9 Ways to Find Financing for a New Product Line Development

AMZ Seller Financing   •   June 17, 2019

Financing a New Product Line

An inventory of quality products that customers want to buy is the lifeline of any e-commerce business. However, studies indicate that continuously offering new products can help you meet your buyers’ needs and expectations. A study by Salesforce indicated that 63% of modern buyers expect companies to release new products more frequently than ever before.

The simplest way to observe that in real life is by visiting any online and physical clothing retail store. If years ago there were only two fashion seasons – Spring/Summer and Fall/Winter, now it’s closer to 13, 20 or even 52 micro-seasons. While in part, this is dictated by companies, this trend is shaping the expectations of buyers. Consumers always crave new products, and companies do not hesitate to provide them.

While you may not be able to provide new products every week, adding a new product line to your inventory can satisfy your buyers’ need for novelty, set you apart from your competition, as well as increase your bottom line.

But what if a lack of financing is preventing you from doing so? Would you let that stop you?

Bank loans are the standard yet not the only option for you. Let’s take a look at a few different financing options that you can consider in order to release a new product line.

9 Financing Options for New Product Line Development

1. Friends and Family

If you own a relatively new e-commerce store, securing lending from financing institutions can be a challenge. If lenders aren’t 100% convinced that your new product line will actually sell, they may be hesitant to invest in you.

Your friends and family, however, know you and what they can expect from you. Therefore, they may be more willing to help you finance your new product line idea.

Nonetheless, keep in mind that doing business with people who are close to you comes with certain risks. You can permanently damage relationships if you do not approach it wisely.

Therefore, treat friends and family like any other investors. Present them with a business plan and discuss contingencies. What actions will you take and how will you repay if things don’t go as planned? It does not mean that your new product line idea is bound to fail. But it can give your friends and family a greater sense of security and potentially prevent conflicts from happening.

2. Peer-to-Peer Investing

Peer-to-peer investing is securing financing from individuals. This is typically done through lending sites and allows you to obtain both personal and business loans. In some instances, these can be more advantageous than bank loans as they can come with lower interest rates and require less paperwork.

3. Pre-Sale

If you are a more established business with a steady customer base, consider pre-sale as an option. You may be able to pre-sell a product before you have produced it.

To successfully do so, consider providing a discount that could motivate your customers to buy a product that isn’t yet in stock. Providing 3D rendered design images or prototypes can be a good option for some types of products to get a feel of what your buyers will be getting.

Once you secure enough funding, you can eventually manufacture enough products to sell at a full price as well.

4. Crowdfunding

Nowadays, there are numerous crowdfunding platforms that connect designers, creators, entrepreneurs, and similar with individuals willing to provide donation-like funding. Crowdfunding platforms usually allow providing incentives such as discounts, limited edition products, and similar.

Keep in mind that crowdfunding isn’t a guaranteed success. People won’t simply donate because you have posted a pitch.

You need to craft a quality pitch to attract investors. Therefore, if you are not a wordsmith yourself, consider hiring a marketing professional to develop your pitch. It’ may be a necessary investment that can lead to long-term success.

5. Online Lending

Banks are no longer the only type of institutions providing loans to business owners. There is a number of online lenders who offer online seller financing with more favorable conditions than banks. These can include no credit check, fast processing time, no hidden fees, fixed repayment rates, and more.

6. Subscription Sales

If you offer products that cannot be reused and need to be replenished regularly, such as cosmetics, office products, or household items, consider a subscription model. This means that your buyers send automated payments to you in exchange for regular shipments of products that they need.

A good idea is providing a discount or some other perk for subscription sales. So, your customers would be saving money or getting another benefit for committing to repeatedly purchase from you. Thus, subscription payments can provide you with enough financing to produce products just in time for shipping.

7. Credit Card Financing

Credit cards can be costly and involve certain risks such as damaging your credit score if not managed properly. Yet, they are still a viable option when it comes to financing a new product line.

Be sure to check out different credit card companies and, most importantly, read the small print to avoid unpleasant surprises. There are plenty of credit card companies that have hidden costs or disadvantageous conditions that are not visible right away.

8. Purchase Order Financing

Purchase order financing or purchase order lending is another financing option for e-commerce sellers who have low cash-flow. In purchase order financing, the lender does not send funds to you. Instead, it advances the money to your supplier.

The supplier will then distribute the goods to your customers, and your customers will pay the supplier. Finally, the supplier will their fees and transfer you the remaining profits.

9. Dropshipping

While not a financing method, dropshipping can enable you to offer new products with minimal investment on your part. With dropshipping, you can list products on your store and have the distributor take care of shipping once the products are purchased.

Keep in mind, though, that you should carefully select vendors and products. There are plenty of products that come from low-quality vendors. In addition to that, many dropshipping distributors are located in Asia and can take up to a month or more to ship the products.

Therefore, if you consider dropshipping, it’s a good idea to buy a sample product to test the quality as well as the buying experience.

Regardless of which option you choose, be sure to take a not make a rash decision. Weigh the pros and cons of each option as well as brainstorm the potential risks and how you would handle them. This will help you to choose the most optimal solution and prepare for any potential issues.

Feel free to check out the other articles on our blog as well as download our FREE e-book on how you can fund your e-commerce business. Follow us on FacebookTwitter, and LinkedIn, and subscribe to our mailing list to get the latest news and offers!