Do you need to boost the cash flow in your small-to-medium-sized business? If you are an eligible Amazon seller, you just might find what you’re looking for in the Amazon lending program.
Amazon is the world’s largest online retailer, with millions of sellers and a 37.6% e-commerce market share in the United States. The platform’s online sales structure helps countless small businesses to thrive. And Amazon loans help sellers overcome financial barriers so that they can scale their businesses.
But exactly what is an Amazon loan, and how do you qualify for it? This guide explains all you need to know about Amazon’s range of financing options.
What Is an Amazon Loan?
An Amazon loan is a financing option provided by Amazon to their online sellers, in cooperation with a third-party financing provider. There are different types of Amazon loans and the one you choose will ultimately depend on your unique business needs.
Do you need flexible repayment terms? Would you prefer a once-off interest-bearing loan or a revolving finance option with no interest? Whatever you need, there’s an Amazon loan that could work for you. But to decide which option suits you best, you need to understand how the Amazon lending program works.
Understanding The Amazon Lending Program
Amazon is offering loans to eligible sellers on their platform, to help them build their businesses and reach their goals. This is called the Amazon Lending program, and it’s making a big difference to many US-based small businesses in need of financial assistance.
But this multinational e-commerce giant is not financing these Amazon loans directly. The platform has partnered with reputable third-party financing providers to make these Amazon loans available to their sellers.
Thanks to these exciting partnerships, Amazon can provide funding alternatives to traditional business loans. Through its Amazon Lending program, sellers with small-to-medium-sized businesses in the United States have access to a range of business financing options.
Amazon Lending Products
Are you an Amazon seller, interested to learn what Amazon loans could do for your small business? With Amazon Lending, loans are easier to access than ever before. The Amazon Lending program offers a variety of financing products for your different business cash flow needs:
Merchant Cash Advance
Need a user-friendly, flexible Amazon loan option? Consider a merchant cash advance. It’s a financing option with a fixed capital fee that gives you access to a non-revolving sum.
Repayments are made through a percentage of your future Amazon sales until you have paid off the cash advance. Unlike conventional business loans, no interest is charged, no personal collateral is required, and there are no penalty fees for late payments.
Merchant cash advances are therefore perfect for start-ups who need a financial boost but can’t afford heavy interest-bearing repayments. Your monthly repayments will fluctuate because they are not a fixed amount but rather a portion of sales.
The Amazon Lending program’s merchant cash advances are provided through the business financing provider, Parafin.
Term Loans
Amazon Lending loans are available as term loans and there are two different options available. One has a fixed interest rate, and the other has a fixed fee calculated as a percentage of the total loan sum. Eligible Amazon sellers can choose the option that suits them best.
First, let’s have a look at the interest-bearing term loan.
This is a non-revolving, lump-sum loan with a fixed interest rate. It has a specified payback period, during which the loan is repaid in equal payments (the principal sum + the interest).
Financing for this loan is provided by a Community Development Financial Institution (CDFI) known as Lendistry.
Then there’s the non-interest-bearing term loan.
Like the interest-only option, this is a non-revolving, lump-sum loan with a specified payback period in equal weekly/monthly payments.
However, instead of a fixed interest rate, this Amazon loan carries a fixed fee (a percentage of the total loan amount). The loan fee is assessed at the time of loan origination and is paid over the life of the loan along with the principal sum. Financing is provided by the global financial tech company, SellersFi.
Lines of Credit
Another type of Amazon loan is the line of credit. A line of credit is a more flexible financing option than traditional business loans. It operates similarly to a credit card, in that it provides access to a revolving line of credit up to an assigned limit. You can use as much of it as you need when you need it the most.
It’s always a good idea to have an emergency fund for your small business. Whether you need help with running expenses or a contingency plan for sudden expenses, an Amazon Lending line of credit may be the solution.
With an Amazon Lending line of credit, interest accrues at a fixed rate on the drawn balance. What this means is you’ll only ever pay interest on funds you use. The interest rate is locked in for the life of the credit agreement.
The Amazon lending program’s line of credit option is provided by SellersFi.
Pros and Cons of Amazon Financing Options
All types of business loans have their pros and cons, and Amazon loans are no different.
Pros
Amazon’s loan options allow you the flexibility and freedom you need to develop and grow your business.
- Easy online application process
- No credit check or collateral required
- A variety of loan products to suit all types of businesses
- Interest-free options for businesses on tight budgets
- Timely payments with Lendistry or SellersFi can improve your business credit.
Cons
The Amazon Lending program is a mostly positive experience. But, there are a couple of drawbacks to consider.
- Only qualified Amazon sellers can access Amazon loans. If you are not an Amazon seller, you can’t take advantage of the loan program. If you are new to the platform and have not had many sales yet, you may not be eligible.
- More detailed eligibility requirements are not easily accessed on the platform’s Amazon Lending information page. Unless you are an eligible seller, you will not be able to view the finer terms and conditions of the Amazon loans on offer.
- Amazon loans are available by invitation only. Therefore, you can’t initiate the loan process unless pre-determined as an eligible candidate. If you are a registered Amazon seller, you can check the Seller Central portal for Amazon loan invitations.
Eligibility for Amazon Loans and How To Qualify
Amazon loans can help small and medium-sized businesses with cash flow for running expenses, inventory purchases, and even marketing costs. However, Amazon loans are only available to eligible sellers.
To be considered an eligible Amazon seller, you must have a proven track record of growing sales on the Amazon platform. You must also have provided your customers on the Amazon platform with the highest level of customer satisfaction.
But who determines whether or not you have met these sales history and customer service eligibility requirements? Amazon does. And their exact formula for doing so is not readily available. Therefore, until you get an invitation from them to apply for a loan, there’s not much you can do but wait and see.
When It’s a Good Idea to Wait, and When It’s Not
Even if you have a promising online business, you can’t just decide to apply for an Amazon loan.
First, you need to be a registered seller on the platform. Then, you need to be considered eligible, and the criteria for this are rather vague. But what we do know is that you need to be making sales on the marketplace, and provide stellar customer service.
The obvious problem in this scenario is this — a lack of ‘growing sales’ may be the very reason why you need financial assistance.
Perhaps you are a startup still finding your feet in the world of e-commerce. If you wait until you make enough sales to be considered eligible, you may be more financially able to honor your loan repayments. But you may also need that financing to make the changes necessary to grow sales.
Therefore, while an Amazon loan may help with unexpected business expenses on a slow month, it’s not the answer for everyone. And if you’re not a registered Amazon seller, you can’t rely on an Amazon loan at all.
Your Alternatives
Fortunately, you have other loan options for your small business, and they don’t even include traditional financial institutions.
You might try one of the many alternative lenders online, such as peer-to-peer lending platforms or business crowdfunding. You may also apply for an SBA 7 (a) loan from the Small Business Administration. Or you could trust the experts at E-Boost Partners to broker a business loan that meets your needs.
Terms for Amazon Loans
Amazon claims that loan applicants can proceed with confidence when choosing an Amazon loan. You can review the details for available options before making a final decision. And the terms and conditions, including rates and payment terms, are ‘transparent’.
According to our research, the cash advance has a minimum loan amount of $500 and a maximum loan amount of $10 million. For the Amazon business line of credit, the Annual Percentage Rate (APR) ranges from 6.99% to 20.99%. The line of credit limit can go up to $1 million.
Term loan amounts vary. Standard term loan amounts range from $1,000 to $750,000 with terms of 6 to 12 months. Other term loans run from $10,000 to $250,000 with terms of up to five years. The APR on the average term loan is typically around 13%.
However, most term loan information is not readily visible on the Amazon website. And unless you are an eligible seller invited to participate in the Amazon Lending program, Amazon loans may not solve your funding needs.
Cut Out the Confusion
Do you want to cut out the confusion when it comes to accessing the funding your small business needs? We can help! At E-Boost Partners, we help US business owners access the financial products they need. And we make the entire process as simple as possible.
Whether you need lines of credit, or working capital between $5K-$2M with repayment terms of up to 24 months, we’ve got you covered. You’ll find all the information you need to make an informed decision, in seconds. And the application/approval process is fast and user-friendly, too.
Final Thoughts
Selling on the Amazon platform can be highly lucrative. And thanks to the Amazon lending program, your small business can get financial assistance for expansion, new inventory, or unexpected business expenses.
Registered Amazon sellers can access term loans, merchant cash advances, and lines of credit to boost their business growth. However, to qualify for Amazon loans, Amazon will need to invite your business to apply.
Luckily, you can get the funding that you need, through E-Boost Partners. We make applying for a business loan easy. Contact us today.