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Explore Options with an Amazon Line of Credit for your Business
The dominance of the Amazon marketplace can be an incredible advantage for e-commerce retailers pursuing new customers and planning to expand their reach. Every seller listing products on the platform has an opportunity to capitalize on millions of loyal shoppers, while Amazon FBA Sellers enjoy a unique competitive fulfillment option.
But sales potential isn’t the only thing that Amazon offers sellers. As the company has grown, it has diversified its business into many other areas. One of those is financial services for businesses. So whether a seller is looking for inventory financing or wants to access an Amazon Business Line of Credit, it may now be an option from Amazon. Thanks to direct lending and partnerships with financial institutions, Amazon Lending options are offered to select, qualified Amazon sellers.
Amazon Lending offers exclusive financing for sellers
Amazon Lending offers a range of products to accommodate the financial needs of Amazon sellers. Each has specific qualification requirements, and the various options are designed to meet unique financial needs in different ways.
Amazon’s term loans provide lump-sum financing with a specified period of repayment. Unlike a revolving business credit line, which can be accessed repeatedly, as needed, this type of loan allows Amazon sellers to borrow a set amount of money and sets a deadline for it to be repaid. The borrower is required to make an equal monthly payment that includes both principal and interest on the loan.
The application for term loans is available to eligible sellers via Seller Central, and the loan does not have lengthy paperwork requirements. The interest rates for a term loan from Amazon will vary depending on current financial conditions and an applicant’s creditworthiness. However, once accepted, the interest rate remains fixed throughout the entire term of the loan.
Amazon term loans are also available from Lendistry, part of the Amazon Community Lending program. It is a minority-owned Community Development Financial Institution (CDFI) designed to serve small businesses in socially and economically distressed communities.
Interest-only loans are another non-revolving business financing option. Unlike a term loan, borrowers opting for this product can repay only the interest that accrues during an initial introductory period. Eventually, after the interest-only period expires, the Amazon business will face an increase in the payment amount that also covers a monthly principal payment in addition to the interest charged on the financing.
An interest-only loan also has a fixed interest rate based on seller qualifications, and the business loan is offered only to select retailers through a simplified application process within the Seller Central dashboard.
Amazon Business Line of Credit
If your Amazon business prefers a revolving credit line, the Amazon Business Line of Credit could fit the bill. It is a flexible financing option that gives a seller access to funding up to a predetermined business credit limit.
An eligible seller can request a draw on the business credit line as funds are needed. This type of financing is typically used to build inventory, fund operations, or quickly take advantage of business opportunities. A fixed interest rate based on the seller’s credit report accrues only on the outstanding balance, not the unused portions of the business credit line. In addition, the interest rate is locked for the life of the line of credit agreement.
In 2020, Amazon partnered with Marcus by Goldman Sachs to give sellers access to competitively priced financing products, specifically this line of credit tool. The Amazon Business Line of Credit application is available only by invitation to select retailers and exclusively through Seller Central.
Merchant Cash Advance
Another non-revolving financing option that an Amazon seller can consider is a Merchant Cash Advance. This business loan differs from an Amazon Business Line of Credit because the advance ties repayment to a portion of the sellers’ future sales. Rather than pay a fixed interest rate, a seller that opts for a Merchant Cash Advance will pay a fixed capital fee. No additional fees, personal collateral or late fees are associated with this type of loan.
Amazon’s Merchant Cash Advance financing is offered through a partnership with Parafin. The business financing provider focuses on helping small businesses grow and originated after the pandemic to provide fast, easy access to capital for companies at risk of being left behind.
Like the other loan options, the Seller Central portal presents applications for a Merchant Cash Advance to eligible sellers.
Why choose a corporate credit option from Amazon?
An Amazon seller eligible to apply can benefit from choosing one of these four loan options for several reasons. First, since Amazon is already vetting sellers before it makes these financing tools available to them, approval often comes quickly. Of course, the wait times will depend on the loan product your business chooses to apply for, but it is likely to be faster than other alternatives.
In addition, the application process for all of these business credit programs is designed to be simple. The applications can be completed online within Seller Central and may allow you to avoid submitting lengthy paperwork that a financial institution lacking familiarity with your Amazon business might require.
In some cases, an Amazon seller can benefit from the flexibility of accessing more than one of these financing options simultaneously. Businesses that qualify for multiple products via Seller Central can choose the right mix of business credit for their needs.
Regardless of where the financing originates, accessing business credit strategically can free up cash flow to help cover inventory costs or develop new products. Many Amazon businesses also use the funds for advertising and marketing expenses. An additional credit line can also give a seller the edge when managing inventory, allowing you to bulk buy products to stock up ahead of upcoming sales or prepare for increased seasonal interest.
Get started with Amazon Lending
As mentioned, Amazon strives to make access to its financing as straightforward as possible for every eligible seller. The marketplace prefers that its retailers have more time to focus on the shopper-centric aspects, such as growing product selection or improving product quality.
To check your eligibility for any of these Amazon Lending products, sign in to Seller Central and look for the financing option card on your homepage. If it is there, you’ll be able to choose the loan option that works best for your business and apply to borrow up the full amount listed for each program. If no lending options are offered, it is likely because your business has not yet established a steady, growing stream of revenue as an Amazon seller.
For those who are eligible, the available financing options will direct you to the next steps that are required to complete an online application and provide the estimated wait time for a final approval decision.
Remember to borrow responsibly
Just because a loan offer from Amazon can make it easy for your business to get financing doesn’t mean it’s the optimal decision. There should be careful consideration before applying for any Amazon Business loan or credit line.
For one, Amazon is not the only lending partner that a small business can turn to. Depending on your credit history and balance sheet, It’s possible that other alternatives, such as SBA loans or inventory loans from competing lending institutions, are obtainable. Or it may be the case that a simple business credit card is the only financing your Amazon business needs.
Pursuing financing from other lenders may be less convenient but could result in a higher loan amount or better payment term. Remember, even with a fantastic credit score, taking on any new fixed payment is risky for a growing Amazon business.
In some cases, Amazon business financing can result in a monthly payment that is automatically withdrawn from your Seller Central account. Repayment won’t adjust to account for a drop in sales, and failure to make required payments can be devastating. Taking advantage of an Amazon corporate credit line can give Amazon a path to holding inventory or restricting the sales of delinquent borrowers. Extreme circumstances could result in the company seizing merchandise to sell it themselves to recoup an unpaid loan.
So how do business owners make an informed decision about pursuing Amazon seller financing? Start by solidifying your plans for the future and taking a close look at the current trajectory of your small business.
Be sure you are confident in your growth strategy. For example, have you optimized your listings and created a marketing plan to support your sales goals? Do your reviews indicate that customer loyalty is trending in the right direction, or are there product quality or fulfillment issues that will hinder your growth plans? These questions can help Amazon sellers determine if they are ready for an Amazon loan.
A partnership with Amify is right on the money
New funding won’t overcome the fundamental challenge of selling on Amazon successfully. Before you commit to a new Amazon financing agreement, consider a conversation with the talented team at Amify to ensure your business is in the best position for growth.
Schedule a consultation with our experts to discuss how a refreshed approach to optimization, fulfillment or marketing could be the more cost-effective way to reach your goals sooner.