Starting a small ebay business?

[Hassan Darkside]

I'm considering starting a small ebay business, because I don't really want a job and I think this would be more interesting. I'm in college right now, I was planning on getting a job second semester but if I can find something more interesting like this, then I might give it a go.

Anyway, I was looking on ebay and I'm considering buying a wholesale list of items. I then plan to use the list to get whatever I want to sell, and sell them on ebay. I also have other connections that can get me similar items for way cheaper than retail and I might shove those up there too.

I don't have a lot of money, so what I want to know is if I should get a loan to start or use credit. Also, what are the dangers of this besides trusting other people you don't know with your money? Anybody else do this?

[Trevytrev11]

Re: Starting a small ebay business?

What is your credit history like? With bad or not credit history, you're likely going to face higher interest rates. Also, without a solid credit history, you're likely not going to be able to get a high enough limit on a credit card to initially purchase the goods you want to sell. Not sure what kind of initial start up fee's your looking at.

I've never applied for a business loan, so I don't know what is all required as far as a business plan, actual business licenses, etc., but maybe you can apply for some sort of personal loan through a local bank or a credit union. Usually you can get lower rates through a credit union, so if you don't belong to one, I would suggest signing up for an account to take advantage of these rates. Usually at least a half point lower than national banks.

If you have a high credit score, you can easily find cards that will offer you 0% for 12-18 months, which may or may not be enough time to establish cash flow so that you can then use your own money to reinvest in the merchandise. Also, with a credit card, you are only responsible for a minimum payment, where as with a loan, you would be responsible for a full principal payment. However, with a credit card, after that introductory 0% rate expires, you'll likely have rates of 10% or higher, where as with a personal loan, your talking 7-10%.

I guess it really depends on your financial status/credit history and how soon you think you can repay back the loan. The last thing you want to have to do is declare bankruptcy if this fails. Your credit wil be ruined for a good 7 years, making it impossible to get a good rate on future car/house purchases and with new laws, your still required to pay back loans that you previously were excused from.

Depending on your family, you can borrow money from them. While it's never a great idea to go into business with family, if you know that you can repay the money, they may be able to help you out as well.


Some questions you might ask yourself:

What kind of merchandise do you plan on selling? Are you sure there is a market for it? Are there other competitors on ebay selling the same stuff? If so, how are their prices compared to yours? If they are equal, how are you going to differentiate your product from theirs? What are local sales tax lasw in your state? What about inventory-where are you going to store the goods you are selling? What if they don't sell? How much can you afford to lose? Etc. Etc.

Good luck...just make sure you think of everything ahead of time.

[Hassan Darkside]

Re: Starting a small ebay business?

Thanks alot on the info. I have no credit history right now and my family's isn't too good either. Plus my parents don't make enough for me to be borrowing a lot.

I do have an account a credit union though, so I'll call them maybe tomorrow and see what they have to say.

I plan on starting small and checking to see if the demand is good enough before I do any real big things. I know there's a market for what I plan on selling as well. You bring up some good questions though, I have to really think about where I want to store this stuff, considering I'm on campus right now and 2 hours from home.

[Trevytrev11]

Re: Starting a small ebay business?

Do you have a cell phone account or any other kind of account in your name? (Car/apartment/utilities) If so, you are building at least a minimal credit history. I would reccoment signing up for a credit card (either a Visa/Master card or even something like a Target card or Bestbuy Card). Once you get the card, make a purchase and then make monthly payments on it. This will show lenders that you can handle a line of credit as well as are responsible enough to make monthly payments. As little as this sounds, it helps immensly. You don't have to go out and spend $2,000, but if you spend a hundred or so, and just make the minimal payment, your score will go up. You said you have an account with a credit union...if it's not a checking account, get one and also get an ATM check card with the Visa or Mastercard logo as well.

Basically, you need to prove to lenders that you are responsible enough for them to give you a loan. The higher risk you are to them means you get stuck with a high rate or they won't lend you the money.

Even if not for the business, this will help you out later in life when you go to buy a house or take out a loan for a car. I can say from experience that this will pay off for you. My parents didn't make a ton of money, but enforced on me how important it is to establish credit and be responsible with my money. At 25, my credit is better than almost anyone else I know. It has saved me a ton of money as I have been able to take advantage of lower interest rates.

Also, with eBay, if you get an eBay store, you get lower fee's for listing items. Make sure you provide good business to the customers. A few negative feedbacks can really hurt any trust a buyer would have with you especially early on when you don't have a lot of transactions.

[Hassan Darkside]

Re: Starting a small ebay business?

The only thing I have in my name is a cell phone (Virgin Mobile) and their plans are basically pay as you go. I just switched to a monthly plan, but there's really like no contracts or anything involved besides just paying whenever you run out of minutes.

I have a debit card/visa check card with the credit union. I'm scared to death of going into any serious debt, so I can bet my life I'm not going to start out by spending a whole bunch of money.

But you do make some good points and I'm tempted to get a credit card rather than some kind of loan so I can begin shaping my credit history. Plus I sure as hell could use one with some of the other things going on here. But I have enough faith in myself to believe that I won't go overboard, just because I'm such a tightwad when it comes to money.

[Trevytrev11]

Re: Starting a small ebay business?

Well sounds like your heads in the right place...as long as you pay your bills before you pay yourself, you should be ok.

Check out this site:

http://www.creditcards.com/

There you can select what type of card you want. I would suggest a low interest or no interest card to start. That way, if it takes you a few months to rack up some sales, your not getting penalized with interest on the goods you have purchased from the wholesaler.

[Hassan Darkside]

Re: Starting a small ebay business?

Thanks for the site. Just skimming some of the low interest cards, they say you need to have Good or Excellent credit to get one...Does no credit qualify? Or am I just going to have to ask and find out?

[Trevytrev11]

Re: Starting a small ebay business?

Not sure, but whatever you do, don't go and apply to like 10 different cards. Every time you apply, they have to check your credit history, which usually we'll deduct a few points off your score. One or two times won't really hurt you, but if you do it a bunch, it could have a noticable impact.

Maybe before going to apply on that site, you might want to contact your credit union and ask them if they have any special indroductoray offers on credit cards. It may not be 0%, but maybe pretty low. If you think about it, say you charge $2,000 and carry that balance. With an interest rate of 7%, you're talking $140 in interest, not great, but not killer either...and since you'd be forced to pay minimum payments, it would likely be lower than that.