E-commerce owners can have a strong sales month and still feel squeezed for cash. Inventory goes out, replacement stock has to be ordered and advertising keeps running. Meanwhile, an existing funding agreement may be taking a share of each day's sales.
We have spoken with owners using processor-linked funding, including Shopify-related arrangements, who were surprised by how much was collected during their busiest season.
Understand what happens when sales rise
If collections are based on a percentage of sales, higher sales can mean more money collected toward the balance. That may help repay the obligation sooner. It also means less cash from those sales stays available for inventory and operations.
The question is whether that arrangement fits your business during the period when you most need to reinvest.
Look at your own agreement. Collection percentages, timing and other requirements vary. We do not want to make a funding decision based on a number that applies to someone else's store.
Compare the seasonal cash flow
A structure with scheduled payments may make budgeting easier for some businesses. But those payments can also become difficult during a slow period. Neither approach should be evaluated using only your strongest month.
We want to compare what stays in the account after inventory, fulfillment, marketing and funding payments. We also want to know what happens after the holiday rush ends.
Watch the video
Retail & E-Commerce Funding: Why Sales-Based Payments Can Hurt During Peak Season
Let’s talk about your business
If your sales are growing but available cash is not, bring your current agreement and your seasonal plan to Tree of Life Funding. Start at treeoflifefunding.com/apply. We can look at the cash flow behind the sales.