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Many assume that an online store is easier to launch than a brick-and-mortar one. However, that can be far from the truth. Our previous write-up on growing a Profitable Online Store details how finding product opportunities is a struggle in the online landscape as well. After the grueling process of finding product ideas, you’ll have to source a competitive supplier. You also have to craft your brand and marketing strategies in order to cut through all the digital noise.

All of these will require capital of varying amounts before you can even get started. Luckily, there are various ways you can finance your online store. Unsure where to begin? Here’s our starter’s guide below.

Term loan

This financing option is available from traditional lenders and online financing companies. Here, your online store gets a specific amount of money with a specified repayment schedule based on a fixed or floating rate.

Your creditworthiness and what is available through the lender will determine the term length. A Forbes article on loan terms recommends choosing the shortest-term loan with monthly payments you can afford. That’s because the amount of interest you pay increases over time. This slippery slope is what eventually took down global retailer Toys ‘R’ Us in 2018. The company accumulated $400 million in interest payments on debt every year and failed to negotiate with a key group of creditors holding a portion of its $1 billion term loan.

Personal loans

These loans can be used for a variety of purposes, including renovating your home, planning a wedding, and of course — financing your online store. While a term loan or a small business loan can equally serve this purpose, many starting entrepreneurs opt for a personal loan because some business loans require business-related documents like tax returns or a business plan to be approved.

Once your personal loan is approved, you can start calculating for the monthly payment according to the interest rate. A Sound Dollar guide to applying for a personal loan explains that rates can range from the single digits to as high as 36% among popular lenders, which is far higher than what you can expect with a credit card. You may get off with a lower interest rate if you already have a high credit score, but regardless, it’s best to do some shopping around before settling with a lender.

Line of credit

While a personal loan provides a single lump sum of money with a fixed monthly payment, a line of credit provides ongoing access to funds. Finance writer Jamie Johnson explains that a business line of credit is ideal for online stores that are looking for flexible financing options. This means that you only pay interest on what you spend.

However, take note that a line of credit is more costly than taking out a small business loan, and you could get stuck with withdrawal and maintenance fees or a high APR. This is why they tend to have a stringent qualification process that may require your online store to put down collateral.

Asset-based lending

An asset-based loan is secured by an asset such as property, plant and equipment, inventory, accounts receivable or marketable securities. Investopedia stresses that lenders typically favor liquid collateral that can be easily turned into cash, and will thereafter use a loan-to-value ratio to determine how much to give your online store. While this may be more flexible than traditional commercial loans, the downside of this type of arrangement includes high financing costs.

When you have secured the funds, you can begin the easy process of launching your online store with getUstore. Here, you can create your shop from hundreds of premium and well-researched industry-specific features in only 3 simple steps and 5 minutes. This ensures that the bulk of your hard-earned financing can be invested toward the success of your products and services.