenue requirements.
Final Thoughts
If you deal with a lot of accounts receivable and you donât qualify for other types of business financing, accounts receivable financing could be a smart next step for your business. Of course, this financial solution isnât for everyone.
Weigh out the total costs of accounts receivable financing and evaluate the needs of your business. You may find that this type of financing is right for you, or you may choose another source of funding such as a business line of credit or business credit card. Regardless of what path you take, make sure that any financing you accept is financially feasible and will be used to better your business.
BlueVine
Fundbox
P2Bi
InterNex Capital
Riviera Finance
American Receivable
Review Visit
ReviewVisit
Review Visit
Review Visit
Review Compare
Review Compare
Credit Facility Size
$5K – $5M
Up to $100K
$500K – $10M
Up to $10M
$5K – $2M
Up to $3M
Average Approval Time
2 – 7 days
1 day
2 weeks
3 – 7 days
4 – 7 days
3 days
Minimum Credit Score
530
N/A
N/A
N/A
N/A
N/A
Minimum Annual Revenue
$100K
$50K
$500K
$1M
N/A
N/A
Required Time In Business
3 months
N/A
6 months
2 years
N/A
N/A
The post Accounts Receivable Financing: What You Need To Know appeared first on Merchant Maverick.
Are you a Canadian seller looking to set up an online store? Or are you an American merchant hoping to sell products in Canada? If so, youâve come to the right place.
In this article, weâll be covering the top 5 eCommerce solutions for Canadian sellers. Each shopping cart included here provides the logistical features that Canadian merchants need for their online stores. Whatâs more, all of the shopping carts in this article are of top quality, each one earning a perfect five-star review.
Here are a few of the Canada-specific features we’ve looked for in each of the eCommerce solutions presented below:
Calculate tax rates for Canada
Display prices and accept payment in CAD
Integrate with Canada Post for real-time shipping rates
Support multiple languages, such as French
Weâll kick off the list with a couple of our favorite Canada-based shopping cart solutions, and then weâll move onto some American software solutions that also work for Canadian merchants. Letâs get started!
Need a payment processing service? Check out the best and worst Canadian merchant accounts providers. Donât have time to read an entire review? Take a look at our top-rated eCommerce solutions for a few quick recommendations. Every option we present here offers excellent customer support, superb web templates, and easy-to-use software, all for a reasonable price.
Â
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Best Choice For
Small to enterprise businesses with little technical skill
Small to large businesses with some technical skill
Small to large businesses with some technical skill
Small to large businesses with advanced technical skill
Large B2B businesses with some technical skill
Based In Canada
Yes
Yes
No
No
No
SaaS
Yes
Yes
Yes
No
Yes
Beginning Pricing Structure
$29/month + 2.0% transaction fee
$19/month for 75 orders
$44.95/month
Free
$299/month
Free Trial
Yes
Yes
Yes
No
Yes
Ease Of Use
Easy to use
Moderate learning curve
Moderate learning curve
Steep learning curve
Moderate Learning Curve
Read on for more details about each eCommerce solution.
Shopify
Based out of Ontario, Canada, Shopify is our first recommendation for Canadian merchants seeking an easy to use shopping cart solution. Shopify is the perfect example of an SaaS (software as a service) solution, which means that Shopify handles the technical aspects of running an online store. For a monthly fee (plus transaction fees) Shopify provides hosting, web security, and technical support.
Shopify is designed for merchants with little to no development experience, so itâs perfect for smaller merchants who want to get their products to market quickly. However, that does not mean that Shopify is limited to exclusively these merchants. The software is scalable, so large or enterprise level businesses can also use Shopify to their advantage.
Pricing for Shopify is relatively low, and all plans include unlimited storage, bandwidth, and products. You can subscribe to their Basic Shopify Plan for just $29/month (+ 2.0% transaction fee). For more advanced features, youâll have to subscribe to a higher level plan. One step up is the Shopify Plan at $79/month and the next step is the Advanced Shopify Plan at $299/month.
Pros
As one of our favorite, most versatile solutions, Shopify has a lot to offer merchants. Here are a few of the biggest perks of using Shopify:
Ease Of Use: Shopify is known for their simple UI. Uploading products is a breeze, and you can make changes to your storefront design with a drag-and-drop tool.
Elegant Design: The Shopify marketplace comes stocked with beautiful, responsive, ready-to-use themes. Ten of these themes are available free of charge, and the rest cost between $140-$180.
Good Customer Service: 24/7 customers support is available on all pricing plans via email, phone, and live chat. Some users report excellent interactions with support reps, although other users have a different experience (see Cons below).
Cons
Despite all of its positives, Shopify is not a perfect solution. There are still many ways Shopify can continue to improve. Here are a few of the things users complain about on online forums:
Limited Features: This is the biggest complaint users have about Shopify. While Shopify includes all of the basic features sellers need to initially set up their store, there are not many advanced features available. In order to access more advanced features (like B2B selling options, single page checkout, etc.), youâll have to purchase the appropriate add-ons. This leads us to our second complaint.
Add-Ons Add Up: Although Shopifyâs plans are affordably priced, costs of using Shopify for your online store can quickly add up once you start using extensions. Extensions and add-ons from the Shopify marketplace are billed monthly.
Poor Customer Support: This contradicts the âproâ I mentioned above. Reviews are mixed when it comes to customer support. Some users have great experiences. Others end up frustrated.
Canada-Specific Features
Because Shopify was created by Canadians, you can expect the software to offer enough features to support Canadian sellersâ specific needs. Hereâs how they handle Canada-specific selling:
Multi-Lingual Features: Have your storefront, checkout, and emails display in multiple languages. Shopify has also recently introduced a beta for a multi-lingual admin. Languages currently supported include French.
Multiple Currencies:Â Display pricing in multiple currencies using a drop-down currency picker. Accept multiple currencies.
Shopify Shipping: Use Shopify Shipping to calculate and display shipping rates for multiple carriers, including Canada Post, UPS, USPS, and DHL.
Tax: Set tax rates for countries and provinces.
Get started with Shopify by signing up for a free 14-day trial, no credit card required.
Read our full Shopify review
Visit the Shopify website
LemonStand
Founded in 2010, LemonStand is an SaaS eCommerce solution with headquarters in Vancouver, BC. Like Shopify, LemonStand provides merchants with hosting, customer service, and site security.
One notable trait about LemonStand is that their design templates are completely customizable. The design is all open source, so if you have the proper know-how, you can change nearly every aspect of the look and feel of your store.
Pricing for LemonStand is based on the number of orders you process each month. We like this pricing model because all features are included with all plans. However, merchants who process many orders each month with very narrow profit margins might be turned off by this pricing model. You can begin with the Starter plan ($19/month for 75 orders) or move up to the Growth plan ($69/month for 300 orders) or Professional plan ($199/month for 1000 orders). Thereâs also a Premium plan available for even larger sellers.
Pros
We deem LemonStand a 5-star solution, and it seems many users would agree. Hereâs what current users praise most frequently on comment boards and review sites:
Customizability: If you have the technical experience, you can do a lot with LemonStand. In particular, you will be able to change many aspects of the look and feel or your storefront.
Progress: LemonStand is constantly working to add new features to their software and improve existing features. This progress is encouraging.
Good Customer Service: LemonStandâs representatives are helpful, courteous, and timely.
Cons
LemonStand isnât a perfect solution, however. Here are a few of the complaints Iâve found:
Missing Features: LemonStand is constantly adding new features, in part because the software is still missing some advanced functionality. Users are hopeful that these gaps in features will be filled soon.
Technical Skill Required: Web design with LemonStand requires at least some knowledge of HTML and CSS. If you don’t have that knowledge, you should be able to hire someone who can take care of design issues for you.
Lacking Documentation: LemonStand provides documentation as a form of self-help technical support. Unfortunately, some of that documentation is not very detailed. Documentation can occasionally be difficult to follow.
Canada-Specific Features
Hereâs how LemonStand supports Canadian merchants:
Canada Post: LemonStand integrates with Canada Post so you can provide real-time shipping rates.
Taxes: Use tax classes to define tax rates by location. Alternatively, you can integrate with Avalara for more detailed tax calculation.
Surprisingly, I was not able to find any information about displaying your storefront in multiple languages and currencies. However, this doesnât necessarily mean they are unavailable (especially since LemonStand is a Canadian based company). Comment below if you have any information on the matter.
Test out the software for yourself with a free, commitment-free 14 day trial. Or, read our full review for more information!
Read our full LemonStand review
Visit the LemonStand website
PinnacleCart
PinnacleCart was developed with the intention of helping merchants promote and sell their products, regardless of technical ability. As SaaS software, PinnacleCart gives you the ability to add and edit products, process orders, create marketing materials, and customize your site design. And although PinnacleCart is not a Canadian company, they do provide many of the logistical features that Canadian merchants need.
Pricing for PinnacleCart is based on traffic and storage. All features come included with every plan. These features include unlimited products, daily backups, phone and email support, and an SSL certificate. Pricing is available in three tiers: $44.95/month, $94.95/month, and $199.95/month.
Pros
Pinnacle Cart is another five-star solution. Find out what makes it great:
Ease Of Use: Once you conquer the initial learning curve, using your PinnacleCart admin should be second nature.
Customer Support: Users are happy with the support they receive from PinnacleCart.
Good Marketing Features: Use widgets to market your products on any website, and integrate with social media to further your reach. PinnacleCartâs SEO features are also generally well praised.
Cons
Some PinnacleCart users, however, may have a different experience. Here are a few cons weâve noticed:
Learning Curve: Users who are new to PinnacleCart (and new to eCommerce in general) will have to overcome a slight learning curve when they first begin using the software.
Difficult Customization: Some users have trouble customizing their design.
Not International Friendly: PinnacleCart does not offer many languages or currency options. In addition, users have some difficulty accepting payments outside of the US and Canada.
Canada-Specific Features
Although PinnacleCart is not the best solution for cross-continental selling, they offer plenty of features for selling within Canada:
Canada Post: Add real-time shipping for Canada Post.
Automatic Tax Calculation: Use flat-rate tax options to set up tax rates by state and province. Integrate with Avalara Ava Tax or Exactor Tax for more detailed tax estimates.
Accept Multiple Currencies: List your prices in multiple currencies and accept payments in multiple currencies.
Add French Language Options: Choose to display your site in multiple languages.
Try out the platform for free for two weeks, no need to hand over any credit card information. For more details on pricing and features, view our full review.
Read our full PinnacleCart review
Get Started With PinnacleCartÂ
Magento
Until now, weâve discussed exclusively SaaS platforms that favor ease of use over customizability. Magento is the opposite. As one of the eCommerce industryâs most popular open-source software, Magento is highly customizable and scalable, and itâs perfect for merchants with greater developing skills.
Another advantage to Magento is that itâs totally free to download. However, that doesnât mean Magento costs $0 to implement. Because Magento is open-source, you will be responsible for finding hosting, maintaining security, and hiring developers (or being your own developer) to design your site and add necessary features. There is no Magento support available. Your only options are to resolve issues on your own or pay a developer to fix things for you.
As you might imagine, Magento is more difficult to implement than the SaaS solutions weâve discussed above. However, Magentoâs strong feature set and customizability make it a good option for fearless merchants.
Pros
Take a look at the advantages that come with Magento:
Features: Magento provides a robust feature set right out of the box. Add even more advanced features through integrations or develop your own extensions with the available API.
Strong User Community: Magento is used by 240,000 merchants around the world. Join a wide community of sellers and developers. Find solutions in Magentoâs community forum or hire a Magento developer for select jobs.
Scalable & Customizable: Use Magento to build the online store system that your business needs.
Cons
As you might expect, Magento comes with its challenges. Many of these challenges relate to ease of use. Take a look:
Steep Learning Curve: Many sellers find Magento difficult to learn. You will need to have some experience with coding or be able to hire a developer.
Expensive: Although the software is free to download, there are always expenses related to operating an online store. Be sure to consider web developer costs as well as the expense of hosting, adding integrations, and maintaining security.
No Customer Support: You can use self-help support routes or hire a developer. Magento does not provide customer support for their open source software.
Canada-Specific Features
Magento is built for merchants worldwide. The software includes many international selling features, which benefit Canadian sellers.
Languages: Choose from many, many available languages. Set up multi-language store views so that you can feature multiple languages without creating multiple sites.
Accept CAD: Accept CAD. Implement âdual currenciesâ to accept both USD and CAD easily.
Taxes: Manually add tax rates and rules, or integrate with AvaTax for more detailed (and easier) tax calculations.
Canada Post: Use integrations from the Magento Marketplace to add Canada Post shipping calculations to your store.
Magento does not offer a free trial because the software itself is totally free to download. Test out the software by downloading it for free, or read our review for more information.
Read our full Magento review
Zoey
If Magento sounds great, but youâre turned off by that âsteep learning curve,â you might look into Zoey. Zoey offers the functionality of Magento paired with an ease of use that rivals Shopify. Sound perfect, doesnât it? The only downfall: the price. Zoey is designed to be a B2B eCommerce platform with B2C capabilities. It is therefore intended for merchants beyond the startup phase, and the price reflects that.
Nevertheless, we think Zoey is a fantastic option. In particular, we love Zoeyâs robust drag-and-drop storefront design tool, which lets all merchants make changes to their sites with zero coding. In addition, we love Zoeyâs extensive feature set that includes strong capabilities for wholesale selling.
Pricing for Zoey is divided into two tiers: Entry ($299/month) and Power ($499/month). A step up in pricing includes more staff account permissions, the ability to list more SKUs, priority customer support, and more.
Something important to note: Multi-language and multi-currency features are only available on the Power plan.
Pros
There’s a lot to love about Zoey. Here are just a few of those positives:
Easy Setup: It’s easy to get your store up and running. Zoey also offers migration services to make the transition from another eCommerce platform easier.
Feature Rich: Zoey comes with lots and lots of features already built-in, so you won’t have to use so many add-ons.
Drag & Drop Editor: Zoey’s drag and drop editor gives you control over your site’s look and feel. You can use it to change many, many aspects of your storefront.
Cons
However, there a few drawbacks to using Zoey. We’ve compiled a few potential issues:
Pricey For Smaller Sellers: Zoey’s monthly subscription rates are significantly higher than any of the other solutions in this list. These rates are likely too high for merchants who are just starting out.
Limited Customizability: Although Zoey is similar to Magento in its features, it is not similar in customizability. Since Zoey is not open source, you will not be able to customize every aspect of your store. So, if you want any additional features, you’ll have to add them via integrations or wait until Zoey releases those features in an update.
“Heavy” Platform: If you add on lots of extensions, your platform can get a bit bogged down and not run as smoothly as you’d like.
Canada-Specific Features
Zoey provides sellers with multiple international sales tools, which Canadian merchants can use to their advantage.
Multi-Lingual: Sell in 80+ languages.
Multiple Currencies: Display prices in 168+ currencies and accept payments with 50+ international payment gateways.
Taxes: Zoey includes tax support for many countries, including Canada.
Shipping Integrations: Zoey does not offer a direct link to Canada Post, which is unfortunate. Access Canada Post with a shipping software extension like Ordoro or ShipStation.
As you’d expect, Zoey offers a 14-day free trial, no credit card required. Test the platform out for yourself or learn more with our full review.
Read our full Zoey review
Get Started With Zoey
Final Thoughts
We hope you’ve found one or two shopping carts that might fit your business’s needs. Take a look into our full review of each potential eCommerce solution to learn the details about pricing, features, and customer service.
And when you have a better idea of what each shopping cart provides, we always recommend you take advantage of a free trial to test out the software yourself. Test out your daily operations, and try to “stump” the software with complex products and promotions.
Best of luck in your search for a Canadian-friendly eCommerce platform! There are lots of great options out there, you just have to find the one that works for you!
Need a payment processing service? Check out the best and worst Canadian merchant accounts providers.
The post 5 Shopping Carts For Starting An eCommerce Business In Canada appeared first on Merchant Maverick.
Business financing is often a necessary part of growing a business, but when it comes to finding capital, it can be difficult to know where to start. Should you get a credit card? What about a loan from your local bank? Is there useful financing out there that you haven’t even heard of?
Read on, and we’ll point you in the right direction. This article discusses the most common (and some less common) ways of getting financing for your business. And, if you find the right type of financing for your business, we’ll give you the next steps to continue your search.
Want help finding a business loan? Apply now to Merchant Maverick’s Community of Lenders. We’ve partnered with banks, credit unions, and other financiers across the country to bring you fast and easy business financing.
1. Business Loans
As you might expect, business loans are one of the most popular and versatile ways of financing your business. Most businesses will qualify for a business loan of one sort or another, and they can be used for many business purposes, from working capital to business expansion to refinancing.
Business loans come from many different places. While everybody knows that you can get a business loan from a bank, you might not be aware that other financial institutions offer business loans. Many offer loans that are easier to qualify for and have faster applications than bank loans. Here are places that commonly offer business loans:
Banks and credit unions offer business loans and other types of financing.
Nonprofits, not-for-profit institutions, and microlenders offer small business loans and other types of financing to create jobs and fuel community growth.
The Small Business Administration partners with financial institutions to offer business loans. Read more about SBA loans in our guide to their programs.
Online lenders, also called “alternative lenders,” offer business loans and other types of financing with fast, semi- or fully-automated application processes.
Loans come in many different forms. The most common are installment loans, in which the money is granted to the business in one lump sum and then repaid via incremental, fixed, payments. However, some loans might have special fee and repayment structures — you might find loans with fixed fees (like short-term loans), loans that have repayment rates based on the percentage of money you make every day or month, or other arrangements. In other words, with a little looking, most merchants will be able to find something that is suited to the needs of their business.
For more information on small business loans, check out our free Beginner’s Guide to Small Business Loans. Or, to read reviews of individual lenders, head over to our small business loans review category.
2. Business Lines Of Credit
Business lines of credit are a sort of hybrid between business loans and credit cards. Like business loans, with a line of credit, you can borrow a sum of money which is (normally) repaid along with interest in installments over a set period of time. Like credit cards, you can request funds at any time, up to your available credit limit.
If you occasionally need funds to make ends meet or grow your business, or you simply want a safety net in case of emergencies, a line of credit is an excellent tool at your disposal.
Credit lines can be especially useful to businesses on a timeline because you don’t need to apply every time you need to borrow funds. When you are approved for a credit line, you’re granted access to a certain amount of money from which you can draw at any time. If you have a revolving line of credit, the amount you can borrow will replenish as you repay outstanding debts.
Some credit lines, such as asset-backed lines of credit, can work a little differently. If you have access to a credit line secured by unpaid invoices, inventory, or other assets, the amount you can draw at any given time will depend on the value of the assets you have outstanding. These credit lines are normally best for B2B businesses.
Credit lines carry a few drawbacks — most credit lines have variable interest rates, which mean that your rates might change without notice. And, if you aren’t very good at managing money, you might find that you don’t have emergency funds when you need them. However, lines of credit are useful tools for many businesses.
In the past, it was difficult for all but the most well-established and prosperous businesses to get credit lines. With the advent of online loans, it’s becoming easier for businesses of all sizes to access this useful financing tool. Check out our guide to business lines of credit for more information, or, if you’re interested in procuring one, take a look at our favorite line of credit services.
3. Business Credit Cards
There are many reasons to get a business credit card for your business.
For starters, most credit card issuers offer rewards and benefits to merchants who have signed on with their services. By using the card, you could be earning savings in the form of cash back points (that can be redeemed for travel or other expenses). These rewards add up in the long run, and you might be able to save your business quite a bit of money. Additionally, many credit card issuers offer benefits to cardholders, such as extended warranty, price protection, roadside assistance, and other perks.
Credit cards are also convenient ways to keep track of expenses and smooth out cash flow. If you put all your purchases on your credit card, you can easily see what you’ve been spending money on and where you might be able to cut costs. Because the money isn’t coming out of your own account right away, you can defer payments until a more convenient date. You don’t have to struggle to come up with money for expenses if you don’t have it at the moment, or it would be more convenient to pay later.
Of course, credit cards do have some downsides: the APRs can be expensive, so if you don’t pay your bills in time you could wind up with hefty fees that can be difficult to pay off. Additionally, some credit cards carry extra fees, like annual fees and balance transfer fees, which could eat into the money you save by using the card in the first place. However, if you are good at managing money, and spend time choosing a card that will maximize your savings based on how much you plan to utilize the card, credit cards can be excellent tools for many businesses.
Interested in getting a business credit card? Check out a list of our favorite business credit cards. Or, if you are starting a business, you might be interested in our favorite personal credit cards that can be used for business.
4. Merchant Cash Advances
If you need a one-time amount of funds, it might be worth considering a merchant cash advance. This type of financing can be useful for B2C businesses with strong daily sales.
In practice, merchant cash advances are similar to business loans, with the exception of how they’re repaid. Cash advances are repaid by deducting a small percentage of your daily sales; the amount you are repaying each day will vary along with your cash flow. These financial products don’t have a set repayment date, but are normally repaid in a year or less.
Merchant cash advances are an excellent tool for B2C businesses that need a small infusion of cash for working capital, business growth, or other reasons. Know, however, that cash advances have a few downsides: they can be very expensive, and the cost might not be immediately apparent because the fee structure is different than a traditional loan. Instead of interest, cash advance fees are calculated using a factor rate, which can obscure the true cost of the advance.
Head over to our comprehensive article on merchant cash advances for more information, or take a look at our reviews of merchant cash advance providers if you’re interested in finding an advance.
5. Personal Loans
While business loans are based on the credibility and strength of your business, personal loans are based on your personal creditworthiness and financial health. For this reason, these loans can be useful for entrepreneurs, startups, and other businesses that don’t yet have a credit history. You’ll want to give this option a pass if you have separated your business and personal finances, but if you’re not there yet, a personal loan can help you get your business up and going.
Personal loans are normally available from banks, credit unions, and online lenders. You’ll have to have a steady source of income, a solid debt-to-income ratio, and fair credit to qualify for reasonable rates.
Take a look at our guide to personal loans for business for more information, or check out our startup business loan reviews for reviews on personal lenders.
6. Crowdfunding
Rising to prominence due to the internet and some changes in legislature, crowdfunding allows you to finance your business via a network of your peers.
Crowdfunding is normally used by entrepreneurs to get a startup off the ground, or by creators who need money to fund a product. In a crowdfunding arrangement, the entrepreneur creates a campaign, which usually includes a description of their business or product, information about the founders and their partners, a rough timeline, potential problems, and other frequently asked questions.
Perhaps the most well-known type of crowdfunding, popularized by services such as Kickstarter (read our review) and Indiegogo (read our review), is rewards crowdfunding. You may not be aware that there are actually quite a few different type of crowdfunding available:
Rewards crowdfunding, from services like Kickstarter and Indiegogo, allows contributors to receive products in exchange for backing the business or project.
Donation crowdfunding, on sites like Razoo (read our review), involves funds that are donated to your cause. This type of crowdfunding is typically only used for nonprofits or other charitable projects.
Debt crowdfunding, from services such as Kiva U.S. (read our review), works similarly to a business loan — backers contribute money with the expectation that it will be paid back, normally with interest.
Equity crowdfunding, from company’s like Fundable (read our review), works when backers contribute money in exchange for equity in your business.
Between all the different types available, most entrepreneurs should be able to find a type of crowdfunding that will suit their business or project. Some less-than-sexy businesses, however, might find that they have trouble appealing to casual investors. While debt and equity crowdfunding — which tends to attract more serious backers — might solve that problem, some businesses might still need to look at other financing options.
Crowdfunding also tends to take a long time. Typically, the entrepreneur has to create a campaign and enter into a one- to three-month funding period. The funding period might require a fair amount of marketing, networking, communicating with current and potential backers, and other work to get your project funded.
Interested in crowdfunding? Head over to our startup business loans review category to read reviews of crowdfunding services.
7. Invoice Factoring
Invoice factoring is a financial solution for B2B businesses that invoice their customers. If you have cash flow struggles due to slow-paying customers, invoice factoring is a potential solution. Factoring is commonly used in industries such as construction, manufacturing, printing, and other B2B businesses.
Invoice factors purchase your unpaid invoices at a discount. While you’ll have to take a bit of a loss, invoice factoring can get you the money you need, when you need it, to keep your business going.
When you sell an invoice to a factoring company, you will receive most of the money up-front, and the factor will place a small amount on reserve. Then, when your customer pays the invoice, the funds are diverted to the factoring company, and you will receive the rest of the money in the reserve, minus the invoice factor’s fee.
There are many invoice factoring arrangements, depending on the factoring company and the needs of your business. You can find factors that require you to sell a lot of invoices or ones that let you pick and choose more carefully. Some factors require that your customers know about the arrangement, while others will keep it a secret, and so on.
Invoice factoring has gotten a bad rap in the past because some factoring companies employed poor practices, such as failing to disclose extra fees, requiring long-term contracts and monthly minimums, and other reasons. However, if you do your due diligence, you will be able to find an invoice factor that suits your business’s needs without employing poor tactics. Check out our Basic Introduction To Invoice Factoring to learn what to look for, and take a look at our comprehensive invoice factoring reviews to learn about individual factors.
8. Equipment Financing
If you run a business that relies on computers, manufacturing equipment, restaurant equipment, vehicles, or other equipment that might be difficult to pay for out of your business’s own pocket, equipment financing might be right for you.
Equipment financing covers two types of financing: equipment loans and equipment leases.
Equipment loans are similar to traditional business loans, but the equipment is generally used as collateral. In a typical equipment loan arrangement, the lender will cover 80% to 90% of the equipment, and you will be responsible for paying the other 10% to 20%.
Equipment leases are arrangements in which you rent the equipment for a certain period of time. In practice, some lease arrangements are similar to loans, because you have the opportunity to buy the equipment at the end of the leading period, but other arrangements are designed so that you can return or trade in the equipment after a certain period of time. Because you don’t have to purchase the equipment, leases can be a good option for businesses that only need equipment for a short time, or frequently need to upgrade expensive equipment (like computers) due to changes in technology.
Equipment financing, especially equipment loans, will most likely be more expensive in the long run than purchasing the equipment outright. However, if you can’t afford what you need, an equipment loan or lease is an excellent way to get financing.
Head over to What Is Equipment Financing? to learn more about this type of financing, or our equipment financing review category to learn about individual financiers.
Final Thoughts
Business owners have many financing tools at their disposal, but finding the right tool for the job can take some work. The above resources will point you in the right direction.
Need some more help? Merchant Maverick’s Community of Lenders is there for you. We’ve teamed up with banks, credit unions, and other financiers across the country to provide our readers with fast and easy business financing. With one short application, you can check your eligibility for all participating financial institutions. Read more about the service, including a step-by-step guide through the application process, in Mirador Finance & Merchant Maverick: Making Small Business Loans Easier.
The post 8 Ways To Finance Your Small Business appeared first on Merchant Maverick.
eCommerce is booming. Although the rate of eCommerce growth is tapering off, online retail continues to be over the top. In 2015, eCommerce sales had grown 11.4% from the year before â an impressive estimate any market. And itâs not only B2C a few of the top tech companies available really exist to assist other companies to higher achieve their customers. From top-shelf enterprise software lower towards the simplest solutions for that Etsy exodus, there’s an abundance of quality eCommerce platforms. Today, weâll take a look at two best enterprise software vendors available for enterprise eCommerce: Magento Enterprise Cloud Edition, and Shopify Plus.
Hopefully my research will encourage you to select the right eCommerce software for the business. There are many great shopping carts available for SMBs, which you’ll review here. But Magento ECE and Shopify Plus are certainly aimed at companies searching to create a leap right into a bigger pond. Below are a few important elements to bear in mind while performing your research to find the best enterprise software available.
Enterprise Software is most effective For: Â
There aren’t any globally agreed-upon criteria for which create a business a company. Some say this milestone is arrived at if you have a minimum of 200 employees. Others say you’ll want a minimum of $7M in yearly sales. And others reason that Enterprise status is about the amount of customers you serve. Personally, I make no such declarations. I am inclined to state that companies have arrived at Enterprise levels when theyâve earned enough power and stature to barter their very own car loan terms with Business to business partners (instead of getting them determined by others).
Nevertheless, you define a company, it’s the specialized niche that Magento Enterprise and Shopify Plus speak. Their intended clients need custom-tailored solutions. Customers of the vendors know theyâre obtaining the the best, from white-colored glove tech support team to skyâs-the-limit feature sets.
These two enterprise carts offer scalability, a vital consideration for just about any size business. An 8% spike in sales is definitely nice, although it wonât necessitate any sweeping changes for any small store. But small fluctuations may have a huge effect on a businessâs technical infrastructure when calculated from a large number of sales each week, or from $50M in sales each year.
This fact hasn’t steered clear of Shopify or Magento. Actually, theyâve built their systems around it. Both of them are highly scalable capable to handle the requirements of almost any high-volume e-tailer. Quibbles about bandwidth an internet-based storage are things of history all these enterprise eCommerce platforms provides you with âunlimited everything,â from bandwidth and storage to the amount of products you sell or the amount of visitors to your website.
That stated, these ultra savvy search engine optimization donât make their lower-tier software obsolete. You certainly get that which you purchase, along with the higher level and services information supplied by both of these vendors comes commensurate cost tags. The particular costs are not exorbitant, but thereâs a obvious lower threshold which makes them prohibitive to smaller sized operations. That is a segue to another big factor you need to considerâ¦
The Conclusion:
If youâre still studying, youâre most likely past the requirement for a sales hype. You know that Shopify Plus and Magento ECE would be the top Enterprise software programs, and youâre ready for many straight talk wireless. So hereâs what we’ve been capable of finding about how much to pay for with every software vendor.
Shopify Plus and Magento ECE both cost themselves to fit your specific business, so naturally they’re detest to supply generic quotes. That which you pay with every vendor is decided (and negotiated) while you consult with a representative from each company. All we are able to say with certainty concerns the low finish from the prices spectra.
The cheapest cost point provided by Shopify Plus is the foremost deal, strictly when it comes to figures. Weâve seen reports of subscriptions as little as $2000/month. Magento ECE is greater, though still within the same ballpark, relatively speaking. You will probably pay a minimum of $1800/month at the very least, but $2400/month is really a more reliable lower median.
Itâs not quite chump change, however if you simply can swing it, these carts count every cent. In case your business is continuing to grow to the stage that you could easily absorb this sort of investment, then you know this is money wisely spent.
Impress Me:
Youâre together with your Board of Company directors, and every software vendor is going to let you know why you need to choose on them your competition. Hereâs things i imagine each one of these would say.
Magento ECE:
âWeâre not here to become your lover. We’re here to pave the way in which, after which get free from the right path. Anything you need your eCommerce software to complete is you skill with Magento ECE. With this industry-leading CDN, youâll get what you would like, when you wish it. And thus will your clients.â
 
Shopify Plus:
âWeâre the cream for the bananas. Your products is excellent weâll help to make it exceptional. From your smooth-as-silk interface to the killer design options, business hasn’t looked so great. Oh, one more thing, the worldâs best programmers wish to code for all of us, therefore we have endless integrations too. NBD.â
They are my quotes, here. Shopify Plus and Magento Cloud never stated this stuff so succinctly. Yet, maybe they ought to have.
What Strings Are Attached:
In ongoing with this theme of straight talk wireless, itâs time for you to go to a couple of downsides which each and every enterprise software vendor would prefer to not mention.
Magento ECE
We already discussed the greater initial cost of the eCommerce platform. But thatâs only the shelf cost. Youâll be responsible for design services, high-finish API integrations, and should you require it, extra customer care. The amount of support that you qualify is decided at the initial consultation, landing you in 1 of 2 possible support tiers. You may already know, more is definitely better â when your internet site is lower, you canât manage to be hearing elevator music while your status ebbs away. And from what Iâve read, Magento ECE customers need all of the support they are able to get, particularly while trudging gradually up a high learning curve.
You may also choose to pay extra for support from the personal Technical Account Manager, whose job it’s to counsel you on a multitude of potentially tricky business decisions. Itâs a white-colored-glove tech support team option without a doubt, however a welcome one. If you’re able to afford it, that’s.
Magento Cloud Edition also offers one glaring omission: No blog feature. This isn’t an enormous deal-breaker, because it’s simple to include one by yourself. But the simplicity of addition is the reason why the omission of the blog feature even more puzzling â thereâs pointless this type of fundamental feature shouldn’t be incorporated, particularly when youâre having to pay a premium price to find the best software.
Shopify Plus
Shopify might be famous for that wide array of high-quality add-ons obtainable in its Application Marketplace, but there’s another side towards the gold coin Shopify is lighter as they are, especially compared to feature-heavy Magento. This is a little a Catch 22. The lighter set of features of Shopify Plus causes it to be simpler to understand, in addition to cheaper (a minimum of initially), however the trade-off is perhaps you can need to search for a third party vendor to include the additional functionality you’ll need.
As well as the characteristics which are incorporated, most of them arenât as robust as individuals provided by the do-everything/personalize-everything Magento Enterprise. For instance, the amount of complexity readily available for product variations and discount rules is surprisingly shallow. They are issues Iâd have a much left within the dust once my company was ready for enterprise eCommerce.
Conclusion
I might are gone for good on the sour note, but donât allow that to dissuade you. I’ve a lot of respect for these two eCommerce platforms. They’re solidly towards the top of their game, as well as their thousands and thousands of loyal customers verify their quality.
We heartily recommend these two enterprise software programs. If you wish to really drill lower in to the information on each vendor (that we counsel you to complete prior to signing any dotted lines), we’ve thorough reviews of both Shopify Plus and Magento ECE.
Whichever enterprise software you select, we provide you our congratulations! Best of luck, and happy selling!
 
The publish Best Enterprise Software: Magento ECE and Shopify Plus made an appearance first on Merchant Maverick.
Shopify Plus and Magento ECE both cost themselves to fit your specific business, so naturally they’re detest to supply generic quotes. That which you pay with every vendor is decided (and negotiated) while you consult with a representative from each company. All we are able to say with certainty concerns the low finish from the prices spectra.
