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Line of Credit Too Low? Here’s What to Do

A line of credit can be a game changer for scaling your ecommerce store. But what do you do when your funding provider doesn't give you enough capital? Let's find out.

E-commerce is big business. 

In fact, UK online sales hit £141 billion in 2020, accounting for more than 30% of total retail sales a first for the British economy. This upward trend is set to continue worldwide, with global e-commerce purchases tipped to make up 95% of all sales by 2040. 🔥

But capturing this growth can be tricky. You need cash flow to keep the inventory and sales flowing, but strict supplier agreements and slow marketplace payouts can make it feel impossible to keep up.

Luckily, the right line of credit can be a great way to inject cash back into your business so you can keep scaling to new heights — but there’s a catch. 

Some providers make it difficult to secure a credit line or worse, don’t give you enough funding because they just don’t ‘get’ ecommerce.

It’s a frustrating catch-22. But we’re here to help. In this guide, we’ll share the ins and outs of credit lines for e-commerce businesses, and give you the blueprint for navigating a small credit line so you can keep growing, no matter what. 

The Scoop on a (High Enough) Line of Credit

  • What is a Line of Credit?
  • Why Finding the Right Credit Line Is a Big Deal in E-commerce
  • How to Get a Business Line of Credit: The Requirements   
  • What to Do When Your Line of Credit Comes Up Short 
  • The Right Way to Overcome a Small Line of Credit 

Need additional funding to keep your business moving forwards? Find out how SellersFi can help.

What Is a Line of Credit? 

A line of credit is a flexible funding option you can secure from banks, credit lenders, and, more recently, dedicated e-commerce funding providers.

Here’s how it usually works: 

  • You’re assigned a pool of cash that you can withdraw from as many times as you like, and you only pay interest on the amount used. 
  • You can use a line of credit calculator to work out how much capital you’ll need and the estimated repayment amount and length.
  • Many modern funding providers don’t restrict what you can use the credit line for. For example, you can take on a credit line to:
  • Refinance existing debt
  • Buy stock and supplies
  • Launch a new product or campaign
  • Purchase real estate
  • Fund territorial expansion

Are cash flow problems holding you back? Discover how SellersFi can help you get ahead. 

Why Finding the Right Credit Line Is a Big Deal in E-commerce

No matter which way you cut it, e-commerce is capital-intensive. Pressure to stay on top of your current operating expenses, while making sure you have enough inventory to meet future demand is difficult on the best of days.

A fair and flexible credit line can give your store the financial breathing room to take on new projects while maintaining your existing momentum. 

For example, say you sell baby clothing in the UK. Once you have a credit line, you could also branch out into baby bottles while also opening a store in the US, without cutting back on the expenses you need to keep running your already successful UK store.

How to Get a Business Line of Credit: The Requirements  

While each funding provider will have specific criteria you need to meet for a business line of credit, there are some standard requirements you can plan for. 

The idea is to prove to the potential funding partner that your business is healthy, with a low-risk profile.

Here are a few common conditions you’ll need to meet:

  1. Good credit, character, and business

When it comes to business, you need to show you’re the good guy — and that means proving great credit ratings, great character, and sufficient revenue. For example, at SellersFi we don’t go into full detective mode on your personal life — but we do check whether your sales are on a steady upward trajectory.  

Here are some of the criteria we look at when deciding if (and how much of) a credit line can be issued: 

  • Monthly turnover. At SellersFi, we look for at least $20,000 per month in revenue (for either your marketplace store or website) to help ensure that you can comfortably make repayments while continuing to operate.
  • Proof your business has been running for a minimum of 6 months.
  • Your business or your credit history. (Unlike most traditional banks and lenders, we do a soft credit check which won’t affect your credit rating.)
  • Your store’s debt history to make sure your company’s in good standing.
  1. Business registration and operational documents 

Love it or hate it, getting your business documentation in order is one step you can’t afford to miss if you want to secure the right amount with your credit line.

Aside from having administrative paperwork on things like company registration, directorships, and tax returns, it’s also important to collect:

  • Calculations showing your e-commerce store has a high ROI, net operating income, and Debt Service Coverage Ratio (DSCR).
  • Documents that demonstrate your store consistently turns a profit.
  • Reports demonstrating high sales volume and low returns.
  • Statements proving you have sufficient liquidity to repay a loan with interest fees.
  • Records proving you’ve been operating for at least 12 months.
  1. A personal guarantee 

Unlike traditional banks, many modern e-commerce funding providers won’t expect you to cough up a lump sum for collateral — but that doesn’t always mean it’s easy to get the line of credit you need.

Today, it’s becoming increasingly common for funding providers to request directors to sign a personal guarantee. 

At SellersFi, we won’t stress you out by requesting collateral on a working capital line of credit. Instead, we only ask for a personal guarantee from the owner or shareholders of the company.

It’s an approach that weeds out applications still on the fence about funding, speeding up the processing time for candidates who are 100% ready and waiting.

What to Do When Your Line of Credit Comes Up Short

In the new and fast-changing world of e-commerce, it’s not always easy to secure a robust line of credit so when you beat the odds, it’s a win worth celebrating. 🎉

But if you score a low credit limit? You can quickly be pulled down from that high.

Luckily, there’s a way around small credit lines. Let’s take a look at the steps you need to overcome the funding gap.

Decide what you need to spend now and what can wait

Before you consider upping your credit line, take a step back and assess whether you can do without additional funding. If you can, it will help you avoid taking out more funding than you need. 

Work this out by listing the essential tasks you need funding for and adding up the costs.

Next, see if you can drum up the missing cash with sales rather than heading straight for more funding. Creativity can pay huge dividends and could be just what you need to fill any cash shortfall, so don’t be afraid to color outside the lines. (Just look at Airbnb’s founders who sold cereal during the Obama and McCain presidential campaigns to raise capital. Yes, it really happened.)

Here’s how to drum up more capital without upping your credit line:

  • Sell slow-moving stock at wholesale or heavily discounted prices.
  • Push items using the presale method.
  • Run flash sales and competitive promos.
  • Create a product line with high-margin items.
  • Launch new products or promotional campaigns to make up for the shortfall.

If your must-have costs exceed your line of credit and you can’t cover the shortfall with existing cash flow or new projects, then move on to increasing your credit line.

Speak with your funding provider

When you get a low credit line, it can be tempting to cancel out of frustration. But resist the urge — reactive moves can harm your credit and affect your chances of getting a higher limit elsewhere. 

Instead, follow these steps: 

  • Ask your provider why they gave you a smaller line of credit and what you need to do to get it increased. 
  • During your conversation, stress the positive reasons you need the capital instead of delving into money troubles. For example, you could highlight that your business is growing and you’d like to support it to thrive. 
  • Be honest, but show off your business’ good points too. 

Clean up your business finances before reapplying

Your funding provider wants to know they made the right choice by investing in your business, so how much capital they’ll offer is often decided by your creditworthiness. 

Here are some ways to increase your standing before you reapply:

  • Pay down debts
  • Stay up-to-date on existing payments
  • Establish a cash reserve
  • Show increasing revenue numbers
  • Demonstrate steady growth

Look for a dedicated e-commerce funding provider 

The truth is, many traditional providers are yet to catch up to the changing game of e-commerce. 

So, if your existing funding partner refuses to budge, don’t sweat it. Take it as a sign to look elsewhere. As an ambitious seller, you should always have a modern e-commerce funding provider on your side — someone who actually understands e-commerce.

Your new provider should be a trusted partner you can count on in the highs and lows, like needing more capital suddenly due to a trending item or during an aggressive new growth strategy. 

Case in point, when men’s beard care brand Viking Revolution needed additional capital to back its fast-moving product launch while also covering Q4 demand, they turned to SellersFi’s flexible working capital. As a result, Viking Revolution launched up to 10 products each month, invested in a subscription box model, and scaled its team. 

Here’s what Viking Revolution’s Co-founder and CEO, Victor Mendoza had to say about it:

“Having enough funding through SellersFi to launch 10 products before Christmas was instrumental for us because it allowed us to get enough inventory in, pay suppliers on a schedule, and then continue to buy the product as sales ramped up.” 

Here are some key traits to look for from an e-commerce funding provider:

  • Quick application process
  • Flexible funding options with sufficient limits
  • Ability to apply for additional capital
  • No lump-sum demands
  • Achievable requirements

The Right Way to Overcome a Small Line of Credit 

It’s not fun to get a small credit line when you’ve patiently gone through the application process and had your sights set on more cash. 

But a credit line that doesn’t meet your expectations doesn’t have to be the end of your funding journey. 

In fact, a smaller line of credit can be a blessing in disguise, saving your business money and nudging it into new income streams. 

If you find yourself stuck with a small funding pot, don’t lose hope. Take steps now to improve your store’s revenue and credit profile. Not only will you scale affordably, but you’ll also do it with more funding options within reach.

Is your credit line too small? Discover how SellersFi can help.


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