Modern Retail

How to get funding for your dropshipping start-up

Funding for drop shipping

Want to start a dropshipping business? We don’t blame you. It’s a proven, lucrative business model. Typically, drop shipping businesses have low operational costs and offer a great deal of flexibility to the founder. If you want a custom ecommerce website, it isn’t cheap to get up and running though – you’re going to need cash (and lots of it) to get off the ground. You’re also going to have to be fully committed.

A quick Google about drop shipping start-up costs reveals loads of people claiming you can get started for a few hundred pounds. Unfortunately, the actual start-up cost of a drop shipping business is more than what you can withdraw from a cash machine, because as with pretty much all businesses, you need cash in the bank to operate.

Start-up costs for dropshipping

The biggest perk of drop shipping is you don’t have to front the cost of the products you’re selling. But, that’s not to say getting started is without cost.

You can easily spend over £20k starting a drop shipping business (cash is eaten up as you start going custom). You can also easily spend less than £1k if you choose to get started with Shopify (the ecommerce platform) and Oberlo (the online merchant).

Which avenue are you going down? Starting on the cheap is a perfectly reasonable way to do it. You could start up with less than £1k, truth be told. But, when you factor in how you’re going to get customers (SEO, PPC, social media, affiliate marketing) you’re going to want to add a pretty sum to your initial start-up figure.

How to get funding for drop shipping

Dropshipping is a proven business model, however it’s also one with a high failure rate. Inexperience is the cause of most failures. With this in mind, many lenders aren’t interested in funding newbies. The risk is just too high to back everyone.

As a newbie to the industry, securing a loan from a reputable lender requires a sound business plan. The lender wants to know how informed you are. They’ll want to see your drop shipping process, how you intend to fulfil orders, and your own research into market viability. Above all else, they’ll want proof that your drop shipping business is profitable and how you intend to ensure a state of positive cash flow.

Basically, a lender wants reassurance they’ll be repaid. If you can offer that, there’s no reason why your drop shipping start-up won’t be funded.

Who should I approach for funding?

If you’re opting for a new business loan, you have two choices:

Banks: High-quality products with high interest rates to match. Low approval rates for drop shipping businesses.

Independent lenders: High-quality products with drop shipping rates. High approval rates for viable dropshipping businesses.

Nationwide Corporate Finance has experience funding drop shipping start-ups. If you’re looking to secure funding, contact us or apply online.