Amazon sellers have a chance to request a short-term loan via the Amazon Lending Program. Since 2011, Amazon has financed sellers to purchase inventory and offers a simple loan application process without credit checks. The global marketplace also partnered with Bank of America in 2018 to further expand its lending infrastructure. Eligible sellers will receive an invitation to request an Amazon loan through the lending program. Here’s how it works.
The Amazon Lending Program
Amazon offers short-term loan products via an invitation-only lending program. The loans are only available to registered Amazon sellers and suit small eCommerce businesses. Ecommerce sellers eyeing Amazon loans must sign up with the marketplace and create a Seller Account. Next, offer products on Amazon and wait for the marketplace to qualify you for a loan. Amazon merchants eligible for a loan will receive an invitation sent to their Seller Account.
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Sellers who receive an invitation to participate in Amazon Lending can request a lump sum of cash to spend on inventory. The loan is more like a merchant cash advance, meaning Amazon will recoup it from the sales. All loans are short-term, so repayment terms don’t extend beyond a year. Sellers can qualify for different amounts, and the loan interests also vary from one merchant to the next. Amazon discloses the loan terms and information directly to the seller.
Amazon Loan Terms, Interests & Repayments
Sellers looking to apply for credit via the Amazon Lending program can only do so after receiving an invitation. The program can offer loans up to $750,000, but not all sellers will qualify for the maximum loan. Most sellers receive the minimum amount ($1,000) and can grow their limit by repaying their loan. Here are key aspects to note about the Amazon seller loans:
- Loan Term:Amazon offers short-term loans only, and the maximum repayment duration is 12 months. Sellers will repay the loan in fixed monthly installments and can choose to pay higher installments to clear their debt within a few months.
- Loan Interest:Seller reports place Amazon loan interest rates between 6.99% to 20.99%, but the company has not disclosed the average rate. Each seller will qualify for a unique loan amount and interest rate, depending on various factors.
- Loan Amount:Amazon sellers invited to participate in the lending program can check their loan limits from their dashboard. The minimum and maximum loan limits are set at $1,000 and $750,000.
- Loan Repayment:Amazon will deduct the monthly installments directly from the Seller Account. Amazon will charge linked payment methods if the account doesn’t have sufficient funds, eliminating delayed/late repayment.
Amazon Lending Requirements/Eligibility
One must offer products on the Amazon platform to be eligible for the lending program. Amazon is yet to publicize information about how it determines who qualifies for the loan and the terms. According to threads and forums from sellers, merchants must have an Amazon selling history of not less than 12 months. Amazon will review the sales, customer reviews, adherence to listing guides, trademarks, and more. Notable eligibility requirements include:
- $10,000 or more in sales achieved within the past year
- High customer satisfaction ratings and metrics
- No serious/unresolved customer complaints over the past six months
- Compliance with all Amazon terms and guidelines
- No outstanding trademark/copyright infringement complaints
- eCommerce sellers with an Amazon Seller Account
Using Amazon Seller Loans
Qualifying sellers who request loans through the Amazon Lending Program can receive funds within 24 hours. The money is debited directly to the Seller Account, and Amazon restricts what merchants can pay for using the funds. Amazon loans are inventory financing, so sellers can use the funds to replenish or improve the inventory. The spending restrictions ensure sellers use the funding within the Amazon ecosystem.
Sellers can use Amazon funding to purchase new inventory, which is the most popular reason for taking such loans. Amazon also allows sellers to use loan funds to launch a new product or expand their eCommerce reach. Sellers should review all loan terms to ensure their business can handle the fixed payments. The best approach is to establish a contingency plan to avoid taking financial hits when sales can’t cover the monthly payments.
Amazon Lending Program Alternatives
The Amazon Lending Program is a decent choice for merchants and sellers with many years of offering products on Amazon. Because of the restrictions and requirements, some eCommerce sellers won’t find Amazon loans ideal. Alternative financing solutions can offer much better terms, amounts, and flexibility, making them more desirable. Popular alternatives to the Amazon Lending Program include:
- Merchant Cash Advance
- Peer-to-Peer Financing
- Credit Card Loans
- Factoring
Each financing option has unique merits and drawbacks, and eCommerce sellers have many institutions to choose from. Working with a trustworthy financing company can ensure transparent terms, flexible repayments, low interests, and higher loan limits.
Amazon Loan for Ecommerce Sellers
Ecommerce sellers can leverage loan products to increase stock, market the business, pay wages, and more. Reputable lenders can provide enough funds with flexible terms and reasonable conditions. Sellers can review and find the best Amazon Loan product for their business. The goal is to secure sufficient funding and avoid unnecessary fees and interests.