Why Banks Just Don’t Understand eCommerce Sellers




If you need financing, chances are you’ll go to your bank to apply for a loan. But when you get there, you’ll soon learn that you likely won’t get approved. Why? The bank loan process is not designed for ecommerce sellers and, at the end of the day, banks just don’t understand how you do business. As a result, you’re viewed as too risky — even if you have a fast growing business.

To help you better understand the bank loan process, here are the top five reasons you’re misunderstood by banks plus how you can get financing elsewhere.

  1. Long application process

The actual loan application process takes weeks, sometimes months. You’ll have to fill out a lot of paperwork and wait for your bank to manually review it. Not only that, your bank rep will likely want to see your business in person (which, as an online entity, might not amount to much).

Compare this lengthy and tedious process to how you do business. For example, if you wake up tomorrow to a sudden increase in sales, you’ll need cash fast to make a rush inventory order so you don’t stockout. Or what if your supplier announces a flash inventory sale? You’ll need funds available now to take advantage.

  1. Low approval rates for small businesses

In general, banks are set up to lend to large businesses that have actual storefronts or physical locations. And when we say large, they typically lend $1 million loans to $20 million businesses. This is largely because of their inefficient and time-consuming review process. When they look at what it takes to approve a loan, they stand to make more return on the $20 million business, not a small or online business that’s looking for a five- to six-figure loan. As a result, approval rates for small businesses are low.

  1. They don’t consider Amazon an asset

Sure, you might be making six figures a month with great margins on Amazon, but that doesn’t mean your bank will give you anything — not even $20,000. Even though you’re piggybacking off of Amazon’s immense reach and potential and are maximizing efficiencies with FBA, your bank loan will instead go to a large brick-and-mortar business.

  1. Business metrics are misunderstood

Banks supplement their manual review process by looking at both your personal and business credit scores. They rely heavily on this information — more so than on your actual business metrics — because your credit scores gives them an idea of how likely you are to make on-time payments. But as is the case with many small businesses, you may have sacrificed your personal credit to get your business off the ground and/or you may have minimal to no business credit at all. If you fall into either category but have a consistently healthy and growing business, you should still prepare yourself for a ‘no’.

  1. They assume too risky

As we mentioned previously, banks consider ecommerce businesses to be too risky. Part of this is because they simply don’t understand how your business works or what your business metrics say and part of this is because they just aren’t technologically-advanced enough to efficiently underwrite your application and make sense of it all.

A marketplace-minded financing option:

Fortunately, banks aren’t your only option for financing. You can finally stop leaving money on the table with Payability, a financing company designed specifically for ecommerce sellers. Their approvals are based on your sales performance and account health — in fact, there are no credit checks at all and you could be approve as soon as tomorrow. Not only that, they have solutions for all your financing needs:

Since 2016, Payability has helped more than 2,500 marketplace sellers grow their businesses 2.5x faster than their competitors. Hear how Gina Goldring grew her Amazon business by 50% in one month after her first Instant Advance, or see how Jump City Toys has been able to turn inventory more quickly thanks to Instant Access. Learn more at Payability here. You’ll receive a $250 sign on bonus and 1.75% Instant Access fee just for being referred by FBA Master.

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