Ecommerce & retail
Size the capital to the inventory cycle, not the maximum offer.
This is the one vertical where revenue-based capital is frequently the correct instrument. Which is exactly why the sizing mistake here is so expensive.
The real problem
Cash converts slower than the dashboard suggests
You pay a deposit on a purchase order, wait on production, wait on freight, land the goods, then sell them over sixty to ninety days — while the marketplace holds your payout for another two weeks. Between the wire and the deposit hitting your account, four months can pass.
Ad spend compounds the gap. It's charged today against revenue that settles later, and it scales up precisely when things are going well. Growth consumes cash in this model; it does not produce it until the cycle completes.
So the capital need is real and it's recurring. The instrument is not automatically wrong. The sizing usually is.
The maximum offer is the trap
When a funder qualifies you for $250,000 and your next purchase order is $90,000, taking $250,000 means paying the full cost of capital on $160,000 that sits in the account doing nothing but accruing. Revenue-based funding is priced on the whole amount, not the used portion. Right-sized to one turn of inventory, it is a reasonable cost of doing business. Taken at the maximum, it converts a healthy margin into a thin one.
What usually fits better
The instruments that match the problem
Capital sized to one inventory turn
Fund the purchase order plus landed cost, timed to the cycle. Repay as the goods sell, then do it again — rather than carrying idle capital across turns.
Purchase order and inventory financing
Secured against the goods themselves, which prices materially better than unsecured revenue-based capital.
A revolving line
For mature sellers with predictable turns, a line costs only for the days drawn — the single largest cost reduction available in this vertical.
Separate ad-spend capacity
Distinct from inventory capital, so a media test never competes with a purchase order for the same dollars.
The graduation path
Where this ends up
Ecommerce graduates to asset-based lending and bank lines faster than most verticals, because the inventory and receivables are genuinely collateralizable. It requires clean inventory accounting, honest returns and chargeback reserves, and a cash conversion cycle you can actually document — most sellers cannot, and that alone is what keeps them on revenue-based money.
Take the amount the next cycle needs. The rest of the offer is not opportunity; it's cost.
Read: Ecommerce: size the capital to the inventory cycle