In 2022, almost 60% of small business owners used personal funds to cover gaps in their business’s cash flow. You can imagine the strain that puts on any business that’s trying to get off the ground. That’s why finding the right online boutique funding can make all the difference when starting an online boutique in 2023.
So in this blog post, we’ll discuss why business funding is so important. And we’ll look at the different types of funding available to aspiring and growing online boutique owners. Finally, we’ll share what to consider with each funding source so that you can make the best decision to move your business forward.
Ecommerce is booming. And it’s expected that 2022 will end with over $200B in sales for the fashion and apparel category alone. So there’s never been a better time to be in business. But it only works if you have the capital to actually stay in business.
As the new year gets closer and closer, keep reading to learn more about funding your online boutique in 2023 (and beyond).
Why Is It Important to Have Funding When Starting an Online Boutique?
If you’re asking how to start an online boutique with no money, well let’s make something absolutely clear: you can’t start and grow a business without money.
And the more money you have available, the better your chances are of being successful. That’s because you have operational expenses like purchasing inventory and digital marketing. So there’s never a day that you’re not spending money on your business. That’s why online boutique funding is so essential. Because you don’t have to rely solely on personal savings or money coming from a job.
Having more business funding available allows you to explore more opportunities. Maybe there’s an influencer you might want to work with. Or you have the chance to participate in a holiday gifting for an event that can increase visibility. And you might want to hire help or possibly have extra storage space for packing and shipping orders so you’re not operating out of your living room. All of that takes money. That’s exactly where business funding comes in.
Is It Easy To Get Funding For An Online Boutique?
It all depends on the qualification requirements of that particular funding source. You may find that some online lenders have less eligibility barriers but also less favorable terms. You have to weigh your options, whether it’s smaller amounts, high interest, or short payback windows. And then choose the one(s) that will help you most based on your business goals, even if you don’t get exactly what you’re looking for.
Some lenders might also consider things like your personal credit if you’re just starting out. Or they’d consider your business credit scores, how long you’ve been in business, or your annual revenue if you’re already an established business.
How Much Funding Will I Need For My Online Boutique?
As much as you can responsibly afford! You want to give yourself as many options as possible. Before you borrow anything, you should calculate how much the debt will cost. That should include the principal amount and any interest based on the terms you’re aware of. That (and the plan for how you’ll use the money) will give you a clearer picture of which opportunities to pursue.
Since you’re starting an online boutique, your startup costs won’t include overhead like space rentals, employees, or utilities. That means you’ll most likely just be paying for things like inventory, storage, supplies, and packaging. Then you’ll use the bulk for marketing expenses. The key is to create a profitable business as quickly as possible with the funding you have so that you can pay it back. When you do that according to the terms of the loan, you’ll improve your profile with your bank or lending source which will lead to more borrowing opportunities.
Now let’s discuss some of the funding options you have for your online boutique.
Taking Out A Bank Loan For Your Online Boutique
Traditional bank loan programs are the most common for new and growing businesses. You can usually sign up with the institution you already bank with. Banks offer a specific amount of money with monthly repayment terms that are disbursed in one lump sum into the account. The interest rates are variable and you may want to explore different banks in your area to see which offers the best terms.
Working with Online Lenders For Your Online Boutique
Online lenders may make it a bit easier to qualify for loans yet the terms can very likely be less favorable. Higher interest rates are common, even for lower amounts so be sure to read the fine print. But you can usually access the funds a lot quicker. Applications can take as little as a few minutes to file and receive approval. That’s why it’s so important to have a specific plan for what you’ll do with the loan.
Using a Small Business Line of Credit For Your Online Boutique
Another route could be using a small business line of credit. Unlike a traditional loan which disburses the funds upfront, the line of credit is a specific amount that you’re able to access as business expenses arise. It’s similar to a credit card where there is revolving credit: interest starts to accumulate once you draw funds, and the amount you pay (except for interest) will again be available for borrowing as you pay down the balance. A line of credit is usually unsecured, meaning that you don’t have to put up collateral (such as a property) in order to be able to access the funds.
Applying For An SBA Loan For Your Online Boutique
A government-backed loan from the U.S. Small Business Administration is an attractive option because they traditionally have the lowest interest rates. But qualifying for it can be a bit trickier. The application process is usually more complicated so be sure to review all the details to make sure you actually qualify before taking the time to apply.
Getting A Small Business Grant
Small business grants are programs are offered by various government agencies, non-profits, and larger companies to assist businesses that are struggling financially. These grant programs are attractive because the funds don’t have to be repaid. Each funding source will have specific qualifications so check websites like Grants.gov to learn more about available options and requirements. You can also check with your local chamber of commerce or city/state website to see if any grant opportunities are available in your immediate area.
Building Business Credit For Your Online Boutique
The key to more funding opportunities is to build your business credit profile. Once you have a legal business entity such as an LLC, you can get your DUNS numbers and start improving your credit profile, especially if you’re just getting started. Most new business owners may have trouble qualifying for loans or lines of credit without using their personal credit or collateral. So while building business credit might take a bit longer, you’ll be able to access more financing later on if you establish a great credit history.
All companies need money to launch and grow, especially online boutiques. Startup costs can’t be ignored, even though there are fewer considerations in eCommerce. The key is to have online boutique funding available to support your big goals and pay for the things that will help you run and eventually expand your business.
So make sure you’re aware of the opportunities and options available to you. And start your online boutique off on the right foot by securing funding as early as possible.