Have you ever wondered what types of Amazon seller financing you can apply for? You may already be aware of many different types of business financing options. But what are the options exclusive to Amazon sellers? Does the platform have anything that they specifically designed for businesses operating inside the Amazon ecosystem? In this post, we will answer these questions. We’ll lay out the different options available from Amazon and how you can apply.
Understanding Amazon Seller Financing
Amazon seller financing is available to certain US sellers who meet the marketplace’s criteria. Called Amazon Lending, these financing options are convenient and designed to meet the business goals of Amazon sellers. This financing is by invitation only. The marketplace usually reaches out to eligible US small and medium-sized businesses. If you are eligible and interested, you just need to respond to that invitation to begin the process. It isn’t complicated nor does it take a long time to apply or wait for an answer from Amazon.
If you need to keep your business cashflow free, Amazon Lending is a great option. You can also depend on this financing option to help you strategically invest in your business to achieve growth without all the hassles of bank loans.
Because this program is by invitation only, Amazon already screens the sellers who receive these invitations. This makes the process so much faster because all applications are essentially pre-approved. A seller can get the loan application through in a matter of minutes. Some loan types do not even require Amazon to run a credit check on the seller. This means that sellers need not worry about negative effects on their credit scores.
Probably the best thing we see about Amazon seller loans is how transparent the costs are. Any seller can simply run a calculation for the amount they want to finance. Using Amazon’s loan calculator, found in the application form, is super easy. They can also put in an idea of the repayments. In an instant, the seller can get a look at what the total cost would look like. And this information is available before the seller submits the application. This way, they don;t need to go through with it if they don’t like the numbers.
Available Amazon Seller Financing Options
Amazon Lending offers competitive financing. Eligible sellers can choose the loan term that fits their needs, as long as it meets the requirements for the pre-qualified amount. The loan is open to finance anything that Amazon considers to be business related. For example, a seller can use the funds to expand inventory, move into greater and different realms of marketing, getting business tools and equipment, and the like.
Term Loans
A term loan from Amazon is non-revolving funding in the form of a lump sum with a fixed interest rate. Amazon expects the seller to pay back this loan within a specific period that they agreed on. The monthly principal and interest repayment amounts must be equal. This type of loan can best serve sellers who have long-term business plans and are seeing continuous growth. The application process for term loans with Amazon Lending as the product provider goes straight through Seller Central. Qualified sellers do not need to prepare or submit lengthy paperwork.
Amazon Community Lending
Sellers can also apply through Lendistry, which is also known as Amazon Community Lending. Amazon partnered with Lendistry to create this program. Lendistry is a Community Development Financial Institution (CDFI) with a track record. It is minority-led and serves both urban and rural small businesses. It specifically caters to businesses in communities that are considered economically and socially distressed. Businesses in traditionally low-to-moderate income communities are invited to learn more about the program. Minority-owned businesses and other historically disadvantaged areas are also welcome to apply.
This program is how Amazon is able to provide small and medium-sized businesses with access to affordable financing. It’s open to sellers on Amazon US who need short-term loans. Lendistry offers competitive and affordable rates in a completely digital experience. This means that sellers can apply for loans fast and seamlessly. The Amazon Community Lending program gives businesses more than much needed working capital. This program offers supplementary resources straight from Lendistry to help businesses succeed. These resources include webinars and educational videos and individual consulting. Lendistry created these resources specifically to satisfy the different needs of sellers.
Merchant Cash Advance
Like term loans, merchant cash advances are also non-revolving credit. This type of funding has flexible payments, though. Amazon will not require personal collateral to apply for this type of loan. They also do not charge any fees for late payments. This makes merchant cash advances easier for most sellers to manage. This is especially true when they have no experience dealing with loans. Cash advances help sellers with store operations as well as growth and expansion. They do not incur interest, so payments are based on a portion of the seller’s sales over a future period. The seller pays a fixed capital fee and that’s all that’s added to the principal loan amount.
We recommend a merchant cash advance for sellers who have growing businesses. They are best for Amazon stores that need more flexibility with repayments. This can usually come in really handy when monthly sales are unstable. Parafin, a business financing provider, is the group that makes Amazon merchant cash advances possible. Parafin has the founding mission of helping small businesses grow. It’s a newer group, but the founding data scientists and engineers are passionate about the mission. They saw small businesses suffer during the pandemic and found a dedication to help. Parafin focuses on providing easier and faster access to capital than traditional loan types.
Lines of Credit
A credit line is a more flexible type of financing option. Amazon opens up this option to sellers on the platform through two providers. First, sellers can benefit from 150 years of financial experience and innovative technology from Goldman Sachs. This comes through a partnership of Amazon Lending and Marcus by Goldman Sachs. This provider gives sellers access to funding. Depending on various criteria, Marcus assigns different credit limits to applicants. The financing products available to Amazon sellers are competitively priced.
SellersFi is a second option in collaboration with Amazon Lending. This global financial technology company focuses on helping e-Commerce businesses that want to grow. Their strategic solutions are designed to make scaling an Amazon business easier and faster. SellersFi offers sellers flexible funding options that are affordable, too.
Eligible sellers can ask for funds to be released as they need a fresh supply, subject to credit approval. This flow allows sellers to infuse different areas of their businesses as different needs arise. For example, a seller can focus on inventory one month, use some funds for operations another month then boost marketing the next. This real time flexibility allows sellers to take full advantage of opportunities that come along.
We think that lines of credit work great for sellers who need emergency funds. They are also excellent, however, for sellers who want some extra funding for existing and ongoing expenses. Interest on lines of credit accrues at a fixed rate on whatever amount a seller draws. This means that a seller will pay interest on only the actual money that they withdraw. Regardless of how quickly or slowly they use this funding, the interest rate remains the same. In other words, the rate agreed on is fixed and locked in for the lifespan of the line of credit.
Eligibility and Application Process
Amazon Lending
Amazon Lending is only for sellers on the Amazon Marketplace that are pre-selected by Amazon. The marketplace vets sellers based on certain metrics to determine their eligibility. Then they send out invitations in Seller Central to those who meet their standards.
Amazon Lending does not publish their criteria, but some sellers have shared some information on the Amazon seller forums. Based on the threads, we can determine a few things that Amazon requires from sellers. First, a seller needs to have a clean record of selling on Amazon for at least one year. This includes proper compliance with Amazon listing guidelines. Amazon also looks only at sellers who have total sales of not less than $10,000 in that period. Third, Amazon looks at sellers’ customer satisfaction metrics that prove zero grave customer complaints within the previous six months. Finally, sellers must have no outstanding trademark or copyright complaints or violations.
We recommend Amazon Lending as an alternative to bank loans for sellers who want to grow their businesses. Banks and other traditional lenders require a lot of documentation. Amazon does not need to see bank statements, tax returns, or annual revenue statements. They have access to all seller accounts. They also do not check credit scores, which makes Amazon loans easier to get than traditional loans.
Lines of Credit
Marcus by Goldman Sachs through Amazon Lending comes with different requirements. Every line of credit is different based on specific circumstances. We do not have much at all to go on in terms of what Amazon or Goldman Sachs looks for. We do see that Goldman Sachs determines loan eligibility based on seller data that Amazon shared with them. Sellers who respond to Amazon’s invitation will check their eligibility on Marcus’ website. If that goes through, they will also complete the application process there.
What Is EcomBalance?
EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, Ebay, Etsy, WooCommerce, & other eCommerce channels.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
- Monthly Finance Meeting Agenda
- 9 Steps to Master Your Ecommerce Bookkeeping Checklist
- The Ultimate Guide on Finding an Ecommerce Virtual Bookkeeping Service
- What Is a Profit and Loss Statement?
- How to Read & Interpret a Cash Flow Statement
- How to Read a Balance Sheet & Truly Understand It
Conclusion
Amazon seller financing is a great option for many sellers on the marketplace. We all know how competitive Amazon is. Most sellers will need some kind of financial assistance at some point along the journey to e-Commerce success. Just make sure that you look into all your available options before making a choice. You want to make sure that you can fulfill your commitments. Otherwise, you risk losing the business you have worked so hard for.
