Peculiarities of Financing E-commerce Enterprises

Research relevance. Any organization, regardless of whether it is commercial or not, needs funding. E-commerce is no exception here too. This type of activity differs from the others by the way of selling, namely via the Internet. Operating in a specific environment prompts to create special ways of financing, which are practically not used by the enterprises of the traditional form of sales.

The purpose of the study is to identify the possible ways of financing a new branch of business like e-commerce and outline directions for their improvement.

The problems of financing economic activity are widely researched both in domestic and foreign scientific literature. Issues of the financial markets’ formation were investigated by Shkvarchuk L. [1], Burmaka M. [2], Kovalyova O. [3], Trudova M. [4] et al. However, the issue of e-commerce financing has not been studied at the scientific level. That’s why the theme is relevant and requires a more in-depth study.

 Presentation of the main material. Creating an ordinary online store does not require spending a lot of money. Significant funds are spent on the construction of unique services that demand not only complex software, but also new ideas and risky solutions. At the same time, the development of any e-commerce project requires funding. The volume of investment usually depends on the scale of the activity and the uniqueness of the project.

The basic capital structure of the e-commerce company can be formed by the value of intangible assets, software and personal computers used for running business.

Initial funding for creating a website is just a small fraction of the funds that are required for the whole activity. As the website develops, its value increases and its cost may include all the expenses on staff dealing with the internal and search optimization.

Of course, it’s very good when the business is financed by the owner’s funds. However, if they are not enough, it is not a reason to stop the business process, since two alternative financing options still exist:

  • financing by investors through their participation in the company’s capital;
  • financing by credit institutions.

The availability of the own funds is always the best method of financing, since it does not involve regular financial obligations, therefore making the activity of an enterprise less risky. But the main driving force for the enterprise development is external financing, which can be carried out in two forms: crediting or the participation of the third-party investors in the company’s capital.

The Ukrainian model of business financing is based on financial crediting, so the corporate culture in the business environment is undeveloped and the economy is dominated by small and medium enterprises that contribute to the lion’s share of budget revenues. The main problem domestic entrepreneurs are trying to solve when looking for the sources of financing is to ensure the possibility of capital formation at the expense of their own funds and in case of their shortage – at the expense of external financing, which is usually carried out in the form of a loan.

Nowadays, the IT industry is at the peak of its popularity. Therefore, there is a considerable number of investors in Ukraine who would like to invest in this industry. Typically, investors form a certain part of the equity capital and receive a percentage of profit proportional to their investments. However, the terms of financing may be very different. For instance, an investor can increase the profit percentage of the business initiator in exchange for his active participation in the project. There are various models of the investor’s participation in capital, so let’s consider them closer.

Types of capital participation programs practiced at e-commerce companies

Figure 1 – Types of capital participation programs practiced at e-commerce companies

Direct investment market. Many investment companies or individuals all around the world are willing to invest in the capital of the newly created or operating companies. As a rule, direct investments are the investments in the share capital of the already operating enterprise. Shares of enterprises have their own price, which depends on the company’s performance indicators. As of now, the system of financial markets works in such a way that enterprises, having at least minimal profits, may become participants in the stock market and offer their shares for public bidding.

Money subsidies are usually a way to support small businesses. Free financing is carried out by sponsors within the framework of certain social programs or by the government within the framework of a state order execution. Such projects, as a rule, are aimed at improving the welfare of society.

Venture financing. This type of financing is widely practiced in the developed countries and refers to the participation of the investor in the capital of the enterprise in the long-term period (5-7 years) in order to receive a part of the company’s profit. The investor may not necessarily participate actively in the business development of the enterprise.

Network of business angels. The concept entered the financial system after the active performance of the platforms under the same name, which facilitate the search for investors who will take an active part in the project development.

Crowdfunding companies. The term stems from the English words “crowd”, i.e. “community, group” and “financing” and the very notion means creating business circles that provide the necessary capital for further investment. This may be the same form as venture financing or the participation of business angels, but the main difference of the crowdfunding is that there may be a lot of investors. Such Internet sites as Kickstarter, Pererbackers and Indiegogo are the bright examples of crowdfunding platforms. There are also accredited investors who can be found at ourCrowd website.

Crediting. This is one of the most available forms of financing practiced in Ukraine. It should be noted that crediting can be carried out not only by banks, but also by third-party organizations or individuals. The main purpose of creditors is to return their money and obtain an economic benefit, i.e. a percentage from the loan amount.

Before issuing a loan, the financial institutions want to minimize all possible risks, so it is necessary to collect a large set of documents, the list of which is established by the banks individually. For example, Credit Agricole Bank issues loans only to a project that has worked for at least a year, has a steady financial position and a positive creditworthiness. The client will also have to open an account in this financial institution for the time of the agreement and carry out cash transactions through it, in proportion to the debt. ProCredit Bank insures its risks by requiring clients to obtain a certificate from the State Register of Moving Property, an extract from the Bureau of Credit Histories, notarial maintenance of the contract, as well as insurance coverage of mortgaged property.

To provide e-commerce companies with a chance to obtain a loan, it is necessary to ensure that the business is stable and profitable. It should also have a transparent organizational structure.

Conclusions and suggestions. Consequently, in the context of the rapid development of e-commerce in Ukraine, it should be born in mind that this activity has a number of specific features with the complexity in external financing. In particular, the main activity of enterprises in this industry is based on the exploitation of intangible assets that are not the object of interest for financial institutions that issue business development loans under the guarantee of the investment objects value (the website). Issuing credits for the development of Internet business is not a widespread practice in Ukraine. In order to launch the own project, one needs to contact banks that are able to offer a loan for five years. Entrepreneurs can count on the amount of up to UAH 1 million. The average interest rate varies from 18 to 25% per annum.



  1. Shkvarchuk, L. (2013). Financial market. Kyiv: Znannia. [in Ukrainian].
  2. Burmaka М. О. (2014). Stock market in Ukraine. Kyiv: ADS EMK Tsentr. [in Ukrainian].
  3. Kovaljova O. (2016). Institutional aspects of the Ukrainian stock market development. Scientific Bulletin of Kherson State University. pp.124-127. [in Ukrainian].
  4. Turova M. (2016). Innovative Prospects for the Development of the Ukrainian Banking System. Economics and Society. Mukachevo State University. pp. 485-489. [in Ukrainian].
  5. Moshenskij S. (2016). Influence of the structure of the financial market on the overall development of the economic system and its security. pp.357-366. [in Ukrainian].


If you want to quote this article, please use these references:  
Kostiuk-Pukaliak, O. (2019) Peculiarities of financing e-commerce enterprises. Proceedings of the International Scientific and Practical Conference "Stability of the National Economy: Problems and Ways to Ensure". May 25, 2019. - The Dnipro.

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