E-commerce business loans: Compare rates & terms

Where can you get business loans for an e-commerce business?

There are two types of lenders that offer e-commerce business loans:

Traditional lenders

Traditional lenders like banks and credit unions are often the top choice for any kind of business loan. These institutions typically offer competitive interest rates and longer repayment terms but require stronger credit profiles and business history.

Canadian banks also provide access to government-backed programs like the Canada Small Business Financing Program (CSBFP). To qualify and receive up to $1.15 million, your business must:

• Operate or plan to operate in Canada
• Be for profit
• Have a gross annual revenue of $10 million or less
• Not be engaged in farming

Alternative lenders

Alternative lenders include online lenders, peer-to-peer platforms and fintech companies. They provide faster access to capital and less strict eligibility requirements but at higher interest rates for this convenience.

Types of e-commerce financing

Here are some of the e-commerce business loans you can consider:

• Term business loans. Get a lump sum loan with fixed repayments over a set period that you can use to cover one-time expenses like new equipment or more inventory.
• Lines of credit. Gain flexible access to funds up to a credit limit and only pay interest on the amount you use. This is ideal for covering ongoing expenses, inventory management or keeping things running during the off season.
• Microloans. Get a small ecommerce business loan that funds small projects that don’t need much capital. These are typically offered by nonprofits or community lenders.
• Peer-to-peer business loans. Get funding from investors interested in your business through peer-to-peer marketplaces.
• Business cash advances. Also known as merchant cash advances, these provide ecommerce financing based on your sales for a set fee or a percentage of your sales. But watch out: these can cost far more than your typical business loan.
• Equipment financing. If you need to purchase equipment for your e-commerce business, such as a computer or label printer, equipment financing may be a good option for you. The equipment serves as collateral, which can make it easier to qualify.

What do you need to apply?

The documents you’ll need to apply for ecommerce business loans vary depending on the lender and the exact loan you’re applying for, but you’ll likely need to provide:

• Your business’s financial records, including monthly revenue and expenses.
• A business plan that details your strategy for growth.
• Your personal information, including your contact details and identification.
• Your business licence and registration documents.

In some cases, you might need to provide your personal credit score.

Can you get an e-commerce business loan with bad credit?

Yes, but it may be challenging. Traditional lenders typically require a credit score of 660 or higher, so you’ll have to consider alternative lenders if your score falls below this threshold. Preparing a detailed business plan can help improve your chances of approval—just expect lower loan amounts, higher interest rates, collateral requirements or shorter terms.

Tips for getting e-commerce business loans

• Consider other options first. If you’re just starting out, avoid high interest rates and predatory fees by looking at other types of e-commerce business loans. Before going to a third-party lender, consider borrowing money from a friend or family member or making a personal investment.
• Have a killer business plan. Not only will a great business plan help you get the most competitive e-commerce financing rates, but it will help you plan for risks, organize your goals and devise a logical strategy. Planning will give you a greater shot at longevity.
• Know your cash flow. Finding the right e-commerce business loan can be difficult if you don’t know how you’re going to pay it off. Go over the numbers and take note of any patterns in your profits.
• Boost your credit score. Taking steps to improve your credit score can help you get a better deal on rates and fees. To do this, you can pay down debts, make payments on time and keep credit card balances low.
• Apply for grants. If you’re eligible for grants, like the Canada Digital Adoption Program (CDAP), apply for them before taking out a loan.

Tips for running a successful e-commerce business

• Use multiple social media platforms. Don’t just rely on reaching your customers through Facebook. Each platform comes with its own strengths and weaknesses, and using more than one could help you reach different audiences, increase brand visibility and drive engagement.
• Be mobile-friendly. Shopping on a computer is becoming a thing of the past. Not only should your site be responsive, but your content should fit mobile reading, too.
• Simplify, simplify, simplify. The last thing you want is for frustrated customers to give up while trying to buy your products or services. Make it as easy as possible for them to spend money on your site.
• Reward loyalty. Developing a loyalty program is a tried-and-true way of getting customers to come back.
• Use high-quality product images and descriptions. Clear, professional photos and detailed, honest descriptions can help customers make confident purchasing decisions and lower negative reviews.

Other e-commerce financing options

Loans are a common way to finance e-commerce businesses, but they aren’t your only option. Here are some alternatives:

• Investors. Get funding in exchange for ownership of a percentage of your business from venture capitalists, angel investors or investment corporations.
• Crowdfunding. Set up a page on a crowdfunding platform to collect donations from your social circle and your business’s fans.
• Friends or family. You probably won’t have to pay interest or fees when borrowing money from a wealthy acquaintance or relative—but you risk serious social consequences if you can’t pay them back.
• Personal loans. Consider taking out a personal loan to fund a thriving business that doesn’t meet the age or revenue requirements for an e-commerce business loan.

Example: How much e-commerce financing costs

Marco has been working at a large publishing house in British Columbia for the past 25 years, but wants to find something small scale he can do on his own. Marco comes across an online bookstore for sale and thinks it might be just what he’s looking for. He then arranges to buy the business for $20,000.00, and applies for e-commerce financing from an online lender. Thanks to his great credit history, he’s approved.

Below is a summary of Marco’s financing and related costs to purchase the online bookstore:

*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the lender, the borrower’s financial situation and other factors.

Bottom line

Finding the right loan for your online business could make or break it. You could find that you’re eligible for e-commerce business loans you might not have considered. If you’d like to explore even more types of ecommerce financing options, you can compare a full range of business loans in our detailed guide. Be sure to read the fine print of any loan agreement before signing on the dotted line to make sure you understand the rates and fees.

Frequently asked questions

• Will I have to put up collateral for my ecommerce loan?

  You might, depending on the type of e-commerce business loan you take out. For example, equipment and auto loans can require borrowers to put their purchases up as collateral. This means you could lose the item you put up for collateral if you fail to make your loan repayments.

  If your business finances are strong, look into an unsecured business loan, which doesn’t require collateral. Keep in mind that interest rates are usually higher with unsecured loans because the lender is taking on more risk without collateral.

• What happens if I can't repay my loan?

  If you can no longer make payments on your loan, call your loan provider as soon as possible. You might be able to work out an adjusted repayment plan. You can also consult a licensed insolvency trustee to explore alternatives like a consumer proposal or, in more severe cases, bankruptcy. If no agreement is reached and you default, your assets can be seized, and your credit score will be damaged.

• Can I get ecommerce financing when my business is struggling?

  You can, but it’s not usually a good idea. Aside from running into trouble qualifying for an e-commerce business loan, if you can’t make your repayments on time, you’ll pay additional fees—and potentially dig your business into a hole of debt.

• Can I get a business loan without revenue?

  Not typically, since most lenders will want your business to meet a minimum revenue requirement before approving a loan. That said, some lenders have minimum requirements as low as $5,000 per month in revenue. If you’re worried about your e-commerce business’s revenue preventing you from getting a loan, it may be worth applying through a business loan search platform, like Loans Canada, which can offer you a selection of loans you qualify for based on your unique financial situation.

To make sure you get accurate and helpful information, this guide has been edited by Leanne Escobal as part of our fact-checking process.

Written by

Anna Serio

Editor

Anna Serio was a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY. See full bio

Anna's expertise

Anna has written 57 Finder guides across topics including:

• Personal, business, student and car loans
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Co-written by

Rebecca Low

Writer

Rebecca Low is a writer for Finder. She has contributed to a range of digital publications, including income.ca, Indeed, and Expatden, writing on topics like personal finance, career development, and travel. See full bio