How to Use FinTech to Grow Your eCommerce Business
February 17, 2020
This post was written by Payability for the ParagonERP blog. It is not intended to be financial advice. This post is only meant to introduce different products and options. We recommend you always do your research before making any financial decision for your business.
Over the last 10+ years, technology has completely changed traditional finance and banking, making it easier and more efficient for business owners like you to get the services you need to grow your businesses. The resulting industry (known simply as financial technology or FinTech) aims to leverage technology to simplify and democratize various financial services.
For business owners — and especially ecommerce sellers — this means better options for financing, business banking, global currency exchange, and more. Not only are these options better than what you’d find through traditional financial services, they’ll actually help you save more time and money in the long run — all in all allowing you to grow your business faster.
So where to begin? Let’s take a look at some of the top FinTech solutions and how they can help your business.
If you’ve ever tried to get a business loan or line of credit from a bank, you know that the process is long and tedious. You may have to compile seemingly endless paperwork, meet with lenders in person, put up collateral, get a credit pull, even have a bank rep come to your place of business for a site visit. It can take weeks, sometimes months. And, in many cases, that time is wasted because their stiff qualifications and low approval rates usually translate to a rejection for small and online business owners.
This just doesn’t make sense for ecommerce sellers, who might work from their homes, keep their inventory spread out across various warehouses, have spotty cash flow because of marketplace payment delays they can’t control, and get limited-time investment opportunities at the last minute (like a supplier’s flash sale on inventory, for example).
Thanks to online financing, however, ecommerce sellers like you have options that are tailored to your unique business needs. In general, here are some benefits you can expect from an online financing provider:
Easy application process: Rather than compiling a ton of paperwork (like tax documents, business plans, financial statements, and more), online lenders offer simple online applications that often only take a few minutes to complete.
Higher approval rates: Online lenders are able to leverage technology and data to create a more accurate picture of a business’s health and creditworthiness. That, paired with more business-friendly qualifications, means they can approve more businesses than a traditional lender.
Fast funding: You could get a decision and, if approved, receive funding in as fast as one business day.
Soft or no credit pull: Some online business lenders only do soft credit pulls, which don’t affect your credit score, while others like Payability don’t pull your credit at all. Instead, decisions are based on the actual health of your business. There are many reasons why this is a good thing for business. On one hand, many business owners sacrifice their personal credit to get their businesses up and running, so even if you have a successful business, you might have a low personal credit score. On the other hand, if you happen to be in the process of buying new property or a new vehicle, you don’t want to jeopardize that financing process by dinging your credit in any way.
They work alongside existing debt: If you happen to already have a bank term loan, for example, you can still get an online financing solution at the same time. For example, if you’ve used the funds from your term loan to bulk up on inventory for your busy season, but still need to stock up on the shipping materials so you can fulfill the orders, then you might benefit from an online financing solution that will get you the funds you need quickly.
Pro Tip: When considering an alternative financing solution, look for options that are designed specifically for ecommerce sellers. After all, their processes, products and services are tailor-made for how you do business — like Payability, for example. A financing company for marketplace sellers, Payability offers a variety of financing solutions for your specific needs. Want to boost cash flow by actually getting paid daily on your sales? Looking for a large lump sum of cash to invest in a large inventory purchase or other growth opportunity? Need to access your payouts on-the-go or on weekends and holidays? Payability has your back.
As we mentioned earlier, banking is another part of the financing landscape that has been disrupted by technology. To be more specific, online banks have been emerging to allow individuals and businesses to hold their money in checking and savings accounts that offer high yields and low-to-no fees. What’s more, many do not have minimum deposit requirements. Online banks can offer better banking terms like these because they don’t have physical branches or other complicated (read: expensive) infrastructure of a traditional bank.
If you have a traditional business bank account, are paying unnecessary fees, and tend to worry about meeting your deposit minimums (which, let’s be honest, could be a regular occurrence due to marketplace payment delays), then you might want to look into online banking as an alternative. Especially if you stand to make more money in interest than you currently do.
Global Currency Exchange
When you run an ecommerce business, you likely have to pay suppliers and/or freelancers overseas. If you’re using a bank or other traditional method, you’re also paying money transfer and currency exchange fees.
For example, banks and traditional payment processors charge large fees — sometimes as high as 3%. This means that, if you send $100,000 to a supplier in China, you’ll be charged $3,000 just for the transfer. And then there’s the exchange rate.
In many cases, traditional services will try to hide their fees in the exchange rate. Needless to say, you should always do a comparison of your provider’s exchange rate to what the market rate actually is. Moreover, exchange rates can change without warning and, if it moves against you, your budget can take a hit.
Fortunately, technology is changing the currency exchange industry, making it easier and less expensive to pay overseas vendors and convert payments to your business into your home currency.
With online currency conversion, you can set up a more efficient money transfer process that saves you time and money. Here’s how:
No hidden fees: The exchange rate you’re quoted won’t have any hidden fees baked in.
Fixed exchange rate: Get ahead of the volatile currency market by securing an exchange rate for a fixed period.
Set up foreign operations to save money: Some online currency conversion providers will help you get set up with a local bank account to send/receive payments to local vendors in that area’s currency.
As you can see, FinTech is changing the game for business. Of course, financing, banking, and currency exchange aren’t the only financial industries that are benefiting from technology. You can find tech-based solutions for payment processing (including mobile pay and cryptocurrency), accounting, ecommerce platforms (i.e. to expand your business outside of a marketplace like Amazon or Walmart), and more.
When all is said and done, you should make informed decisions for your business and its unique financial needs — whether it’s opting for a traditional loan or fintech cash flow solution like Payability; moving your banking, money transfer and currency exchange needs online; or streamlining other financial aspects of your business. However you choose to leverage FinTech, you’ll be making your business more efficient and better set up for growth.
About the author
Victoria Sullivan is a Marketing Manager at Payability. She has over eight years of social media, copywriting and marketing experience. Prior to joining the Payability team, Victoria developed social media content and strategies for top technology brands such as Skype and Samsung. She holds a degree in Advertising from Syracuse University’s S.I. Newhouse School of Public Communications. She can often be found in a yoga class or working on her fashion blog.