Although the cost of starting a dropshipping business is fairly minimal, it’s not nonexistent. At a minimum, you’ll be paying for your ecommerce website, inventory, and some shipping and marketing costs.
There are a few different avenues you can take to finance a dropshipping business. They are as follows:
Business line of credit: You can think of a business line of credit as a mixture of a loan and a credit card, allowing you to draw against a pre-approved amount of financing, and only pay interest on what you borrow. This makes sense for dropshippers who only need to pay for expenses as they arise, like marketing campaigns.
Inventory financing: If you can’t afford the wholesale prices offered by dropshipping suppliers, inventory financing may make sense for you. With inventory financing, a lender provides the funds for a large portion of inventory, and the products purchased with those funds serve as collateral for the financing itself. As long as you make your scheduled payments on time and in full, the inventory is yours to do with as you see fit. Be careful though; if you fail to make a payment, your lender could repossess your inventory as repayment for the debt.
Business credit card: If you’re having a hard time securing a loan, try using a business credit card. If you can qualify for a 0% intro APR business credit card, you can spend for a predetermined period without paying interest. Once your introductory period ends, your APR will set in at a rate that will vary with the market Prime Rate, so be sure to see the issuer’s terms and conditions for the latest APR information.
Ecommerce grant: Grants are free money. However, to acquire a grant, you typically have to fill out a lengthy application and wait a significant period of time. If you’re looking for grant opportunities, two places we recommend checking are the U.S. Department of Commerce, and the U.S. Small Business Innovation Research program.
Note that if you are seeking a loan, online lenders are going to be your best bet. Dropshipping is a highly competitive industry, and banks tend to be risk-averse. Online lenders also offer faster funding, and more flexibility.