Sector
Online businesses, marketplace sellers and D2C brands
Online businesses are often offered one product whatever is actually happening in the business: a merchant cash advance. We don't introduce those. The real gap is usually one of three shapes: cash tied up in stock bought ahead of a season, a marketplace paying out on its own settlement cycle rather than against an invoice, or genuine wholesale receivables on trade terms. Each points to a different facility.
How money moves
Stock is paid for on the supplier's timetable, sales arrive on the platform's
An online seller pays for stock before any of it sells, then waits for the marketplace or payment provider to settle what has sold. Two sellers with the same sales can have very different cash positions depending on how far ahead they buy and how their payouts are held.
StockPaid out
- Stock ordered and paid for ahead of a season or launch
- Shipped, stored and listed
- Sells through over the following weeks or months
Marketplace payoutsIncome
- Order placed and delivered
- Platform settles on its own cycle, less fees and refunds
- Part held back as a reserve for later refunds or chargebacks
Wholesale, where it existsIncome
- Goods delivered to a retailer or stockist
- Invoice raised on trade terms
- Paid when the terms run out
The gap runs from paying the supplier to receiving the payout. Growth widens it, because the next season's stock has to be bought before this season's sales have settled.
The platform, not the customer, pays the seller. Amazon's UK guidance for new sellers says Amazon "collects payment from the customer and pays you available funds" on a regular settlement cycle (Amazon UK: beginner's guide to selling). eBay's UK help says it can hold a seller's funds if there's an open case or dispute, if the buyer reports a problem, if the seller owes eBay money, or if the seller is a new or infrequent business seller, and that in most cases holds lift once eBay can confirm the order has arrived (eBay UK: payments on hold). Shopify describes a reserve as "a temporary hold on a portion, in some cases a full amount, of transactions" for a set period, applied for reasons including high chargeback or refund rates, long delivery timelines and sudden volume surges (Shopify Help Center: reserves).
Where the sector gets misread
What a generalist lender sees, and what's actually happening
"Online retail": unpredictable and hard to underwrite
Sales, fees, refunds, reserves and scheduled payouts are all recorded in the platform's own statements, often in more detail than a traditional retailer's books.
A marketplace balance as a debtor to finance
A payout is the platform's settlement of sales net of fees, refunds and any reserve. There's no customer invoice and no payment terms, so invoice finance has nothing to advance against.
Rising sales as spare cash
Stock for the next peak is bought before this one has paid out, so a growing seller often has less cash, not more.
The measure that matters
Stock-to-payout cycle, not monthly sales
The useful numbers are how long cash is out between paying a supplier and receiving the payout for that stock, how much is held in reserves at any time, and how much of the business is wholesale on trade terms rather than consumer sales. Those show the real size and shape of the gap.
Two businesses that both describe themselves as an Amazon seller can need completely different things. One sells only to consumers through the marketplace. The other also wholesales to independent retailers on trade terms, and has a genuine invoice-finance-eligible ledger inside the same business.
Where finance fits
Match the facility to the gap, not to the label "online"
A facility can carry stock until it sells. It can't make stock sell that customers don't want.
If what's being offered elsewhere is a merchant cash advance, it's worth asking whether it's being offered because it suits the business or because it's the easiest thing to originate without looking closely. Where the stock is imported, trade and import working capital covers the part of the cycle before anything is sold.
Sources
Where these points come from
- Marketplace payoutsAmazon UK: beginner's guide to selling on Amazon
- Payout holdseBay UK help: payments on hold
- ReservesShopify Help Center: reserves in Shopify Payments
Talk it through
Need another perspective?
Describe where things stand in a sentence or two: who pays, how, and where the gap sits. We'll tell you whether it's something we can help with. There's no charge for this.
Thank you. It's with our team now.
A person reads every enquiry and we'll come back to you with what we think the right next step is. No obligation at any point.
What happens next
- A person on our team reads it against how businesses in this sector are actually paid.
- If we can help, we introduce you to a specialist partner we have vetted and tell you who they are.
- No charge and no obligation at any point. You decide whether to go further.
Adam Parker
Founder of Muswell Rose Consulting Ltd, which trades as Established Finance · former Managing Director of Penny, an invoice finance business, with 15+ years across mortgages, commercial finance and fintech lending.
Last updated:
Practical questions
Before you get in touch
What information do I need?
To start, just a description of what’s actually happening in the business. If it progresses, the specialist partner will ask for the usual things: recent accounts, a sense of turnover and trading history, and details of the specific need.