Step-by-step Guide to Getting Funding for Your E-Commerce Business

Mitchell Tessier
Mitchell Tessier

This article is a chapter of our Ultimate Guide to E-Commerce Funding.

Number 1

Option 1: Pitch to VCs in 8 steps

Do your research

Raising capital is a big decision. Before starting the process, do comprehensive research into the pros and cons of raising capital. For most entrepreneurs, the raising process takes anywhere from 6 to 9 months.

Build a business plan

A strong business plan is required for pitching to VCs. Essentially, you want your business plan to persuade investors to provide you with the capital you need to achieve the goals you’ve set out. This means you need to be convincing, yet concise.

Your business plan should at least include the following sections:

Executive Summary

Company Analysis: information about your history, management team, and competitive advantage

Industry Analysis: outline industry trends that show opportunities for your company, and how you plan
to overcome any threats

Competitive Analysis: list the strengths and weaknesses of your direct and indirect competitors,
and determine what sets you apart

Customer Analysis: clearly define the demographics
of your target market

Marketing Plan: describe your products, promotions, price, and placement

Operational Plan: depending on your products or services, use this section to explain your supply chain, production workflow and processes, teams, and any associated costs

Financial Plan: include your revenue streams, projected statements, and how you intend to use your capital

Create a shortlist of potential investors

When pitching to a VC, you also want to make sure that their values are aligned with your goals. While it may feel like you have less bargaining power and just want access to capital, remember that you’re giving away ownership of a percentage of your company. 

Identify individuals or firms that have experience with companies in your industry and stage, and make sure there’s a personal fit. 

Create a pitch deck

Your pitch deck is your secret weapon. It should be able to stand alone without a presentation, and its purpose is to share your vision with potential investors. Similar to your business plan, your pitch deck should be compelling, convincing, and concise. 

There are many pitch deck templates available.
Look to these for inspiration, but make sure to tailor it to your audience and personalize it with your company’s personality. 

Create a shortlist of potential investors

When pitching to a VC, you also want to make sure that their values are aligned with your goals. While it may feel like you have less bargaining power and just want access to capital, remember that you’re giving away ownership of a percentage of your company. 

Identify individuals or firms that have experience with companies in your industry and stage, and make sure there’s a personal fit. 

Practice your pitch and do your due diligence

Be prepared. A VC pitch isn’t something you can - or should - figure out on the spot. Practice your pitch in front of your team, family members, or anyone else who can give you feedback. Test between different “hooks” to see what captures the most attention. Make sure you’re well-prepared for any questions that may arise.

Present

This is your chance to make a good impression and secure funding. Keep calm and don’t forget everything you’ve practiced. Arrive early and be respectful to everyone you meet. When presenting, remember to communicate clearly and be open to questions. 

Negotiate

If all goes well, you will receive a term sheet from the VC firm. Congratulations, this is already a huge achievement! A term sheet is a non-binding agreement that lists the terms and conditions of the investment. It usually includes the company valuation, investment amount, percentage of ownership, and other provisions. 

Depending on the VC, there may or may not be room to negotiate, so a good rule of thumb is to practice the rule of 3: focus on the three most important issues. These issues can include the valuation of your company, your board of directors, the exclusivity period for other investors, etc. 

When reviewing a term sheet, have a trusted advisor or experienced lawyer with you to make sure you don’t miss any important information. 

Sign a deal

If all goes well with the negotiations and with due diligence, you and your investors will sign the final contract. It may take weeks or months before you move from the term sheet to final contract stage.

Number 2

Option 2: Get a business loan in 6 steps

Crunch your numbers

Before starting the loan application process, determine what your goal is and exactly how much money you’ll need to achieve it. When applying, you want to make sure you’re not asking for too much or too little. 

Choose the right type of loan

There are  many loan options available and you have to do your research to determine what financing will best suit your business needs. A few of these options include:

Traditional bank loan: these usually have the lowest interest rates but often have the highest credit criteria.

Small Business Administration Loan: this loan process has lower rates and typically favourable terms but the loan process can take weeks or even months.

Line of Credit: similar to a credit card, businesses can use LOCs to borrow from a pool of money and make payments based on what they use. However, these often have high compounded interest rates.

Check your qualifications and credit scores

Bankers and other lenders will evaluate your loan application based on the 5 Cs of lending: character, capacity, capital, conditions, and collateral. This includes a variety of factors including, but not limited to:

  • Personal credit score
  • Business credit history
  • Cash flow
  • Debt to income ratio
  • Length of time in business
  • Industry
  • Bank loyalty

Collect your documents

Different lenders will require different documents. Your bank and financial statements are the most important as they display how much you’re earning and how you’re spending your money. You’ll also likely need other documents including tax returns, proof of business registration, personal identification card, and your personal financial information. 

Shop around for the best terms

Each financial institution will offer business loans with varying terms. To make sure you’re getting the best deal for your business, look at the fine print.

The interest rate is not the only factor you should take into consideration. Consider the loan terms, size, collateral, and repayment flexibility. 

Apply for the loan

Once you meet all the requirements and can provide the proper documentation, you must meet with your banker to complete your loan application. Afterwards, it may take weeks or months to get approved.

Number 3

Option 3: Secure revenue-share capital in just 3 steps

Apply online and connect your accounts

Unlike traditional loans or venture capital, we don’t take equity, interest, or a personal guarantee. With Clearco, all you need to do is connect your relevant accounts to our online application, and our system will generate unique funding offers for your business within 24 hours. 

Speak to an Investment Analyst

Our sales team can answer any questions you may have about your funding offers, and they can help you decide which is the best for your current position. Your designated Investment Analyst will also show you our partners and welcome you to our founders community. 

Receive funding in a week or less

Once you qualify and accept an offer from Clearco, we can provide you with the growth capital you need to scale your business in just a few days. Plus, as your business expands, we can offer you more capital via topups.

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