I keep seeing the same mistake. Good DTC brands use expensive equity to solve ordinary cash flow gaps. Then they wonder why growth feels heavier every year.
My view comes from both sides of the table. I spent years in banking. Then, after my layoff in 2020, I co-founded Paperstack. The lesson was already clear by then. Modern commerce brands are often healthy businesses trapped inside a funding system that still thinks like a traditional bank.
The opportunity is still massive. Global B2C e-commerce sales hit about $6.4 trillion in 2023. The market is projected to grow roughly 9.3% a year through 2028. Demand is there. Capital is the friction.
If you run an asset-light CPG brand, 2026 will reward discipline. You do not need VC money for every growth decision. You need a capital plan that matches how your business actually works. If you are trying to reach your next milestone without giving up another chunk of the cap table, this matters. I think about finance like structural engineering. If the support under the business is wrong, more growth only adds stress.
The funding gap is still real
During my banking career, I kept seeing the same pattern. Strong consumer brands were getting declined, even when the business looked healthy to anyone who understood commerce. One case that stayed with me was a DTC beverage brand doing more than $3 million in annual revenue. Customers loved the product. Margins were healthy. Cash flow was steady.
The bank still said no. The brand outsourced manufacturing, so there were no hard assets. Revenue moved with summer demand, so seasonality got read as instability. Marketing spend got treated like operating expense instead of a growth engine.
That is the systemic lending gap. Traditional underwriting was built for factories, equipment, and real estate. It was never designed for a modern CPG brand running lean and scaling online.
I still see this in the market. Brands under about $5 million in revenue are often pushed away from real commercial loans and into personal lines of credit that are far too small for the job. The business may have healthy unit economics. It just looks "weak" through an old lens.
The data still points to the same issue. In 2024, U.S. small-business financing applications saw a 21% denial rate. Brookings, citing the Fed's Small Business Credit Survey, found that 87% of U.S. employer firms used some form of external financing by 2023. In that same research, over 20% of loan applications were fully rejected and another 28% were only partially funded.
The way lenders explain those denials matters too. LendingTree's survey of denied applicants found that 68.4% were told weak financial performance was the issue, while only 5.7% heard insufficient collateral. In DTC, that "weak performance" label often needs a second look. A seasonal revenue curve, a heavy inventory build, or a large marketing month can get misunderstood fast.
When founders get pushed into stopgap options, it usually gets worse. In 2024, merchant cash advance and credit-card loan applications faced a 45% denial rate. So yes, the gap is still real. In 2026, more founders will stop trying to force their business into an outdated template. They will look for underwriting that understands cash flow quality.
Cash flow quality will matter more than collateral
What lenders should really measure
In commerce, the real question is simple. How does money move through the business? Is revenue predictable? How fast does inventory turn? When does cash land from Amazon, Shopify, and wholesale? Are customers coming back?
That is cash flow quality. I care about predictability, timing, and sustainability. Those signals tell me far more about resilience than a list of hard assets ever could.
This matters even more because marketing is often one of the biggest uses of cash. Many growing brands put 15% to 25% of annual revenue into marketing. That is normal in DTC. The only question that matters is whether that spend creates profitable demand.
I have always felt that banks misread this part. They see marketing as expense. I look at it as an investment engine, as long as the math holds. ROAS matters. Contribution margin matters. Repeat purchase behavior and LTV matter.
We learned this again when Paperstack first started as a CFO analytics platform. Founders liked the visibility. Then they told us something very direct. They did not need another dashboard sitting in the background. They needed capital to act on what the data was showing. That pivot shaped how I still think today. Good data matters. Action matters more.
We saw this with a CPG brand that had strong repeat customers, healthy margins, and steady growth across Amazon, Shopify, and wholesale. Their problem was timing. They had to pay suppliers long before inventory arrived. Then they had to wait for channel payouts to land. Other providers wanted to finance each channel separately. We looked at the total performance of the business and gave them one clear source of capital. That gave them room to say yes to strategic retail partnerships without starving DTC or cutting marketing to preserve cash.
Equity will be used more carefully
Venture capital has a place. So does non-dilutive capital. The problem is mismatch.
Equity has a clear purpose. Use it for R&D, new product launches, and bigger strategic bets where the outcome is still being tested. Do not use it to fund the same inventory cycle, payroll run, or repeatable marketing play every few months.
When recurring expenses are funded with equity, dilution becomes a habit. That gets expensive very quickly. The business grows, but ownership keeps shrinking for a problem that working capital should have solved.
The ideal setup is customer cash arriving before supplier payments. Most CPG brands do not live in that world. They pay suppliers well before inventory lands. They wait on marketplace payouts. They bridge long production cycles. That gap is exactly where non-dilutive capital should do its job.
For brands with traction, the better question is this: can you show, mathematically, how a specific capital injection becomes revenue over the next 12, 24, or 36 months? If you can, you should be looking at non-dilutive options before giving away more of the company.
There are early-stage exceptions. If you are a very new brand with no credit history, you may need equity to get first inventory into the market and test demand. I understand that. But once you have history, the standard should rise.
The same discipline applies to venture debt. The fixed cost can look attractive. You still need to weigh that against warrants and tie the capital to a clear milestone. In 2026, stronger brands will separate risk capital from operating capital much more carefully.
Flexible capital will replace one-time advances
I expect 2026 to push more brands toward committed facilities and away from one big lump-sum draw.
I say this often because founders need to hear it clearly: just because your business qualifies for a million dollars doesn't mean you have to take it all. Taking the full amount too early creates pressure on daily cash flow. It is the business version of maxing out a credit card because the limit is there.
The better move is to draw capital when the business actually needs it. Maybe you draw the first 30% to place a manufacturing deposit. Then you wait to draw the balance when goods leave the warehouse. That keeps costs lower. It also keeps you from paying for capital that stays in the bank account unused.
This is the logic behind the kind of capital wallet we have been building at Paperstack. A brand should not have to reapply every time it wants to act on a good growth opportunity. It should have room to move when inventory needs to be ordered, when marketing efficiency spikes, or when a retailer opens the door.
Repayment structure matters just as much. By 2023, only 34% of employer firms regularly used a business line of credit. I think that number will move up because commerce brands need flexibility more than they need one-time money.
They also need repayment terms that respect slower months. A big sales month should not create a penalty of success and drain cash faster than planned. Monthly caps matter. If your revenue comes through wholesale or Amazon, repayment should follow how cash actually lands in the bank. Terms are the keys.
Inventory discipline will matter more than top-line hype
Stop celebrating stockouts
One of the most misunderstood moments in DTC is the sellout. A lot of people still treat it like a win. I usually see a planning problem.
In many cases, selling out is a financial failure or an operational failure. You already spent to bring the customer in. They arrive ready to buy. Then you let them leave because inventory is gone. Later, you spend again to win them back. CAC goes up. Trust goes down.
I saw this clearly with a brand that had an unexpected viral moment during the holidays. From the outside, it looked exciting. Inside the business, it created a trust problem at the worst time. Customers were ready to pay. The product was not there.
The hidden cost goes beyond lost revenue. Fixed costs keep running too. Warehouse rent still gets paid even when the shelf is empty. That is why I push teams to line up three things at the same time: the marketing calendar, the production schedule, and the cash flow cycle.
When those three move together, the business runs cleaner. Inventory turns faster. Marketing converts better. Cash recycles back into growth. When they drift apart, even a healthy brand can end up discounting too hard, sitting on slow-moving inventory, or starving the next launch.
Timing is a margin tool
A lot of finance leaders still look at growth mostly through volume. In DTC, timing matters just as much.
If inventory is delayed, cutting price harder can make the situation worse. Sometimes the better move is to reduce promotions and sell at full price. That gives you more profit per unit and more room to cover emergency costs, like air-freighting replacement inventory from another manufacturer.
The same discipline applies to peak periods. I do not assume bigger ad spend during Black Friday is automatically smart. You have to know whether the higher CAC still leaves room for net profit. If it does not, more volume can still hurt the business.
And not every season should be about new customer acquisition. Some brands need a quarter where they focus on LTV, upsells, and AOV. A calmer period can be the right time to drive more revenue from the customers you already paid to acquire.
B2B will become part of the DTC playbook
This is one of the biggest shifts I expect in 2026. More DTC brands will build B2B on purpose.
The market is too large to ignore. Global B2B e-commerce was roughly $22 trillion in 2024. It is projected to reach $57.5 trillion by 2030. If you are only thinking in pure DTC terms, you are leaving a stabilizing channel on the table.
I like B2B for a simple reason. It gives a brand more control. You are not relying only on ad performance or platform changes. You can go create revenue directly through outbound relationships. Orders are larger. Repeat behavior can be stronger. In many cases, the channel improves the structure of the P&L.
I have seen brands sell products in bulk to banks and law firms for corporate gifting. Those buyers funded the distribution, and many recipients later became direct customers. That is acquiring customers at someone else's cost. Finance and growth are working together in the same move.
There is a practical way to do this. Position the product as a gifting opportunity. Offer personalization, like adding a corporate logo. Once a product is customized, it becomes much easier to ask for an upfront security deposit because the buyer knows that inventory was made for them.
You do not need a huge outbound machine to start. Contact a focused group of local businesses first. Learn which niche responds. Then use a land-and-expand approach. One successful contract in one office can lead to referrals across branches or sister locations. Done well, one B2B relationship can put your product in front of hundreds or thousands of consumers with zero ad spend.
Unapologetic optimism will become a finance skill
Unapologetic optimism isn't about blind positivity - it's about discipline.
That matters in DTC because volatility is part of the job now. Tariffs change. Supply chains shift. Payout cycles move. If your whole financial plan depends on smooth conditions, you do not really have a plan.
One of our brand partners dealt with this when new import tariffs pushed landed costs up almost overnight. A lot of teams react to that kind of shock by freezing. They cut marketing, pause inventory, and wait for the market to settle.
We took a different route. We modeled a conservative case, a most likely case, and an optimistic case. We looked at the impact on unit economics. We asked whether suppliers could share any of the burden. We estimated what customer retention might look like if prices had to rise.
That gave the team options. They kept ordering at scale and protected supplier relationships while competitors hesitated. When conditions stabilized, they were one of the few brands that stayed fully stocked, and they captured market share.
In 2026, I want more founders and CFOs to work this way. Do not build one forecast and hope. Build options. Then connect each option to a clear capital plan.
How I would evaluate non-dilutive capital in 2026
Look past the headline rate
Most founders start with the rate card. I understand why. Everyone wants the lowest cost of capital possible. But the lowest headline number can still become the most expensive decision if the structure is wrong.
Start with the full cost. Look for origination fees, admin fees, underwriting fees, and any charge on unused capital. Then look at the scope of the underwriting. If Shopify is only 30% of your revenue, a provider that underwrites only Shopify is leaving 70% of your performance out of the picture.
Next, study the remittance terms carefully. Ask what the minimum payment looks like in a slow month. Ask whether there is a monthly cap in a strong month. Ask how wholesale revenue is treated. I have seen a real difference between a lender counting wholesale when a draft order is created and one counting it only when cash hits the bank account.
You also need to know how repayment follows cash. A wholesale or Amazon-heavy brand often needs repayment tied to bank deposits, not just a percentage of online sales. And you need to know where funds are deployed. Do they land in your bank account, where your team controls timing and use of funds? Or does the provider pay suppliers or marketing platforms for you?
Continuity matters too. If you need help after funding, will you still be talking to the same person who understands your business? Or will you get handed to a different team and have to explain everything again? The relationship should continue after the money is wired.
This is where many brands get burned. They wait until the cash gap is urgent, then they grab the fastest offer on the table. That usually leads to poor structure, more pressure, and another refinancing cycle a few months later. You want a capital partner who understands your operating rhythm and can underwrite the whole business with confidence.
Final thought
I am optimistic about DTC in 2026. The market is still growing. The brands are getting smarter. And more founders are finally treating capital as part of the operating system instead of a one-time event.
That shift matters to me because Paperstack started as a CFO analytics tool. Founders told us very clearly that visibility alone was not enough. They needed capital tied to action. My long-term vision at Paperstack is a Stripe-style operating system for commerce capital, because growing brands need more than one-off funding. They need a durable capital foundation.
If you are running an asset-light CPG brand, protect your equity. Use non-dilutive capital for recurring needs. Align inventory, marketing, and cash flow. Build channels that make the business sturdier. Ask harder questions about terms before you sign anything.
When you do that, capital starts working with your business, not against it. That is how you build a durable foundation that grows in rhythm with your brand. And that is how you fund growth without calling a VC every time demand picks up.
Frequently Asked Questions
Why do traditional banks reject profitable, asset-light DTC brands?
Traditional banks underwrite physical assets, completely missing cash flow quality. In early 2025, 68.4% of denied applicants were flagged for weak financial performance. Lenders falsely misinterpret calculated marketing spend and seasonal DTC revenue spikes as instability, systematically starving healthy, asset-light commerce brands of vital operating capital.
Should founders use venture capital to fund DTC inventory and marketing?
Absolutely not. Using expensive equity to solve ordinary working capital gaps is a critical structural mistake. Equity should strictly fund R&D or new strategic bets, not repeatable marketing plays. Funding inventory cycles with VC money creates unnecessary dilution and shrinks your ownership without actually fixing the baseline financial system.
Why is expanding into B2B e-commerce critical for scaling DTC brands?
B2B provides a stabilizing, high-margin revenue channel that offsets DTC volatility. The global B2B market is projected to reach $57.5 trillion by 2030, growing at an 18.2% CAGR. Corporate bulk orders improve P&L structure, increase upfront cash deposits, and acquire new consumers at zero advertising spend.
Are merchant cash advances safe when traditional business loans are denied?
Stopgap options like MCAs usually make structural cash flow problems much worse. In 2024, merchant cash advance applications faced a 45% denial rate. They aggressively strip daily cash deposits and ignore your actual business rhythm. You need durable, non-dilutive capital that actively aligns with your specific inventory cycles.
How does a flexible credit facility improve DTC marketing efficiency?
A flexible wallet allows you to draw exact tranches precisely when ROAS is highest. By 2023, only 34% of financed employer firms utilized a line of credit. Drawing massive lump sums upfront creates expensive, dead capital. Flexible facilities ensure you only pay for what you deploy into profitable acquisition.
