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How to Get a Business Loan to Start an Online Store

Posted September 16, 2019 by EasyFinance.com to Finance 1 0

Thinking about opening your own online store? Here's everything you need to know about getting a retail loan to start your own eCommerce business.


The internet has revolutionized how we do many things, including how we shop and do business. Today, the retail e-commerce industry in the United State is growing steadily, with annual sales expected to cross $735 billion by 2023.

As an entrepreneur, there couldn’t be a better time to start an online business. The market is there and ready.

But market availability isn't the only thing you need. You must offer a unique product or service and you also need adequate startup capital.

In this article, our focus is on the money. How do you raise it? Taking out a retail loan is a good idea.

Continue reading to learn how to secure a business loan to fund your online business.

Understand How the Small Business Lending Industry Works

The first step to securing a business loan is to gain a good understanding of the current state of the small business lending industry. Gone are the days when lenders were ready to make loans to small business entrepreneurs.

Before the Financial Crisis of 2008, it’s wasn’t as hard as it’s now to get a small business loan. After the crisis, however, most banks are playing hardball with small business borrowers. In fact, in 2018 big banks only approved 26.9 percent of small business loans.

It isn’t all gloom, though. Small banks, institutional lenders, and alternative lenders are making loans to small businesses at much higher rates.

When you have a good grasp of the state of the lending industry, you’re in a stronger position to make informed borrowing decisions before you apply. From these stats, for instance, you can tell that you stand a better chance of getting approved if you approach a small bank or alternative lender.

Draw a Detailed Business Plan

You want a business loan, right?

Your potential lenders will want to evaluate the performance of your business when reviewing your loan application. But there’s a problem. You have no business yet. As such, you can’t provide income statements to back up your application.

This is where a business plan comes in.

This document fleshes out details about the ownership and structure of your upcoming online store. Here are more details to include in your plan:

  • Products and services 

  • Market analysis (size of the target market and competition)

  • Capital requirements

  • Income projections

  • Sales and marketing strategy.

With this information, the lender will be able to determine whether the money you’re looking to borrow is consistent with your capital requirements, for example. From your income projections, they can estimate whether the business will be bringing in enough money to service the loan.

In short, your business plan will play a central role in the lender’s decision-making. The more detailed it is, the higher your chances of getting approved.

If you have never written a business plan before or you lack the expertise, it’s best to hire a professional business plan writer or small business consultant to do the job. It will cost you some money, sure, but it’s the smart thing to do.

Prepare Business Registration Documents 

To apply for a small retail loan, you must own an existing business.

If you haven’t registered your online store, be sure to do so before submitting your application. Don’t assume that you don’t need to register your business because it’ll be web-based.

After registering the business in your state, you’ll get a registration certificate.

Also, if your upcoming business will need special licenses or permits to operate, obtain them. For example, if you plan to sell cookies and cakes online, you’ll typically need to get a food service license.

No lender is going to approve your loan application unless they’re satisfied that your online store is registered and licensed.

Polish Up Your Personal Credit History

You’re probably asking, “I’m applying for a business loan. Why does anyone need my personal credit history?”

Well, good question!

You see, you’ve got no actual business yet. As such, your newly-registered entity has no business credit score.

Lenders will want to examine the financial responsibility of the person behind the business. Your personal credit history helps them ensure they aren’t lending money to a businessperson with a bad financial record.

So before you make your small business loan application, have a look at your credit history. If it’s good, proceed to the next step. If you have a bad score – perhaps a couple of loans in collections or overdue credit card balances – sort them out first.

Make a List of Potential Lenders

You already know big banks are out of your league, but this doesn’t mean every small bank or institutional lender will be willing to lend you money.

This is why you need to do some market research and make a list of potential lenders. You ideal lender is a company that has a strong reputation for making loans to startups, especially startups in this industry.

With the list, narrow down to 2-3 lenders. Avoid the temptation of submitting your application to several lenders.

To this end, you are ready to apply for the loan. Give your documents one more review and ensure the information on them is accurate and up to date. Fill out the forms keenly, because an entry error can delay approval time or result in rejection.

You Can Secure a Retail Loan for Your eCommerce Startup

Getting approved for a retail loan might seem like a tall challenge, but it’s doable.

As long as you identify the right lender and prepare a solid application, you have a good chance of getting the money you need to fund your online store.

Good luck and keep reading our blog for more insights.

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