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Common Cash Challenges
Several online payment systems offer a withdrawal period of more than a week, such as Stripe, PayPal, and sites like Amazon, eBay, etc. This is the main challenge faced by many online sellers, as inflows, cash flows and outflows of goods do not occur on time. In other words, the receipt of payments for orders is usually late, which impacts your cash flow, namely inventory, management, logistics, and marketing or working capital costs. You should know that this challenge is not related to the sale itself because the sale is going as planned but to the online payment service.
Another common reason for cash flow problems is inventory difficulty. During strong sales seasons or during the sales growth phase. Many online sellers have cash flow problems restocking with their suppliers. Thus, this situation can slow down the momentum of their sales, or even cause them to lose loyal customers. Also, logistics and storage costs sometimes weigh on their cash flow. But in the case of storage costs, the good news is that you can opt for drop-shipping. In order to avoid any cost on the supply chain.
Solutions to cash flow problems
The lack of cash is solved by cash, the most classic solution is therefore to seek financing in order to seize opportunities for sales growth in time. There are several financing solutions, we present below the usual financing solutions.
Request for financing from financial institutions—Bank – Microcredits
Depending on your income, the reliability of your credit history, or the viability or profitability of your business, a loan may be granted to you by the bank or other financing institutes. This financing commits your responsibility to repay the capital borrowed and the interest on the sum borrowed according to the time limits. The documents needed to study the loan file often contain the same information. Here are the documents generally requested:
- tax returns Business and personal
- bank statements
- business plan
- financial records
- credit history
The allocation of a term loan to a company commits the manager of the owner, or even the borrower, the supporting documents of the company are not sufficient for the allocation of the loan. Information such as your personal credit score, debt ratio, and income are also taken into account. In addition, your social security number and your W2 tax form may be requested, as well as any other document necessary for the study of your file.
Advice on your loan application
So study the terms of your loan carefully, here are some tips:
- Avoid professional credit cards if possible, because, in the long term, the costs are very high. Thus, it is a question of managing your cash flow well, it is better to find alternatives with the maximum savings or a personal credit card to cover your cash flow problems.
- Prefer commercial credit, it gives you the possibility of making purchases and withdrawals up to a certain threshold. Interest is generally applied to your expenses and withdrawals, and you will have fewer complications in obtaining your loan.
Understand challenges and opportunities: Covid-19
Conclusion
The Covid-19 pandemic has presented both challenges and opportunities for e-commerce businesses. One significant challenge for e-commerce companies is the cashflow issues caused by the global economic downturn. Consumers are more cautious with their spending, and businesses are facing difficulties with inventory management, supply chain disruptions, and shipping delays. However, the pandemic has also presented opportunities for e-commerce businesses to adapt and pivot their operations to meet changing consumer demands. By offering contactless delivery options, online payments, and digital marketing strategies, e-commerce companies can continue to thrive despite the current economic climate.
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