Guest Post from our friends at Brex
Black Friday is less than 75 days away, and if last year’s record-breaking selling frenzy is any indication of what’s to come, November 2019 is shaping up to be another huge month for online sales. If we’ve learned anything from serving ecommerce merchants over the last decade, it’s that it’s never too early to start preparing. In fact, according to the National Retail Federation, 40% of holiday shoppers begin buying before Halloween.
In less than three months, you’ll need to finalize: 1) the seasonal product lines and offers you’d like to promote, 2) the advertising campaigns you’ll need to run, 3) the inventory you’ll need to purchase, and 4) all of the website / mobile operating improvements you’ll need to make to ensure you’re ready for peak traffic and order volume. Not only will this be a massive time commitment, but it will also cost a lot of money. Even if the returns on these investments are compelling, you probably don’t have the cash on hand to fund all of this spend on your own.
Over the last several years, a number of tech companies have emerged to address this specific problem. While each new market entrant carries its own benefits and tradeoffs, almost all of them beat the traditional financing alternatives, which can take weeks to access, require personal guarantees / collateral, and carry very high interest rates.
Many merchants naturally have turned to the online selling platforms like Amazon and Shopify, who have their own short term financing programs. The great thing about these programs is that they’re easy to access, fast to fund, and they offer flexible payment terms for merchants. However, what many merchants miss is that these short term loans can carry interest rates in the 30-90% range on an annualized basis. They also underwrite exclusively based on one platform’s selling volume, so loan sizes can be limited.
Some merchants are catching on to the costs of these programs and have flocked to cheaper alternatives like Clearbanc. Clearbanc offers up to $10M lines of credit without requiring any collateral or personal guarantee. While Clearbanc has been a great tool for many merchants, their credit still comes at the cost of double-digit interest rates and Clearbanc capital can only be used to fund marketing spend.
Many of our customers have been happy with Brex’s new ecommerce product. Brex offers interest-free 60 day float on lines of credit ranging from 50-100% of a merchant’s monthly sales. While the 60 day float might limit what you can use the capital for, in our experience, Brex is offering the highest limits and the most spend flexibility on the market. Brex is also completely free to use, and like Clearbank, Brex can provide rapid funding without requiring a personal guarantee. Given our customers’ success with Brex, we’ve worked with their team to offer our newsletter readers a $1,000 signup bonus and waived card fees for life (which you can access here).
Regardless of which financing tool you decide to use, our experience has shown that if the returns are compelling, don’t let cash flow constraints prevent you from investing ahead of the holiday season.