Sell here, borrow here. Once you have a seller’s account with Amazon, you may be eligible to borrow up to $750,000.
What is Amazon Lending?
Amazon launched Amazon Community Lending as a pilot program in 2011. From 2011 through 2019, borrowers got about $710 million in funding.
Amazon Lending provides short term business loans for qualified sellers. The sellers use the funds to get additional inventory. Amazon Lending works in partnership with Goldman Sachs and other third party lenders.
The available products include term loans, interest-only loans and lines of credit for US-based businesses.
How does Amazon Lending Work?
You must have an Amazon sellers account. The loans are by invitation only. There’s no credit check in the traditional style. Amazon automatically looks at select metrics such as your sales volume and invites you to apply.
What’s the payment method? Your monthly payments are automatically deducted from your sellers account based on a percentage of sales from your Seller’s Account. If there’s not enough money in your Seller’s Account to cover the loan payment on the due date, the funds are withdrawn from the credit card information you provided when you set up the loan.
There are various financial programs. You can follow the steps to choose which is best for you.
How Does Amazon Financing Help Grow Your Business?
You get more ability to grow your business as you purchase inventory.
You can expand your product line through better inventory management.
You can reach more shoppers.
You can better position your company.
Am I Eligible for an Amazon Loan?
Once you establish a Seller’s Account on Amazon Marketplace, Amazon will let you know. If you aren’t immediately eligible, you won’t receive an invitation to apply for an Amazon loan. It is one of the better small business financing options in the market if you get the nod.
Amazon wants to enhance and grow businesses owned by historically disadvantaged sellers, and those of low to moderate income. During the online application process, Amazon does not look at your credit score as a factor when making a loan decision.
As you sell on Amazon, you may later become eligible due to sales volume. Eligible sellers may receive an invitation later.
How Much Could I Borrow from Amazon Lending?
There are minimum and maximum loan amounts for each type of loan. You can borrow from $1,000 to $750,000. The majority of high dollar loans are lines of credit loans.
Does Amazon Financing Have High Loan Payments
The lending program has various loan rates. The loan rates are determined by the loan size, the term, and the quality of your credit as determined by Amazon.
As with all small business loans, you’ll pay an additional fee for late payments. The annual interest rates range from 6.99% to 20.99%.
For Line of Credit loans, there is an additional maintenance fee if you don’t use 30% of your line of credit amount.
Amazon Lending Program vs. Traditional Small Business Loan
If you choose a bank loan, you’ll most likely make payments from your business bank account. There are other factors that influence this bottom line, such as utility and insurance payments. With Amazon Lending, you’re borrowing money to buy inventory, and using inventory sales through the online marketplace to pay the loan. That’s simple to track and analyze, compared to other business financing options, making it one of the biggest alternative lenders for small business. The only drawback being you have to be on Amazon platform.
With Amazon Lending early payments aren’t penalized. If you make the full loan payment early, erasing the loan early, there’s no prepayment penalty. That means with early payment, you’ll have interest savings.
As a credit option, the Amazon business lending program is fast, with the time from business completed application to approved loans issued often within 2-5 business days. That’s a huge plus for business financing options.
Typically, a small business loan requires a 600 and better score, and a requirement that you’ve been in operation for 12 months. Small businesses might get better interest rates on merchant cash advances, business credit cards or a business line of credit from other lending institutions, but small businesses typically wait 2 or 3 months for a decision. There may be various fees associated with your loan. And even with a short term loans, you may pay a penalty if you pay your loan balance early, which is one of the main hidden fees in the fine print.
If you default on the loan by not making payments, and your credit card is declined, Amazon may do a first seller account disbursement. That means that Amazon can use and sell your remaining inventory to use against your remaining loan payout.
5 Steps to Apply
Businesses eligible must be set up with a seller’s account on Amazon seller central. Here’s a brief overview of the steps to take:
1. Sign in to Your Amazon Sellers Account on Seller Central
If you’re new to Amazon Sellers, don’t despair if you don’t receive an invitation for a loan. As your business grows, Amazon will automatically take another look. After opening and running your sellers account for some time, you may become eligible for a loan.
2. Verify Eligibility
If you’re eligible for Amazon loans as an Amazon seller, your online business will get an invitation.
3. Choose a Financing Option
Choose your loan amount, and go through the steps of the application process. Choose the option that best fits your business needs. You can choose a term loan, interest only loan, or a line of credit.
4. Send Your Application
Submit your application for an Amazon loan.
5. Wait for Your Application to be Processed
You should get a response on your Amazon business loan application in 2-5 business days, with loans issued immediately.
Does Amazon financing affect credit?
No. If you’re seeking finances from potential lenders outside Amazon, they won’t be able to access information about your Amazon Lending activities. The loan issued and ongoing payments against the remaining balance are internal transactions within Amazon.
Does Amazon have 18 month financing?
No. The repayment terms are up to one year.
You can get 18 month financing on a short term business loan through a traditional lender.