Revenue-based finance
The lender advances cash and takes a fixed share of sales until an agreed total is repaid. It suits businesses with steady sales and marketing that reliably pays back. Compare offers by the total repayment against the amount advanced and by how quickly you expect to repay, because a fast repayment can mean a high effective cost.
Inventory and trade finance
These fund stock purchases, often by paying suppliers directly and being repaid when goods sell. Watch for fees charged per period, security over stock and what happens if items sell slower than planned.
Equity
Equity investors take a share of the business and expect a large return, usually through a sale. For brands, valuation reflects contribution margin, repeat purchase and brand strength rather than revenue alone. Check the terms carefully: liquidation preferences can matter greatly in a modest exit, which is common in consumer brands.
Terms that catch founders out
Before signing any ecommerce funding, check for:
- Personal guarantees on loans or finance facilities.
- Covenants requiring minimum sales or cash balances.
- Security that stops you raising other finance.
- Rights over your marketplace or payment-provider payouts.
When selling beats raising
For some profitable brands, selling all or part of the business to an operator is a better route than raising. Our Sell Your Business page explains how KJ Enterprises approaches acquisitions.
Ecommerce funding costs compared
| Option | You give up | Watch out for |
|---|---|---|
| Revenue-based finance | Share of sales until repaid | High effective cost if repaid fast |
| Inventory finance | Fees and security over stock | Slow-moving stock |
| Bank loan | Interest, often guarantees | Personal guarantees, covenants |
| Equity | Ownership | Liquidation preferences in modest exits |
Questions to prepare before you pitch
- What is the total repayment against the amount advanced?
- Is a personal guarantee required?
- What security is taken, and does it block other finance?
- Are there sales or cash covenants, and what happens if we miss one?
How KJ Enterprises evaluates ecommerce businesses
KJ Enterprises, through Brands Lab, has operated ecommerce brands and considers both growth investment and acquisitions. We look for clean unit economics and funding matched to each need.
If that describes your company, you can apply for investment. Related reading: the complete funding guide and the step-by-step how-to and marketplace costs and terms.