The traditional unsecured business loan doesn’t suit many online businesses. Fortunately, the market has responded with a raft of alternative lending solutions.

In the digital world, customers call the shots: if they cannot get what they want when they want it, they will go elsewhere.

This is true of business customers as well and a new generation of products and services for businesses has grown up around disruptor banks and agile, innovative products led by the needs of the market.

As an example, an online shop may specialise in highly seasonal products or need to respond to unexpected surges of demand. For such a business, a traditional unsecured business loan is not fit for purpose: it may take too long to draw down and the rigid repayment structure may not be convenient for the borrower.

Products such as eCommerce financing are an answer to these needs. This is an equity-free capital investment giving online businesses fast access to capital. Rather than pay back at an interest rate, the borrower repays a percentage of revenue until the fixed price of the investment is paid back. When the business is not making as much money, repayments are lower; when times are good, the repayment window shortens.

In other words, the more a business earns, the faster it repays the money.

The other advantages of this approach are that the investment is not technically a loan, so it will not affect a business’s credit score, there is no personal guarantee required and the receiving business does not have to give up equity.

Businesses that would benefit from eCommerce financing would be those which receive payments for services via an app or website, such as Direct-to-Consumer (D2C) online retail, Software as a Service (SaaS) businesses, subscription businesses, and online marketplaces.