What Online Retailers Should Have in Place Before Seeking a Second Loan

In the article What Online Retailers Need to Know Before Seeking a Loan, I detailed what e-commerce merchants need to have achieved or understood before seeking funding. Now, let’s discuss what needs to be in place before seeking a second loan.

Running an e-commerce business is like navigating a ship: you need the right conditions to keep moving forward. Taking additional capital (a second funding or more) can be the wind in your sails, helping you grow, expand your inventory, or sharpen your marketing strategy.

However, providers like Onramp aren’t looking for just any business to loan capital to. Funding partners are looking for ones that are healthy, ambitious and smart about how they use capital. Before seeking your next round of funding, here’s what you should have in place.

1. Show progress on your first loan.

Demonstrate significant progress in repaying your initial loan. Ideally, you’ve paid down at least 50 percent of it using your business’s revenue — not through shortcuts or last-minute fixes. Revenue-based financing providers will need to validate that your business performance is meeting expectations. While paying the loan off early is always an option, it’s not just about speed. Lenders want to see that you’ve used those funds effectively, kept your sales steady or growing, and that your deployment of funds is driving business results. That’s the kind of track record that builds confidence and shows you’re ready for more funding.

2. Be cautious about taking on more debt.

Don’t overdo it with loans. If you’re still working through your first one, adding more debt from other sources can put a strain on your cash flow, and it might make lenders hesitate when considering additional funding. Many businesses struggle with cash flow, and overleveraging your business by taking on too much financing or debt is one reason for those cash flow challenges. Lenders will review your overall financial and capital situation, and a cluttered picture can be a tough sell.

3. Keep lenders in the loop on payments.

Let’s be honest — financial challenges happen. Cash may get tight and payments could be delayed. That’s OK, but don’t keep lenders in the dark. If you see an issue coming, give your funding partner a heads-up before it turns into a problem. Lenders aren't here to point fingers. We’re here to work with you and find solutions that keep your business on track. Keep in mind, though, too many missed steps or big ups and downs in cash flow can raise questions when lenders are reviewing your next request.

4. Prove you’re growing, not just surviving.

Your sales tell a story about your business. If they’ve taken a dip since your first loan, it might hint at challenges like supply issues or marketing that didn’t land. Most lenders won’t fund fixes for past missteps. Funding partners want to see positive momentum. Show that the first loan helped boost your revenue or profit margins, not just kept things afloat. Be sure to bring your funding partner clear data that indicates your business is growing. If things didn’t go as planned, take a moment to sort it out before asking for more.

5. Have a clear plan, not just a wish list.

Ongoing loans, financings or funding events are important tools for growth. You’ll need a well-defined strategy for how you’ll use them. Did your first loan help you stock up and save on costs? Perfect. Let your lender know how this next round will build on that success, whether it’s exploring a new market or ramping up winning ad campaigns. Lenders are looking for thoughtful planning, not just a desire for extra cash. Good funding partners understand that supply chain hiccups and tariffs can throw a wrench in the works. However, with a solid plan in hand, lenders will likely still back you, even when the road gets a little bumpy.

Final Thoughts

Lenders want to support e-commerce businesses that think ahead and scale smart. Ongoing capital access can boost your business to new heights. By showing steady progress on your first loan, managing debt wisely, staying communicative, proving growth, and having a clear plan, you set yourself up as a strong candidate for more funding.

Eric S. Youngstrom is founder and CEO of Austin-based Onramp Funds, an innovative funding provider that supports the growth of e-commerce businesses.