Ecommerce business loans

If you run an online company, applying for an ecommerce business loan could help you to expand more easily.

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2020 was a huge year for new ecommerce business registrations, according to a report from Your Ecommerce Accountant. While many high street businesses were forced to close during the pandemic, more people shifted to online shopping. As a result, 35,589 new ecommerce businesses registered throughout 2020, up 43% from the previous year.

However, this increase means that competition among online businesses is now higher than ever. So if you want your business to stand out, it might be time to invest in it. This guide looks at how to borrow funds through an ecommerce business loan.

What is an ecommerce loan?

An ecommerce loan is simply a business loan that can help your online business grow. You can use the funds to help maintain everyday cash flow requirements, or you can use them to make improvements to your business, whether to buy new products, invest in advertising, hire more staff or create a better online user experience.

An ecommerce loan works in a similar way to any other business loan. You borrow a fixed amount of money and repay it in monthly instalments over a set term, with interest added on top.

Repayment periods depend on your loan type and provider, but typically they can be anywhere between 3 months and 5 years. There are often no charges if you repay your loan early, and the amount you can borrow will typically be between £5,000 and £500,000.

How to apply

Before you apply for an ecommerce business loan, you’ll need to check you’re eligible. Usually, this means your business needs to be registered in the UK and have been trading for between 6 and 12 months. There is usually a minimum monthly turnover requirement, and you, as the business owner, need to be over the age of 18. A good history of credit can also increase your chances of acceptance.

Applications can be made online, and you’ll need to fill in details about your business, plus personal details about yourself and how much you wish to borrow. In most cases, you’ll receive a call back from the provider to discuss your application further, including how much you’ll be able to borrow and the terms of the agreement.

Different types of funding for ecommerce businesses

The 3 main types of funding for ecommerce business are secured loans, unsecured loans and merchant cash advances.

Secured loans

Secured loans require you to use an asset as collateral. Often, this will be the company itself, but you can also use personal assets such as your home. Because the loan provider has the right to use these assets to get its money back if you can’t make your loan repayments, you can usually borrow a larger sum of money with a secured loan, and interest rates tend to be lower.

Unsecured loans

By contrast, an unsecured loan does not require you to use an asset as collateral. For this reason, they are less risky and can be a great way of securing a quick cash injection. However, due to the lender’s lack of security, the lender may take a greater interest in your trading history or ask for a personal guarantee. This is usually a written commitment from the company director (and possibly other stakeholders) to personally pay off the loan if the business defaults on its repayments.

Unsecured loans can be quicker to obtain, but the amount you can borrow will be smaller compared to a secured loan.

Merchant cash advance

A merchant cash advance is designed for smaller businesses that accept debit and credit card payments from customers. It enables businesses to borrow a lump sum and then repay it as a percentage of their customers’ card payments using a card terminal. The amount borrowed is repaid with fees, but repayments fluctuate in line with your income, so you’ll pay more in months when business is booming and less when you’re not as busy.

Ecommerce funding options

Some other ecommerce funding options you could consider for your business are outlined below:


A business grant is an amount of money that’s awarded to a business, usually by the government or other companies, to help it grow. Business grants do not need to be repaid. There are hundreds of grants in the UK targeted towards different business requirements, including grants for small and startup businesses.


Equity crowdfunding can help you raise funds for your business from several investors. You’ll need to list your business on an online platform where investors and members of the public can buy shares in your company. The Financial Conduct Authority (FCA) regulates all equity crowdfunding platforms.

Angel investors

Angel investors, or business angels, are high-net-worth private individuals who are happy to invest their own funds into a small business in return for a minority stake – typically between 10% and 25%. Angel investors can also offer mentoring and support.

Should you get a business credit card?

A business credit card provides companies with a line of credit up to a set limit. This usually depends on your company’s turnover and whether you and/or your business have a good credit history.

Business credit cards can be used to make purchases and help your business manage cash flow. They also bring with them a range of other benefits. They can allow you to keep your business and personal expenses separate, assign different cards to employees, track your finances and earn rewards. Some business credit cards even offer 0% purchase periods, enabling you to spread the cost of an item, such as a piece of equipment, over a number of months without paying interest.

Using a business credit card sensibly can also help your company build up a credit history. Just keep in mind that if your business is new, you may struggle to get accepted for the most competitive interest rates. A business credit card also won’t be the best option if you need to borrow a larger sum of money, as you won’t be able to borrow as much as you could with a business loan, for example.

Bottom line

For online businesses looking to expand, ecommerce business loans could offer a valuable solution to cover essential expenses such as marketing, enabling both competitiveness and growth of a business. Ecommerce loans have various funding and repayment options, which tailor to your business’ specific needs.

An ecommerce business loan won’t require you to give up equity in your company like other types of loans. However, you may need to use personal assets as collateral. Borrowing money is a big committment, so it’s always best to do some research before making any decisions.

Frequently asked questions

  1. Your Ecommerce Accountant, 2020

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