Seize the Opportunity: Lending to E-commerce Companies
Feb 01,2018
Like brick-and-mortar businesses, e-commerce companies need capital for working capital and fixed asset purchases. To help meet their financing needs, they’ve historically turned to alternative online lenders. Nontraditional lenders may provide needed capital, but they also can saddle e-commerce companies with onerous terms and high interest rates.As the online distribution channel has matured and become more mainstream, traditional lenders have become more open to lending to e-commerce companies. Before adding these types of companies to your loan portfolio, it’s important to recognize how their business model differs and consider adjusting your underwriting process accordingly.Here are three ways you can vet loan applications from e-commerce companies.1. Learn about customer acquisitionOnline marketing expense consumes a significant portion of an e-commerce company’s budget. Ask for a detailed analysis of the company’s marketing efforts, including the total spent on each campaign and the effective acquisition cost of each customer in the previous 12 months.Focus...

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