Recent years have brought no shortage of challenges for businesses, but it’s also created opportunity. E-commerce has been growing in the face of risings costs, digital threats, supply chain delays and increasing competition. The U.S. boasts almost half of the world’s e-commerce sites and generated more than $1,118 billion in 2023 alone.
From covering seasonal slowdowns to scaling for growth, one of the most crucial elements to success for e-commerce companies is being able to access capital when you need it. Robust financial support is needed to stay nimble and fuel expansion. It is for this reason that a quality banking relationship is key in driving e-commerce success.
Asset-based lending (ABL), for example, is a traditional way for e-commerce businesses to secure the financing they need to grow. However, many financial organizations aren’t comfortable lending against assets held in other countries. A strong banking partner with industry relationships and resources can work to create customized solutions and overcome such challenges.
The Benefits of Strong Banking Partnerships
Like many businesses, securing the capital you need when you need it is vital for success in e-commerce. A strong relationship with your banker will help ensure financial stability. Discussing your goals and keeping your banker informed of changes in your business will allow them to support you with expertise and products to keep you on track, whether you need to access reliable credit lines or ensure smooth cash flow management.
Support from a strong banking partner goes beyond delivering a product and should include thoughtful and strategic financial solutions. A deep understanding of your industry and market positions your banker to tap their own networks of experts and secure introductions and key insights to create a path for overcoming the challenges you may experience.
The Challenge: International Asset-Based Lending
E-commerce companies traditionally require asset-based lending at some point, as it allows them to secure financing by using key business assets, such as product inventory or equipment, as collateral. It will provide e-commerce businesses with access to working capital by leveraging existing assets, which can be useful for managing cash flow or funding growth.
For e-commerce companies who have opted to house assets internationally however, there can be some challenges. While favorable tax duty law treatments make setting up and maintaining inventory in countries outside the U.S. attractive, many lenders aren’t comfortable lending against assets held in other countries.
The Solution: A Relationship-Focused Approach
For a relationship-focused banker, overcoming a challenge flexes both their creativity and expertise. It requires looking beyond a simple product and reaching across departments to understand and identify the partners and knowledge base needed to find a solution. The more engrained a banker is in the business history and goals, the more wholistic their solution will be.
E-commerce Success Story
I recently worked with two e-commerce brands who were going through a merger where one was financially stable and the other was just coming out of bankruptcy. They were seeking more traditional bank financing for working capital, but they were also planning for future growth. It was clear they’d need a partner who would be willing to lend against the inventory assets they held abroad.
We began by leveraging a network of strong experts with key proven success regarding international assets. My team worked with experienced legal professionals who helped perfect the bank’s security interest in the foreign country. We started conversations and got to know the third-party logistics company the client was working with. In addition, we opted to work with an inventory appraisal company to further validate the foreign assets.
At Valley, we focus on having a strong circle of influence that you can tap and use for their stability and deep knowledge base. There were a lot of nuances with the assets abroad, but once we had the right legal and evaluation partners, we saw a clear path forward.
The other key to success for this situation was the consultative approach we took. We tapped our Treasury Solutions team early to evaluate efficiency opportunities. They worked seamlessly with the two companies to help optimize the account structure for each to make them more efficient overall. The result for the e-commerce companies was the capital they required to build on their success, as well as optimizations that eased processes both now and into the future.
As the e-commerce market across the globe continues to grow, those businesses best poised for lasting success will depend largely on their relationships, particularly with their banking partner. Don’t wait for future challenges to evaluate if you have the right partner who will keep you nimble and put their own relationships to work for your business.
Contact a Valley Bank team member today to discuss your plans and future aims. From lines of credit to asset-based lending, we have the banking tools you need paired with the expertise to customize effective solutions for your biggest plans. Let’s build your success together.
~ Phillip McCaulay is a Senior Vice President, Senior Relationship Manager at Valley Bank based in their Chicago, IL offices. He applies his 20 years of experience to support middle market to large corporate businesses across industries, including Metals and Industrials, Food and Beverage and E-commerce.
*This article is made available for informational and educational purposes only. Any views, thoughts, and opinions expressed herein are solely those of the writer and do not necessarily reflect the views, opinions, policies, or positions of Valley National Bank.