Ecommerce Know-How: Alternative Financing

The United States and much of the western world is in the midst of a recession that has made business credit difficult to find. More than 1 million Americans lost their jobs in the third quarter of 2008, according to U.S. Bureau of Labor Statistics data released May 19, 2009. And perhaps 1 million more have lost employment since.

During recessions a significant portion of the unemployed start new businesses—a trend that I believe ultimately makes the U.S. economy stronger. But this recession has been different, perhaps, because of a distinct lack of credit funding (remember it was a lack of market liquidity that pulled our economy downward), many would-be-entrepreneurs or even established businesses seeking to expand are finding that they do not meet new and very stringent qualification criteria at their local bank.

In this edition of “eCommerce Know-How,” I am going to identify two sources of alternative funding for starting or growing your ecommerce business. Both of these sources provide loans to businesses and entrepreneurs that might not otherwise qualify.

Patriot Express Loans for Military Veterans

Created under the Bush Administration, the Small Business Administration’s (SBA) Patriot Express loan program offers many U.S. veterans and their spouses the opportunity to get guaranteed, low-interest loans for starting or improving a business—like on online retailing operation.

“With military activations and extensions having a profound impact on entrepreneurs in the military community, SBA is committed to helping America’s service men and women during the continuing War on Terror,” said Steven Preston, who was the SBA Administrator when the program was announced. “We believe that Patriot Express, supported by SBA’s other services, goes directly to the needs of these American patriots who wish to start businesses, and in the process encourages job creation and growth, an essential part of the President’s [Bush] economic agenda.”

Veterans will still have to work with a bank, but thanks to the SBA guaranteeing up to 85 percent of the loan, it will be far easier to qualify.

To be eligible for the Patriot Express loan program, a person must meet one of the following:

  • U.S. military veteran
  • Service-disabled veteran
  • Active-duty and eligible for the Transition Assistance Program
  • Reservist or member of the National Guard
  • Current spouse of a qualified veteran
  • Widowed spouse of a service member that died during service or as the result of service

Consider that veterans own approximately 14 percent of all businesses in the United States, according to the SBA, and it is easy to see the value in this loan program.

Accion For Micro-Businesses

Accion USA is a private and nonprofit organization that has been helping low-to-moderate income business people get funding when they cannot qualify for traditional bank loans. The organization is part of Accion International a poverty-fighting group that is perhaps best known for the funding of businesses in Africa, South America, and other relatively poor regions.

Accion International was founded in 1961 and first started lending in Brazil. Its simple mission was to give “people the financial tools they need―microenterprise loans, business training and other financial services―to work their way out of poverty.”

Since 1991, Accion has been offering loans in the United States to middle income business people, and is playing a role in helping to overcome the current economic woes by actively offering loans. Accion offers loans from $500 to $50,000. Ecommerce businesses can use these funds to buy inventory, boost marketing, improve their websites, etc.

Terms for the loans are up to 60 months depending on the loan value, and will cost a 3-to-5 percent closing fee and about 8-to-15 percent in annual interest. Once the loan application is compete Accion responds in 10 days or less. And remember the standard for qualification is lower than what banks require.

To qualify for an Accion USA loan, a business owner must be:

  • 18 years of age or older
  • No recent bankruptcies (in the past 12 months)
  • Generally up to date on all bills (no more than $3,000 in past due debt)
  • Some stable source of income

Starting or Growing an eCommerce Business

Some 99.9 percent of all businesses in American are classified as small. But small does not mean that it is not profitable or successful. Ecommerce businesses have some of the lowest barriers to entry of any enterprise and small loans can go a long way toward a successful venture.

In this edition of “Ecommerce Know-How,” I’ve identified two sources of alternative loan funding to start or grow an ecommerce business. Both also offer help with business plan development and other management and financial challenges associated with starting or managing your business.

Armando Roggio
Armando Roggio
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