Through the Amazon Lending program, Amazon gives qualified sellers access to various credit lines and working capital so they can navigate short-term cash flow gaps and keep growing their businesses.
For e-commerce sellers, this can be the difference between success and failure or stagnancy and growth.
In the past, business owners had to rely almost exclusively on traditional banks for funding. But as the e-commerce industry has grown, Amazon seized the opportunity to become a funding resource for its sellers.
However, as an invitation-only program, not every seller can partake in Amazon Lending. Those sellers who are invited to participate may still be on the fence about whether it’s the right funding choice for their businesses.
Let’s take a closer look at the potential benefits and pitfalls if you’re thinking about securing funding from Amazon.
All About Amazon Lending
- Inside the Amazon Lending Program: A Complete Overview
- Your Top Amazon Lending FAQs Answered
- How to Decide if Amazon Lending Is Right for You
- Alternatives to Amazon Lending
Inside the Amazon Lending Program: A Complete Overview
With Amazon Lending, approved sellers have access to working capital to help replenish their products and promote their brands.
To gain a full understanding of how the program works, let’s review the process step by step.
How Do Amazon Loans Work?
If you’re an eligible Amazon seller, you may be able to accept term loans from Amazon Lending and lines of credit from Marcus by Goldman Sachs. If eligible for either or both, you’ll see an option card on your Seller Central homepage.
Sellers using Amazon Lending no longer have to choose between a term loan and a line of credit.
Amazon and its third-party lending partners currently offer:
- Interest Only (IO) Loans: Non-revolving sums of funding with the flexibility to repay interest amount for a set period of time before principal payments are due.
- Term Loans: Non-revolving, lump-sum funding with specified payback periods.
- Merchant Cash Advances (MCA): Non-revolving sums of funding that tie payment to a portion of the seller’s future sales for a fixed capital fee.
- Business Lines of Credit (LoC): Flexible financing with access to funding up to an assigned credit limit.
The Repayment Process
Similar to a merchant cash advance, Amazon automatically deducts your loan payment from your account balance in Seller Center. Alternatively, you can schedule a manual ACH loan payment from the bank account you have on file.
Fortunately, Amazon allows prepayment at any time without penalty charges. This early repayment helps sellers save on interest since Amazon prorates the interest due based on the remaining balance.
How Do I Get Funding from Amazon Lending?
Since Amazon Lending is an invitation-only program, you’ll only see an option card to apply if you prequalify.
Here’s how the Amazon lending process works:
- First, sign in to your Seller Central account.
- Next, check to see if you have an option card on your homepage.
- If you see one or more financing options available, choose the one that works best for you, up to the amount you’re eligible to apply for.
- Finally, complete the steps to submit the online application.
What Are Amazon’s Lending Requirements?
Amazon evaluates seller accounts regularly, offering financing options to those with a:
- Track record of growing sales
- High customer satisfaction rating
- Seller account in good standing
- Clean Amazon record (i.e., no policy violations)
What Kind of Interest Rates Can I Expect with an Amazon Loan?
While Amazon Lending doesn’t disclose the rates of its loans, you can peruse the Amazon seller forums to see what sellers have to say on the subject.
Your Top Amazon Lending FAQs Answered
How Can I Get Invited to the Program?
If you qualify to apply for one of its financial products, you’ll see an option card on your Seller Central homepage. Currently, this is the only way to get invited to the Amazon Lending program.
Will Applying Affect My Credit Scores?
Amazon doesn’t run credit reports, but its third-party lending partners may run them with no impact on your credit score.
Can You Start an Amazon Business with Little or No Capital?
Yes. In a recent JungleScout study of 3,500 entrepreneurs, brands, and businesses selling on Amazon, 69% of sellers reported spending less than $5,000 to start their Amazon businesses and 32% spent less than $1,000.
Common costs for selling on Amazon include:
- Product costs
- Amazon storage fees
- Amazon seller fees
- Advertising
The report also found that most Amazon sellers bootstrapped their businesses, funding their stores out of their own pockets. Some borrowed money from family or other lenders, and others even used their Covid stimulus checks to launch their stores. Only 22% borrowed money from banks.
Is Amazon Lending Worth It?
For qualified sellers with healthy sales on Amazon, Amazon Lending may be a solid option. Just make sure to keep an eye on your monthly progress to verify that 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, consider looking into a reputable alternative funding provider like SellersFunding.
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 before moving through the process.
Pro: Easy Application Process
If you’re an eligible seller, applying is fairly simple. Amazon already has your business information and monitors its performance metrics, so you don’t have to take any extra steps after submitting your request.
Con: Inventory Collateral
If your sales decline and you’re forced to default on a loan, Amazon can freeze your account and hold your inventory as collateral until you pay your balance in full.
Pro: Fewer Fees
While many funding options come with several fees, such as origination and prepayment penalty fees, Amazon Lending does not include these fees. Instead, paying back early saves you money on interest.
Con: Fixed Deductions
No matter your sales performance levels, Amazon Lending deductions remain the same each month. This could be an issue for some sellers with fluctuating sales due to seasonal trends.
Pro: No Credit Check
Since Amazon bases approvals on your customer satisfaction and sales history, it doesn’t look at credit scores. While Amazon Lending doesn’t require a credit check, third-party lenders may still choose to run them, but they won’t affect your credit score.
Con: Unclear Eligibility and Interest Rates
Amazon Lending doesn’t clarify specific determining eligibility factors. As for its third-party lenders, rates vary and are based on their discretion during the approval process.
What Are Some Alternatives to Amazon Lending?
Whether it’s for inventory, advertising, or new product launches, reinvesting in your business is paramount to seeing consistent, profitable growth.
Amazon Lending might make sense in some cases, but for maximum flexibility, you may need a more versatile funding partner.
At SellersFunding, our all-in-one e-commerce funding solutions were built to help e-commerce sellers grow sustainably and at speed, with competitive rates and terms that fit your schedule.
The SellersFunding Daily Advance
The Daily Advance allows sellers to access up to 90% of their previous day’s marketplace sales with rates as low as 0.5% of the advanced amount. The Daily Advance comes with no prepayment penalty and no impact on your personal credit score.
Unlike Amazon Lending, repayments are based on how much revenue you make each month, not on fixed amounts.
When used with the Digital Wallet, sellers can access fair exchange rates and save more on international transactions compared to those of the Amazon Currency Converter.
Flexible E-commerce Working Capital
Alternatively, a flexible line of credit allows you to invest in the inventory, marketing, technology, and human resources you need when you need them.
Our team of e-commerce experts can approve credit limits from $5K to $5M in 48 hours or less and you’ll only pay interest on the amount you use.
“Before getting funding, we had sold $90,000. I got a credit limit from SellersFunding in December and as soon as I got the funds, I was able to invest in my business. We increased to $133,000 in December, and the month we got a Daily Advance, we sold $180,000. So basically, we doubled sales.” –Sansarah Beermann, owner of Sunflower Ideas and just one of many sellers tapping into the power of e-commerce funding to fuel further growth on Amazon.
To learn more about how sellers like you are using transparent funding to reach the next level, check out our growing library of e-commerce success stories, or reach out to find out how we can help you succeed and scale.
