Scaling your eCommerce business during a recession

Earlier this year, we shared an article titled “How to be Recession Ready for eCommerce businesses.” The article included three reasons why we thought a recession was just around the corner, i.e., May and June.

Now that we are in July, we would like to reflect on the economic downturn and what to expect in quarter three of 2022. Increasing Inflation Rates & Oil Prices, Supply Chain financing Disruptions, and survival of the financial markets were factors. It allowed me to identify the quick downturn that happened over May and June. As we start the third quarter of the year, many wonder if the downturn is over or is this just the beginning?


The downturn in the market over the past two months was very noticeable. Where most eCommerce businesses had a significant fall in their sales compared to the same period last year. However, I firmly believe that what we just saw was the tip of the iceberg, and the more challenging days are yet to come. But before such days, economies will go through a 3-4 month “bull trap” season. A bull trap is a false signal in the market that makes people believe that the recession is over. And that the market has started to revive, allowing people to spend more on consumer goods.


As consumers spend more during bull trap seasons, it is generally a reasonable period for eCommerce sales. Preparing for the next “prolonged recession” season that may last up to 15 months is vital for businesses to survive during the bull trap season.


In this article, we will discuss the different forms of funding that eCommerce businesses can get hold of during the winter and the pros & cons of each.


What is eCommerce financing?

Ecommerce supply chain financing provides online retailers with the money they need to start or scale up their business. Several different funding sources will be discussed in this article. The best source of funding heavily depends on the business model, the amount of money required, the stage of the business, and the repayment plans.  


How does funding for eCommerce businesses work?

 The type of funding model the business goes for determines if there’s repayment, interest, and equity lost. Some methods, such as revenue-based Supply Chain financing, ask businesses to pay back the funds over time. While others, such as equity investors, may require you to give up shares in your company.  

These are the six most popular funding options for eCommerce businesses which will be discussed in the article:


  • Revenue-based funding
  • Merchant cash advance
  • Bank loan
  • Equity financing
  • Grants
  • Invoice factoring

The funding options available to eCommerce businesses

 1. Revenue-based funding



Revenue-based funding allows companies to borrow between £10,000 and £5,000,000 in as little as 24 hours. Each month, your lender collects a proportion of your turnover (from 5% to 25%) until you repay the loan in full. The cost of these business loans is between 6% and 12%. So if you borrow $100,000, you will repay a maximum of $112,000 after a month. 

Revenue Based Financing

2. Merchant cash advance

 Merchant Cash Advance providers give clients up to 6 months of turnover from credit and debit cards up to £500,000. Businesses are then expected to pay the provider back 15% of their daily credit/debit card turnover.

Merchant Cash Advances

3. Bank loans

 The bank is the first place businesses usually think of when thinking of loans. Banks generally approve loans for companies that have been trading for at least one year and might require a business plan. Although it is not common for banks to offer loans for scale-up. An increasing number of banks have been doing so lately. £25,000 is the borrowing level where this process is considered to be easy. Beyond this number, the process may become more complicated.

Pros & Cons of Bank Loans

4. Equity investors

 Equity is the most common type of funding for big eCommerce businesses. The amount that can be raised is variable and depends on your company’s size and valuation. It can be as little as £10,000 to hundreds of millions. It works because investors inject money into the company in return for equity. Although you might have less control over the business. Equity investors give you access to their network, allowing you to accelerate your business. In times of recession, equity funding might not be the best option as there is little confidence in the market, so investors are not willing to invest. If they are, they would be looking for higher equity than in a healthy market.

Pros & Cons of Equity Investors

5. Grants

 Government-backed grants seem like a solid bet, but there aren’t many available for businesses. Innovate UK, along with other grants, has a series of grants which range from as little as £10,000 to a hundred thousand pounds. Some grants would require firms to have a specific percentage as spare cash to apply. More recently, grants have been focused on innovative and sustainable technologies rather than eCommerce. Therefore, grants are not a viable option for eCommerce businesses.

Pros & Cons of Grants

6. Invoice factoring

 Invoice factoring is an act where you send an invoice to third-party platforms. They release up to 90% of the invoice to your bank or supplier’s bank within 24 hours. After the agreed days have passed, the third-party platform would unlock the remaining amount minus any fees. The good thing about invoice factoring is that the more you work with the same party, the higher the credit limit becomes.

Pros & Cons of Invoice Factoring

Which eCommerce business funding solution is right for you?

Now that we have covered the top six funding options for eCommerce. It is crucial to decide which of the above (combination) works best for your business. Think about the amount needed to survive through the recession, how it will be spent, and the duration required to repay the funds.

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