You can run a profitable e-commerce brand and still feel cash-poor. Inventory needs cash before it creates cash. Marketing needs cash before it shows up in revenue. Platforms pay you on their schedule, not yours.
The "systemic lending gap" I saw in banking
In banking, I kept seeing strong consumer brands get declined. The rules were written for asset-heavy industries.
One brand that stuck with me was a DTC beverage company doing over $3M a year. Margins were healthy. Cash flow was steady. The bank still saw three problems.
They had no hard assets because manufacturing was outsourced. Revenue was seasonal. And marketing spend looked like a simple expense, not the investment engine behind growth.
That moment shaped my view of funding. Your lender needs to understand your cash flow cycle. Otherwise you'll spend months trying to fit an outdated template.
Cash flow is the whole game
Cash flow isn't a "finance problem." It's a survival problem. Forbes Tech Council points out that nearly 20% of U.S. small businesses fail in their first year, and roughly 50% fail by year five.
They also say small businesses live and die by their operational cash flow. Seasonality, rising costs, and delayed payments can decimate cash flow. That's why I care about structure as much as price.
Insider tips I'd give any e-commerce founder before they fund growth
Tip 1: Measure cash flow quality, not just revenue
Revenue is a vanity metric when cash is late. Track when money leaves your account and when it comes back.
Map your cycle: supplier deposits, production lead time, inbound freight, sell-through, and payout timing by channel. Keep it updated. Cash flow quality is about predictability, timing, and sustainability.
If you can't explain your cash cycle, don't borrow to scale it.
Tip 2: Make marketing spend "bankable"
Many brands spend 15% to 25% of annual revenue on marketing. Lenders see that number and panic if you can't explain what it buys.
Know your ROAS, CAC, and payback period. Be clear on your model. Do you need first-order profitability, or do you win on LTV?
At some stages, the smartest growth move is spending less on acquisition. Push upsells. Lift AOV. Let existing demand fund the next move.
Tip 3: Sync inventory, marketing, and payouts
Most cash crunches come from misaligned timing. Marketing drives demand. Ops tries to fulfill it. Finance watches cash drain in real time.
Growth isn't just about how much you sell, it's about when you sell it. If you buy inventory too early, it sits and racks up storage costs. If you push promos when inventory is tight, you hit stockouts fast.
When supply chain delays hit, slow demand on purpose. Lower spend. Pull discounts. Keep your best customers served.
Tip 4: Treat "sold out" as a warning sign
Selling out feels good for a day. Then it gets expensive.
When a customer tries to buy and hits "out of stock," trust drops. CAC rises because you have to spend again to bring them back. I've seen a brand go viral during the holidays and run out of inventory. It broke consumer trust instead of building momentum.
It shouldn't be celebrated when the product is sold out. In-stock rate protects your brand and your unit economics.
Tip 5: Don't let channels force you into multiple lenders
Multi-channel is normal now. Funding still hasn't caught up.
We worked with a CPG brand selling across Amazon, Shopify, and wholesale. Their issue was timing - paying suppliers about 60 days before inventory arrived, then waiting on payouts.
Other providers wanted to underwrite one channel at a time. That can push you into three or four lenders with different repayment schedules. Underwrite the whole business and consolidate where you can.
Tip 6: Do due diligence on structure, not the headline rate
Two offers can look identical and behave totally differently once your sales swing.
Ask for the true total cost after all fees. Ask what revenue they count across channels. Then get specific about repayments: how is "remittance" set up, and do minimum payments strain slow months? Ask about caps, too, so a big month doesn't drain your cash.
Also ask where the money goes. Do funds hit your bank account, or do they pay vendors directly? That changes control. And ask who supports you after funding. The relationship shouldn't end at signing.
Tip 7: Borrow step-by-step, not in one big gulp
Just because you qualify for a million dollars doesn't mean you should take it all. A lump sum creates pressure. It's like maxing out a credit card personally.
Paperstack's "Capital Wallet" is built for tranches. Brands can receive a $1M - $3M commitment and draw smaller amounts as needed. You only pay fees on what you use, with no origination fees and no fees on unused capital. A 10% fee means a $100K draw is repaid as $110K.
Match draws to supplier milestones. Draw the deposit. Draw the balance when goods ship. Stop paying for capital that sits unused.
Tip 8: Use unapologetic optimism as your volatility playbook
Unapologetic optimism isn't about blind positivity - it's about discipline. When volatility hits, your job is to create options.
One of our brand partners got hit with new import tariffs that raised landed costs overnight. Many teams would freeze inventory and cut marketing. We ran scenarios instead and built a flexible capital plan around them. They kept ordering, stayed stocked, and captured meaningful market share while others hesitated.
Scenario planning turns fear into math. That's how you stay resilient.
What I want you to take away
Paperstack started as a CFO analytics tool. Founders gave us direct feedback: visibility is great, but they needed capital to act. That's why we pivoted into revenue-based financing. Data alone doesn't move a business forward - capital does, when it's deployed with insight.
My long-term bet is a Stripe-style OS for commerce capital. One partner. Clear structure. Capital that grows in rhythm with your brand.
Choose the setup that makes capital work with your business, not against it. Keep control. Then scale.
FAQs
Why do traditional banks often reject profitable DTC brands?
Banks typically use outdated underwriting templates built for asset-heavy industries. They view marketing spend as a simple expense rather than a growth engine and often lack the models to evaluate seasonal revenue. Since most DTC brands outsource manufacturing, they lack the 'hard assets' banks require for collateral, leading to rejections despite strong margins.
How critical is cash flow management for e-commerce survival?
It is effectively a survival metric. According to the Forbes Tech Council, roughly 50% of small businesses fail by their fifth year, often due to cash conversion issues. E-commerce 'lives and dies' by operational cash flow. Managing the gap between inventory outlays and platform payouts is more critical than top-line revenue.
Should I take the full loan amount offered upfront?
Generally, no. Taking a lump sum creates immediate repayment pressure, similar to maxing out a personal credit card. Instead, utilize tranche-based structures (like a Capital Wallet) to draw funds only as needed for specific milestones - such as supplier deposits. This ensures you only pay fees on deployed capital, protecting your margins.
How do I prove my marketing spend is an investment to lenders?
Lenders panic when they see 15-25% of revenue going to marketing without context. To make this spend 'bankable,' you must clearly articulate your unit economics, specifically ROAS, CAC, and payback periods. Clearly defining whether you model for first-order profitability or LTV transforms your marketing line item from a risk into a calculated asset.
Is selling out of inventory a good sign for potential funding?
Actually, 'sold out' is often a red flag. It breaks consumer trust and spikes your CAC because you have to spend again to re-acquire those customers. Lenders view consistent in-stock rates as a sign of operational maturity and unit economic health, whereas stockouts signal poor planning that damages long-term brand equity.
