The flexibility of a business line of credit—which allows you to draw against a pre-approved amount of funding and only pay interest on the funds borrowed—makes it a good option for many companies, including drop shippers. Inventory financing may also be something to consider.
What is Dropshipping?
It’s an order fulfilment method where stores don’t keep the products they sell in stock. When they receive customer orders, they purchase the required items from third-party suppliers that ship them to the customers. The seller never even handles the product.
Dropshipping Benefits/Disadvantages
There are a number of reasons dropshipping is a great business model for aspiring entrepreneurs, including these:
- Less capital is needed
- It’s easy to get started
- Overhead is low
- You can set up just about anywhere
- A wide selection of products is available to sell
- It’s easier to test and scale
Of course, there are also a variety of disadvantages of dropshipping, including these:
- Margins are low
- You may have inventory issues
- Shipping complexities can occur
- Supplier errors are possible
- There is limited opportunity for customization and branding
Financing Types
Despite your best intentions, you may find yourself needing financing support for your dropshipping venture. Two attractive options are business lines of credit and inventory financing.
Business lines of credit make sense for dropshippers who only need to pay for expenses as they arise, like marketing campaigns. Inventory financing makes sense for those who cannot afford the wholesale prices offered by drop shipping suppliers; a lender provides the funds for a large portion of inventory, and the products purchased with those funds serve as collateral for the financing itself.
Finding a Lender
As you might expect, most traditional lenders may not be interested in lending money to a dropshipping company without a track record of success and/or if you don’t have the best credit history. That’s where an alternative lender like Clear Skies Capital comes into the picture. We’ve worked with many business owners who are just starting out as well as those who have less than stellar credit, providing business lines of credit and inventory financing that makes sense for both of us. Because we’re alternative lenders, we enter into every relationship with a mindset to say “yes,” something that differentiates us from traditional lenders like banks.
The Takeaway
The accessibility of dropshipping makes it an attractive business venture for many, but every business needs to have a healthy cash flow to succeed over the long term. If you find yourself needing funds and have been unsuccessful in getting them through traditional means, we may be able to help, even if you have less than perfect credit. Contact us—you’re under no obligation—so we can discuss different ways to get you the custom financing solution that best suits your business’ needs.
Want to discuss a business line of credit or inventory financing with experts who’ve helped countless owners over the years? Contact Clear Skies Capital at 1-800-230-9822 or visit us online to learn more.