Amazon is growing larger and larger every day. By the time you finish reading this blog post, a couple dozen new seller accounts will have been created. This means competition will only become fiercer henceforth. If you don’t put your best foot forward, you’ll fail and lose the empire you’ve worked hard to build.
Taking advantage of every opportunity for growth is critical to surviving the brutal world of e-commerce. If you have a feasible and profitable product concept, don’t hesitate to try it before other sellers beat you to it.
Unfortunately, turning a product concept into reality is tricky if you lack funding. This is where financing comes in. And if you’re an Amazon seller, you might benefit from the loans Amazon offers. Yes, Amazon provides financing solutions to its sellers.
That’s what this blog post covers—how Amazon Lending works and how to qualify for a loan.
Why is Amazon offering loans?
First, Amazon went from selling books to selling literary anything under the sun. Now, they’re lending money? Why did it break into the financing business? Three reasons:
- They want to attract more sellers. Amazon knows it’s not the only growing platform out there. eBay, Rakuten, Walmart, Target, and other online marketplaces are also driving massive traffic. Even tech and social media giants like Facebook and Google have their own marketplaces now. Offering to finance businesses is one of the fastest ways to attract merchants and stay ahead.
- They want more product listings. To maintain its status as the go-to marketplace for all buyers, Amazon wants its sellers to have enough inventory to meet the ever-growing demand for online goods. Since not all buyers have the resources to produce more products, they offer to finance their production and sourcing.
- They want to give buyers more freedom. Amazon’s financing programs cater not just to sellers but also to buyers. For instance, the Amazon Pay Later program offers buyers access to instant credit that they can use for purchases using Easy Month Installments (EMI).
Why Apply for a Loan from Amazon?
People take out loans from Amazon for the same reason they do elsewhere: to obtain immediate funds. However, Amazon only lends money for purposes that benefit the platform, meaning you cannot spend the money on non-Amazon-related expenses. Here are several indicators that Amazon loans may be your best financing option.
- You want to try a different product category: Some product categories, particularly the restricted ones, require a specific amount of monthly inventory to maintain access. Whether you’ve just had your first anniversary or have been selling on Amazon for many years, you can be eligible for an Amazon loan to finance this project.
- You’re launching a new product: Newly listed products don’t reach the first page of Amazon searches unless you use promotion, which requires funding. Amazon loans can be a perfect source of funds.
- You’re preparing for a demand boost: A holiday is coming, and you know from experience that your sales will spike during this period. However, you lack the funding to produce your target inventory. You can take advantage of Amazon Lending to avoid passing up the opportunity.
- You’re growing your team and need additional working capital: Your Amazon business is growing fast, and you need more people in your team. The problem is your profit could barely support your other needs. A single virtual assistant alone could cost hundreds of dollars per month. Amazon loans can augment your budget.
What is Amazon Lending?
You can qualify for an Amazon loan through the Amazon Lending program. For now, the program only offers short-term loans with fixed interest rates. These are non-revolving, lump-sum loans that require monthly principal and interest repayment. Qualifiers can borrow from $1,000 to $75,000.
Amazon has two other financing options in its catalog: business line of credit (LoC) and merchant cash advance (MCA). However, these products have other providers: Marcus by Goldman Sachs, SellersFi, and Parafin. Each financing option is designed to meet specific needs and comes with a different interest rate. This means eligibility requirements may also differ between loan types. You can learn more about Amazon Lending here.
Is Amazon Lending worth it?
Compared with other financing solutions, Amazon Lending loans are easier to take out. The reason? — Amazon doesn’t base a borrower’s qualification on credit score. It focuses on your performance on the platform. Approval also doesn’t take long, only between two to five days. Once approved, you’ll see the money deposited in your Amazon seller account.
In addition, you don’t have to pay extra fees, such as application and pre-payment fees. Interest rates are also considerably lower than that of other loans. Some sellers qualify for loans with around 15% interest rate payable within 12 months.
But it’s not all roses. There are also thorns on the side. Of course, Amazon will require collateral for security. Usually, your inventory will suffice. If you fail to pay your dues, Amazon can claim your inventory, and you can lose your Amazon business. Your payment will also be deducted automatically from your Seller account balance. This means if your sales dwindle, you’ll be in trouble.
How to Qualify for Amazon Lending
Amazon Lending is an invitation-only program, so you cannot apply. Amazon will notify you if your account qualifies. However, it doesn’t pick accounts randomly. It has its own criteria. Below are the minimum qualifications.
- You must be based in the US
- You must have a proven record of providing the highest level of satisfaction
- You must have a registered 1099-K in a US state where Amazon Lending is available
- You must have at least 12 months of Amazon selling history
- You must have total sales of at least $10,000 in the previous 12 months
- You must have zero copyright or trademark infringement complaints
- You must not have any serious customer complaints in the last six months
- All your listings must follow Amazon listing Style Guides
- There shouldn’t be any Amazon Lending loans issued to you in the past 33 days
How to Take Out a Loan through Amazon Lending
Since you cannot directly apply for an Amazon Lending loan, there’s not much you can do but build up your account to meet at least the minimum criteria. The real action happens when you receive Amazon’s notification.
This notification will be in the form of an option card on your Seller Central homepage. If you see one when you log in, it means you qualify for the program. Click it and choose the financing program that suits your needs, preferred interest rate, and payment method. Then, complete your online application. Amazon will notify you once your application is approved, and you’ll see the funds in your account balance.
Alternative to Amazon Lending
Qualifying for Amazon Lending takes time, especially if your Amazon store has yet to take off. While waiting, consider looking into other financing options. For instance, consider taking out an SBA microloan or peer-to-peer loan. These loans may only stretch your budget a few thousand bucks, but they can help you expand your inventory, generate more sales, and qualify for Amazon Lending faster.
However, unlike Amazon Lending, these financing programs require a thorough credit check. If you haven’t been building up your credit score over the years, you’ll have difficulty qualifying. If you are eligible for alternative financing options and put them to good use, you may not even need Amazon Lending.
Grow Your Amazon Business Faster with Amazon Lending
Whether you’re launching a new product or expanding to a new product category, you need significant funding to increase your chance of success. Let Amazon take care of that for you. But you need to work on your stats first.
Improve the quality of your products and services to boost your seller score. Then, grow your sales using your current resources. Your ultimate goal is to make that Amazon Lending option card appear on your homepage. Let this blog post be your springboard to a successful application.