The short answer
Retail and ecommerce finance is lending for shops, online stores, wholesalers and importers, and it's mostly about stock. Businesses have to pay suppliers weeks or months before the stock sells, especially ahead of Christmas, end-of-financial-year sales and other peaks. The usual tools are a business line of credit, which can be drawn for each buying cycle and repaid as stock sells, and short-term loans for a single large order. Online sellers can use their sales history to support an application, as daily settlements from payment platforms and marketplaces show trading in the bank statements much like card takings do for a shop. Importers often need funds to pay overseas suppliers before goods ship, which some lenders handle through trade finance. Wholesalers selling to other businesses on account can use invoice finance. Fit-outs and point-of-sale equipment can be financed separately. Lenders watch margins, stock turnover and returns. FundFox arranges business-purpose finance for retailers and online sellers across Australia.
What do retail businesses usually need finance for?
| Need | Common solution |
|---|---|
| Stock ahead of a peak season | Line of credit or short-term loan |
| Paying overseas suppliers before goods ship | Trade finance or a short-term facility |
| Wholesale customers paying on account | Invoice finance |
| Shop fit-out, shelving and point of sale | Equipment finance for movable items |
| Warehouse equipment and delivery vans | Equipment or van finance |
| Buying an existing store or online business | Business acquisition finance |
How should stock be financed?
Stock is the classic case for a revolving facility. A line of credit lets a retailer draw for each buying cycle and repay as the stock sells, paying interest only while the money is out. A single large order, such as a Christmas range, may suit a short-term loan timed to repay after the season. Avoid funding slow-moving stock with high-cost short-term loans, because the repayments can fall due before the goods sell.
How do lenders read ecommerce sales?
Online stores settle sales from payment gateways and marketplaces into the business account, often daily. Lenders read those settlements like a shop's card takings: average monthly sales, growth, seasonality, refunds and chargebacks. Some lenders also connect to the store or marketplace data directly. Strong margins and a low return rate help. Heavy reliance on paid advertising, or on one marketplace that could change its terms, is something lenders will ask about.
Importing and paying suppliers upfront
Many importers pay a deposit when they order and the balance before goods ship, then wait weeks for the stock to land and sell. Trade finance pays the overseas supplier and gives the importer time to repay after the goods arrive, and some lenders offer it alongside a line of credit. Remember that GST and duty are paid when goods are imported, which adds to the cash needed before any sales.
What do lenders look at for retailers?
- Sales history, including at least one peak season if possible.
- Gross margin and how quickly stock turns over.
- Returns and chargebacks, especially for online sellers.
- The lease for physical stores.
- Supplier terms and how much stock is already held.
Example scenario
An online homewares store turning over about $150,000 a month needs $120,000 for its Christmas range, payable to suppliers in August. The broker sets up a $150,000 line of credit with a non-bank lender, assessed on 18 months of platform settlements. The store draws for the order and repays from November and December sales, then keeps the facility open for the end-of-financial-year buy.
Example only. It isn't a real client.
