Maintaining its title as the largest eCommerce company in the world, Amazon receives over 200 million unique visitors per month. With 89% of online shoppers choosing Amazon over other eCommerce websites, this Fortune 5 brand doesn’t just strategize customer loyalty, it also wants to keep its sellers happy. 

Through the Amazon Lending program, Amazon gives qualified sellers access to various credit lines and working capital so that they can keep their businesses moving. 

That’s important. Because in the past, growing businesses were forced to rely almost exclusively on traditional banks for funding. With approval rates generally less than 30%, opportunities to restock inventory, take advantage of limited time discounts and reinvest in the business were extremely limited. However, once online funding providers hit the eCommerce scene as a quicker, easier alternative, Amazon seized the opportunity to become a funding resource for its sellers. 

But as an invitation-only program, not every seller has heard of Amazon Lending. Even those who know about the offering may still be on the fence as to whether or not it’s the right choice for their business.

If you’re already an Amazon seller or plan to become one, access to its working capital platform is worth considering. In this article, we’ll take an objective look at the pros and cons of Amazon Lending to help you pinpoint the best funding solutions for your business.

Amazon Lending Program Overview

With Amazon Lending, eligible sellers on Amazon have access to working capital to help replenish and promote their inventory. To gain a full understanding of the program, we’ll break down most frequently asked questions about the Amazon Lending service and application process.  

How Amazon Loans Work

If you’re an eligible Amazon seller, you will be able to see the available funding options within your Seller Central page. After deciding on a loan offer, you can apply for the amount you need up to the prequalified total.

Here’s a look at the types of funding options offered by Amazon Lending.

  • Loans Either Amazon or a third-party lender through the Amazon Seller Lending Program will offer loans ranging from $1,000-$750,000 to those they deem eligible. After approval, you can expect to receive access to the funds within five business days. There are currently three lenders in the Amazon Seller Lending Program, all of whom are based in China: Shanghai Fuyou Commercial Factoring Co. Ltd, CreditEase, and HSBC.
  • Line of Credit Similar to a business credit card, Marcus by Goldman Sachs offers eligible Amazon sellers a line of credit. The approval time may vary, as it bases the decision on creditworthiness. Once approved, you can request funds at any time with a minimum draw amount of $500.

Repayment Process

Similarly to a merchant cash advance, Amazon takes a fixed percentage of your gross sales as the monthly repayment. Since the deductions are automatic, sellers will need to monitor their monthly progress. If your disbursement one month is insufficient to make the full loan payment, Amazon will deduct the remaining balance next month. The downside of this process is that monthly deductions occur until you fully repay the loan, regardless of your sales performance.

Fortunately, Amazon allows you to pay off the loan balance at any time without a prepayment penalty. This early repayment helps sellers save on interest since Amazon will prorate the interest due based on the remaining balance.

How Do I Get Funding from Amazon?

Since Amazon Lending is an invite-only program, you will only receive a message from Amazon with their loan offers if you prequalify. When you click the invitation for a Marcus Business Line of Credit or third-party lender, it will redirect you to their respective websites. You will likely have to provide more information in order to verify your eligibility.

Amazon Lending allows you to apply for as many loans as you would like, but you can only choose one through the Seller Central page. After you receive approval of the loan, you cannot apply for another source of funding within the program.

What Are the Amazon Lending Requirements?

Amazon evaluates seller accounts regularly, offering financing options to those with a track record of growing sales and customer satisfaction.

While exact criteria aren’t mentioned, some users have shared the following requirements on Amazon sellers forum threads:

  • Registration in a US state where Amazon Lending is available
  • At least $10,000 in total sales over the past 12 months 
  • No serious customer complaints within the past six months 
  • Supporting customer satisfaction metrics

Be aware, sellers can receive an application one week, only for it to disappear the next. This removal happens either because the lenders determined that your criteria have changed, or that your business’s sales and performance metrics have fluctuated. 

Fortunately, sellers who are currently ineligible to apply for Amazon Lending can still look into alternative eCommerce funding solutions.

What Kind of Interest Rates Can I Expect With an Amazon Loan?

While Amazon Lending does not disclose the rates of its loans, some users on the Amazon seller forum report receiving a 6.99% interest rate from Marcus by Goldman Sachs, and up to a 16% interest rate on Amazon loans.

How to Decide if Amazon Lending Is Right for You

If you’ve received an invitation to apply for Amazon Lending, take a minute to examine the following benefits and drawbacks as they relate to your business.

Pros

Easy application process

If you’re an eligible seller, applying is fairly simple. Amazon already has your business information and monitors its performance metrics, no extra steps are needed after submitting your request.

Fewer Fees

While many funding options come with several fees, such as origination and prepayment penalty fees, Amazon Lending does not. Instead, paying back the amount early saves you money on interest fees.  

No credit check

As mentioned earlier, Amazon monitors your business performance frequently. Since it bases approval on your customer satisfaction and sales history, your credit score isn’t needed.

It’s important to note that while an Amazon loan does not require a credit check, third-party lenders may still choose to do one. That said, when weighing your options with Amazon Lending, here are some drawbacks to consider.

Cons

Fixed deductions

No matter your sales performance levels, the deductions through Amazon Lending remain the same each month. This could be an issue for some sellers, should their gross sales decline temporarily due to seasonal trends, etc.

Inventory collateral 

Using the issue above as an example, if you’re experiencing a decline in sales and are forced to default on a loan, Amazon can freeze your account and hold your inventory as collateral until full repayment.

Obscure eligibility and interest rates 

Amazon Lending doesn’t mention specific determining factors of eligibility. As for the third-party lenders, rates vary and are up to their discretion during the approval process.

Can You Start an Amazon Business With No Capital?

Fortunately, the answer is yes. 

In a recent JungleScout survey of over 1,000 Amazon sellers, 55% who started with $500 or less have been selling for at least three years. Additionally, the survey shows that 38% of Amazon sellers who started at $500 or less earn at least $5,000 per month. It is possible to start your Amazon business with little to no capital, but it will require strategic planning, research, and of course, trial and error.

If you’re thinking about selling on Amazon, you’ll also want to take into account all initial costs and fees. This includes the subscription fee and referral fees per item sold on Amazon. Additional starting costs may include professional product photography, product label designs, and shipment and fulfillment fees. 

Alternatively, you could save money by first starting under Amazon’s individual seller account, which is free. Once you gain momentum with sales and build consistent revenue, this can serve later as a financial cushion while transitioning to the business account. 

Is Amazon Lending Worth It?

Whether or not you should use an Amazon loan depends on the needs of your business.

For qualified sellers who make most of their revenue on Amazon, Amazon Lending is a solid option. Just make sure to monitor your monthly progress and ensure the automatic deductions fully repay the amount due each month.

If you don’t qualify for Amazon Lending right now, or if the loan amounts available aren’t enough to cover the investments you need to make in your business, it may make sense to look into an alternative funding provider.

If you own an eCommerce business, you know that quick access to working capital is crucial to staying a step ahead. Whether it’s for inventory, advertising, or special offers, reinvesting into your business is what fuels profitable growth. 

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