In a world that’s embracing both digital trends and contactless shopping, the e-Commerce industry is thriving. Between April and June, consumer spending on online shopping was up 44% according to Digital Commerce 360, and Amazon’s revenue increased by 40% during the same period. If you’re an Amazon seller eager to increase sales, this presents a massive opportunity—but could Amazon lending help you achieve it?
If you have a registered Amazon store on Seller Central, then extra cash could help you purchase additional inventory, landing even more sales.
But, is Amazon Lending the right financing option to take your ecommerce business to the next level? Or would one of several other available financing options better suit your business?
In this guide, we’ll explain everything you need to know about Amazon loans and financing for Amazon sellers, including options available through specialized small business lenders.
Many Amazon sellers have everything it takes for selling on Amazon—the marketing skills, a drop shipping program, and a hungry customer base—except the cash to get started.
Amazon Lending is a proprietary lending platform designed to help Amazon sellers get the financing they need to purchase inventory, and fuel their Amazon store.
While we’re aware of the Amazon business loan program, details about its offerings and qualifications are vague. In fact, there are no formal details listed about the Amazon loan app or lending platform on its website. Most information is available secondhand, through those who have received loans.
For some Amazon sellers, utilizing this platform may make things simple, easy and centralized. But for others, it can be limiting. Amazon Lending only helps sellers purchase additional inventory, without allocating any money for other aspects of the business. Through other sources of capital, you can avoid these limitations.
Amazon Lending also operates on an invite-only basis, meaning you can take advantage of it only if you’re invented to.
Overall, Amazon Lending provides a simple and easy way to purchase additional inventory and drive sales—if you’re invited, and you don’t need cash for other parts of your business.
After covering the purpose and origins of Amazon Lending, it’s time to delve into who can get an Amazon loan. Naturally, this financing platform is only open to those who are selling through Amazon.
But while Amazon Lending exists to help the eCommerce giant’s registered sellers, it’s not open to all sellers.
Like we mentioned before, you can’t apply to receive a loan through Amazon. Instead, this program works on an invite-only basis—if you meet the unspoken Amazon lending requirements, then they may reach out to see if you’re interested.
If you’re trying to figure out how to get Amazon marketplace lending, then it’s important to understand that there’s not exactly a clear-cut answer.
Because you need to receive an invitation for Amazon’s loan program—rather than apply outright—there are no precise steps you can take to qualify.
However, because these financing products are only available to registered Amazon sellers, Amazon uses specific metrics to identify who might make a good candidate.
Unlike other sources of financing, Amazon won’t evaluate your business based on traditional qualifications like business or personal credit score. They also won’t request any bank account statements, or other documentation.
After all, because fund usage is limited to Amazon inventory, and Amazon can judge your eCommerce business based on sales metrics, there’s no need for them to consider outside factors.
If you receive an Amazon loan offer for your eCommerce business and accept, it’s important to know how you can use the funds.
Because financing for Amazon sellers is routed directly through the platform, there’s not much flexibility when it comes to fund usage.
If you receive financing through Amazon Lending, you can only put it toward purchasing new inventory for your marketplace. Unfortunately, you can’t spend any of the money on other areas of your business, like marketing, hiring, or anything else.
If this is all your small business needs cash for, then that probably isn’t an issue. But on the other hand, if your business could benefit from investment in other areas, then it may not be the best fit.
So, how does Amazon Lending actually work? If you’re selected for the program and choose to accept the offer, then you’ll receive Amazon’s loan product.
But while it gives your business extra cash to grow, it doesn’t work exactly like a standard small business loan.
Amazon offers sellers anywhere from $1,000-$750,000, depending on their business. The higher your annual sales, the more likely you are to receive a larger loan amount.
Because the purpose of the loan is to help you drive Amazon sales in the short term, term lengths are also short. Repayment terms are as long as 12 months, but could be shorter. While there are no details confirming this, it appears that Amazon doesn’t charge sellers a prepayment penalty for early payments.
When it comes to Amazon Lending rates, there’s no clear answer as to what you can qualify for. Amazon has noted that their rates are lower than business credit cards. According to some sellers, interest rates range from 6-16%—but this may not paint the full picture.
It’s also important to understand how repaying an Amazon loan works.
Depending on your agreement, money will be automatically deducted from your Amazon seller account. This eliminates the potential for you to forget a payment, and fall behind. If you don’t have enough cash to cover this cost, then it may instead be deducted from your linked account.
While the repayment method is similar to a merchant cash advance, Amazon loans are repaid through a fixed term.
To understand if an Amazon loan is the best solution for you, you’ll need to put it up against other financing options on the market. While the simplified application process makes it easy, other limitations (like fund usage and more) may ultimately restrict your business.
If you don’t qualify and haven’t been invited to access Amazon Lending, or want the ability to compare available rates, terms, and amounts, then you’re not out of luck.
By applying through a lender or broker, you can find other funding options. Unlike Amazon Lending, you’ll have complete control over how funds are put to use. You don’t have to find a specialized Amazon loan company to overcome cash flow issues or get extra working capital, either.
Depending on the specific lender you work with, you may have the flexibility to access a longer term. If you’re generating less than the required $10K in online sales for Amazon lending, but earn more selling on your own website or through other channels, then exploring other options is also a good idea.
Aside from Amazon loans, these are some of the most popular financing options you can use to grow your eCommerce business.
Small business loans, also called term loans, are straightforward and simple. After being approved, you’ll receive a set amount of cash that you then repay over a defined term.
You can choose to put all the funding toward inventory, or allocate it throughout different areas of your business. In some cases, it might make sense to save a percentage for marketing, hiring, and a larger warehouse space.
Depending on your business and needs, you may qualify for short term business loans, or longer term products.
A business line of credit is the most flexible alternative to Amazon Lending.
Rather than receiving a set amount of cash, lines of credit give you the ability to draw more funds (as you need them) from a larger, pre-approved amount. You’ll also only pay interest on what you take, rather than what you qualify for.
With the true revolving line of credit that National offers, you can draw more as you pay it down.
Through a merchant cash advance, you can get cash quickly and easily in exchange for future sales. Instead of making consistent payments as you go through fast and slow periods, repayment is based on your day-to-day sales.
In recent years, merchant cash advance options have come a long way, and are actually quite competitive.
If your eCommerce business is moving full-steam ahead, then why limit your momentum with Amazon Lending?
At National, we work within our 75+ lender marketplace to get you the financing options you need. A knowledgeable Business Financing Advisor will guide you through the options available, and help you understand which is best for you.
Once you receive the cash in your account, you can use it to truly grow your business—instead of just purchasing inventory.
Get started by applying now!
National Business Capital is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
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Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!