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The Amazon lending program is a loan product offered by amazon only available to established sellers. Amazon seller loans or also commonly known as Amazon FBA loans are offered to give sellers the opportunity to buy more products, expand their business, and in turn, make themselves and amazon more money.
Amazon seller loans work on an invitation-only basis at amounts of between $1000 and $750,000.
Amazon is a multi-billion dollar e-commerce giant and its services don’t stop at simply selling books. Along with the company’s online market place, T.V and movie streaming, and grocery delivery scheme, Amazon also offers small business financing for sellers that use their platform.
In 2018 Amazon partnered up with the Bank of America and now lends around 1 billion USD every 12 months.
Don’t fret if you haven’t heard of the Amazon lending program; it’s not something that they advertise much, and they don’t even feature a landing page for the billion-dollar venture.
If you currently run an amazon shop or are looking to open one, read on to find out more!
In the following guide, we are going to go through all the answers to this question, plus more.
Before we get ahead of ourselves, let’s introduce the program and go through a little overview.
Amazon business lending was started way back in 2011 as an initiative to offer its sellers a solution to a common business crushing problem – funding.
Before Amazon seller loans, sellers facing money issues or difficulties expanding would be forced to approach traditional lenders for funding. While this is all good and well for normal businesses, amazon businesses work a little differently.
As a result of FBA (fulfillment by amazon), sellers rarely have to hold any stock, meaning that an entire amazon shop (no matter how big) can be run by a single laptop from the comfort of someone’s home.
This means that there are no premises or substantial collateral.
In the eyes of most lenders, No collateral is usually a no go when approving someone for funding.
You might be wondering why Amazon felt the need to move into the Lending market anyway? what’s in it for them?
As it stands, there are over 6 million amazon sellers on Amazon, many of which are run as small businesses, which at some point could benefit from some form of funding, be it for stock, expansion or other.
As any small business owner knows, getting funding is no easy task, and it is especially difficult when you don’t have a solid credit score or a lot of collateral. This is when amazon steps in a does what they do best – offers a solution to a problem.
The more sellers amazon has, and the more profitable those sellers are, the better amazon do themselves. It is in Amazon’s best interest to keep their seller’s businesses running at their best and ever-expanding.
So, this is all sounding really good, but who’s eligible for an amazon loan and how do you go about applying?
As it stands, Amazon business funding is only available for small business owners that sell products on the Amazon platform. This means that if you are a small business owner selling on say, eBay… you probably won’t be getting a response from Amazon funding fairies.
Another important point to mention is that unlike most lenders, you can’t actually apply for a loan through amazon, instead they have to invite you. This sounds a little backward, but its amazon is not exactly known for following the norm.
If Amazon wants to offer you the opportunity for funding, they will send you a message directly through your seller account.
Amazon loans are greatly based around a merchant cash advance financing model; these types of loans are a little different from your regular small business loan, but the format is very well suited to the amazon selling scenario.
So when amazon lends you a sum of money, you will also be given a 12 month period to pay the money back, but instead of you physically having to transfer them funds every month, they simply take a fixed percentage of your sales.
If sales do not generate enough income for amazon to receive their minimum payment, they will simply take the money from the card linked to the Amazon sellers account.
For the time being amazon only offers short term loans with repayment terms that are capped at 12-months. It is unclear whether or not there is a grace period involved, although there should be little need for one, as no stock is physically held by the seller.
Again, Amazon isn’t very keen to share information about their funding so we can not be certain about their loan interest rates. The general consensus, however, is that their loans run with an interest rate of between 5% and 15% – which is much better than a small business credit card or traditional merchant cash advance.
The amount Amazon is willing to offer sellers greatly comes down to the size of their store, and how much amazon believe they would benefit from expanding.
It is understandable that a company selling expensive electronic items is going to benefit from more funding than say a shop selling small stationery.
Amazon loans tend to be in the range of $1000 and $750,000, which I know is a broad scale, but the different business types that sell on Amazon are so broad aswell.
On acceptance of an amazon loan, you will have to agree to paying the money back through fixed monthly repayments. Due to Amazon funding following the merchant cash advance model, you won’t have to physically transfer any money, Amazon will instead deduct the funds from your sales as they come in.
This system definitely has its advantages:
The last bullet point it both an advantage and disadvantage because if you have a particularly bad month, Amazon will still take the same fixed fee. This is different from a traditional merchant loan, where they usually deduct a variable percentage of monthly income.
When you’re in a tight squeeze and your business is on the ropes, time to funding can make or break the future of your operations. Like most short term business loans, Amazon business funding is speedy and should be with you within 24 hours.
On approval funds usually show up in your seller account immediately.
Now, this is where things get a little, iffy.
Unlike regular small business loans, in which you can use the funds for whatever you please (as long as it is business-related), Amazon loans are very strict, and heavily restrict what the funding can be used for.
Any money received through the amazon lending program can only be used for the replenishment or expansion of amazon inventory.
Ah, so no new office space to get you out of your parent’s basement? Unfortunately not.
As you’ve probably established by now, the Amazon lending program is only for amazon sellers; but what about the other requirements, what do you need to demonstrate as an amazon seller to become eligible?
People who have revived an amazon seller loan usually:
The above points are not written in stone nor does amazon disclose any solid information on the matter. Ultimately, Amazon is happy to offer their loans to small businesses that they believe will make good use of the money, and grow their business as a result.
As I’ve said before, the better Amazon’s sellers do, the more profit Amazon makes themselves.
Now that you have a basic understanding of what amazon seller loans are, how they work, and what their terms are, let’s have a look and see if amazon funding is the best funding for your business.
Amazon is the biggest online retailer, period. With over 200 million unique shoppers visiting the market place every single month, the Amazon platform is one the best, high traffic places to situate your online store.
With so many unique visitors, you can take full advantage of the online footfall (clickfall) and drive some serious traffic to your store.
As an Amazon seller, you also get access to the Amazon review system that is run by real shoppers. This is a great way to build trust with your customers and develop a positive seller score that consumers prefer to shop with.
If you’ve ever had to apply for traditional small business financing, then you know how much of pain it can be and how many hoops there are to jump through.
Business credit checks, personal credit checks, bank statements, profit and loss accounts, collateral evaluations, the list goes on and on! This process takes time and effort that many business owners don’t have, and there is never a guarantee of being approved.
Amazon seller loans, on the other hand, involve very little requirements, and in actual fact, there is no application process at all. Amazon cherry-picks and offers their funding to the sellers that they deem suitable – it’s like the pot of gold finds you!
At the time of the offer, you can accept, decline, or postpone it to a later date; there are no obligations.
No credit checks or anything of that nature, Amazon are only concerned with the running of your business on their platform.
There are a lot of options out there for small business owners looking for funding, but the difficulty is not finding a lender or suitable product, but instead being approved.
Applying and being rejected is common when you haven’t got a good credit score or your financials up to scratch.
As mentioned above, Amazon does not do any credit score checks, nor do they look into your personal financials, which makes their loans perfect for individuals that have been previously or recently rejected by other lenders.
One of the most important factors to consider when looking for a short term loan is the repayment rates that you will have to pay.
Funding can make your business, interest can break it. Many loans are subject to very high-interest rates that can suffocate profits, and essentially deem the loan useless in the first place.
Amazon lending is reported to offer relatively good interest rates in comparison to other lenders.
Between 5% and 15% might not sound amazing, but most traditional merchant cash advance interest rates start at 20% and most go well beyond this number.
It’s still important to remember that even though the interest rates of amazon loans are good, you will still have to carefully consider whether or not the funds will effectively grow your business enough to make the investment worthwhile.
As well as interest rates, traditional lenders love to slap on some extra fees here and there just to squeeze out as much as they can out of you before your all dried up.
Opening fees, administration fees, early repayment fees, late payment fees Al these little add ons can really leach you of your funds.
Amazon lending is essentially free from fees, there is no fee for starting the loan agreement, no administration fees, and because they take a fixed rate every month, there is no potential for late payment fees either.
Also, if you pay your loan back early, instead of being issued an early repayment fee, you will be rewarded with a discounted early settlement amount as Amazon will knock off any remaining interest.
As you can see, there are a lot of benefits to Amazon business financing – no fees, easy to qualify, low-interest rates, huge customer base – but as with any funding solution, there are always some cons to consider before taking the leap of faith.
The Amazon Marketplace is a fantastic feeding ground for consumers, and the sellers benefit tremendously, as a result, but it can also be difficult for your brand to stand out amongst a sea of other similar competitors that pretty much all look the same.
Unlike a personalized website, all Amazon stores near enough look the same. It is very easy for a customer to buy a great product, but not even know who they bought it from, all they know is that they got it from Amazon.
Many small business owners that conduct their eCommerce on amazon, struggle to ever step away from it. The marketplace makes it incredibly difficult to build your own brand, and instead, your name is dwarfed by the superpower that is Amazon.
If you already feel that your company is struggling to stand out, or that Amazon is limiting your organic growth to other platforms, then accepting a loan by them is only going to further this, and make it more difficult to break away and establish your business under other means.
If you go to a traditional lender fo funds and you get accepted, they will usually leave you to your own devices, and allow you to use your funds for anything that you see fit. Be it a new premises, more stock, new equipment, updated security system, as long as it’s for the business, it doesn’t really matter.
Amazon loans, on the other hand, can only be used for the purchase of more stock, or to expand your product offering.
This inflexible approach to lending means that their product model will not meet the needs of many small businesses.
The way that your repayments work will work with an amazon loan will be great for some, but terrible for others.
Amazon takes a fixed fee from your monthly turn over as payment for the loan over a 12 month period.
If your business’s income is consistent and steady, this shouldn’t be a problem, but if you have regular ups and downs, or your store is seasonal, such as a Christmas store, the quieter months can be really difficult.
Although Amazon does not ask for collateral to be put against the loan, the funding is still secured by your current and future inventory. This means that if you are unable to meet the repayments, Amazon will have the right to claim your stock to recover the debt.
If you use Amazon FBA (fulfillment by Amazon) which most sellers do, they can either:
If you hold you on stock, amazon will simply deduct the money from your future sales, or they will try and charge the bank account that is linked you your seller account.
Amazon lending is essentially a groundbreaking move by the company into the small business financing market, and its product offering is very unique.
Amazons financing solutions are invitation-only, only available to sellers on the platform, and the funds are only for use exclusively on the platform as well.
The funding that they offer is tailor-made and pretty perfect for businesses that conduct most, if not all, of there business on the Amazon platform. If you are happy with the Amazon marketplace and would benefit from growing your inventory, then the amazon seller loans that they offer could be your best bet – especially if you are struggling to secure funding from elsewhere.
If, however, you are a business owner that is need of funds to serve a number of needs, then you might be better off looking for a loan that offers some more flexibility.
In the end, the decision you make in regards to your funding is down to you and the needs of your business. Weigh up the pro’s and cons, and make sure that whatever funding option you go with (if any) you have carefully considered how if the risk is worth the investment.
If you feel that an amazon seller loan is not best suited to your business, you are not fully convinced by the offering of traditional lenders, or you are struggling to get approved, are there any alternatives out there for your business?
Luckily there is another solution – progressive lenders.
Progressive lenders are breaking free from the confines of traditional lending practices, offering tailor-made loan solutions that meet the needs of specific business models.
Premier FinTech company, Lending valley, is an excellent example of such lenders, offering personalized loans to businesses and individuals with poor credit, no credit, no collateral, and so on.
Lending Valley offers amazon sellers all the products that they would offer to any other business, including:
Plus more.
The advantage of working with a company such as Lending Valley to reach your financing goals is flexibility – you are in the driving seat.
Lending valley will work with prospecting businesses to get them the best Amazon FBA seller loans for them with the best terms and favorable rates.
