Table of Contents
- There are several financing options available to help open an Etsy shop
- Even sole proprietors and self-employed business owners can use business loans and business credit cards
- Business grants and some types of crowdfunding don’t have to be repaid
Starting an Etsy business can be an exciting adventure for creative entrepreneurs looking to sell their products. But it can also be a challenge, especially if you need to borrow money to start your business. Fortunately, there are a number of ways to finance an Etsy shop, including small business loans, crowdfunding and even business grants. Here’s what you need to know about the different financing options available and how to choose the best one for your Etsy business.
Etsy key insights
Founded in 2005, Etsy is a global eCommerce platform that helps creative entrepreneurs sell their products around the world.
Small business loans for Etsy shops
Business loans can be an excellent way to finance Etsy shops. The best business loans offer flexible financing and allow you to borrow anywhere from $500 to $500,000 or more. If you’re running an Etsy shop as the sole proprietor of your business, you might need to jump through a few hoops to secure financing. While plenty of options are available, getting a small business loan when self-employed can be challenging. Most lenders will want to see a steady revenue, and you may have to provide collateral to help secure the loan.
The U.S. Small Business Administration offers several types of affordable loans to entrepreneurs. Even self-employed business owners and sole proprietors may qualify for an SBA loan to help cover business-related expenses like working capital, equipment purchases and inventory.
Crowdfunding for an Etsy shop
Crowdfunding involves collecting small contributions from a large group of people to secure funding for a new business endeavor. It involves using online platforms to gather financial support from individuals, organizations or businesses. Small business owners can use crowdfunding to start a business, cover personal costs, pay for education or support charitable initiatives and artistic endeavors.
There are several types of crowdfunding methods:
- Donation crowdfunding lets you gather contributions that don’t have to be repaid.
- Reward crowdfunding encourages people to provide funds in exchange for a reward, such as a pre-release product, service or other unique item.
- Debt crowdfunding treats the money you raise as a loan that must be repaid.
- Equity crowdfunding requires you to give up shares of your business in exchange for capital.
Small business grants
A small business grant is a sum of money given to a business to help it start, continue or grow. Unlike a small business loan, grants do not need to be repaid. They can be obtained from government entities or private businesses. They are a popular option for individuals, businesses or online ventures that do not have enough funds for growth or expansion.
The Small Business Growth Fund is a business grant funded by Etsy and Progressive. It offers grants ranging between $5,000 and $25,000 to small business owners. The last round of 2023 closes on Oct. 27, 2023. Business owners may also be able to use other types of grants to cover the cost of starting and running an Etsy shop.
There are business grants to help many types of small business owners, including people in underserved communities:
Small business credit cards
There are a few advantages to using a business credit card for your Etsy shop. These cards give you capital to cover short-term costs and also come with additional benefits. Many cards offer cash back and travel rewards that can be redeemed for statement credits or to help reduce travel costs. They typically also come with employee cards and other business-related perks.
It’s a good idea to pay your balance in full each month to avoid interest changes. But as long as you pay your bill on time and keep your debt to a minimum, business credit cards can also help you build business credit. It’s also an easy way to keep your business costs separate from personal expenses, which will come in handy during tax season.
Etsy may also help you finance your shop. It regularly partners with nonprofits and lenders to further its mission to help entrepreneurs gain the funding and training necessary to have successful businesses.
Starting an Etsy shop is a great way to become an entrepreneur, but financing it can be challenging. Business loans, crowdfunding, business grants and business credit cards are some of the options available to finance your shop. Make sure to consider the advantages and risks of these options before deciding which one is best for you.
Frequently asked questions about financing an Etsy business
An Etsy shop is relatively easy to set up and maintain. It also gives small business owners a chance to build a customer base, market and sell products with a minimal budget using Etsy’s well-known and trusted brand.
Having an LLC is not required to sell on Etsy. The website states most sellers are sole proprietors. But registering your business as an LLC does have advantages. It can be relatively simple to set up and offers legal protections that can protect your personal assets in case your business is sued.
The transaction fee on Etsy is 6.5 percent of the total amount paid, which includes the item’s price and any costs for shipping and gift wrapping. For example, if you sell an item for $100, the transaction fee would be $6.50. You’ll also have to watch out for other fees, such as listing, advertising and promotional fees.