All About Financing Your Business With Amazon Lending

October 13, 2023

Are you an Amazon seller looking to fund your business? Here's what you need to know about Amazon's lending program.

8fig Team

As an Amazon seller, you know how hard it can be to keep your cash flowing. With numerous supply chain expenses that must be paid before you ever see revenue from sales, running into a cash flow crunch is an all too common problem. Fortunately, Amazon provides sellers on the platform with several financing options that can help stabilize your cash flow and fund your next endeavor.

Are you trying to boost your latest PPC campaign? What about paying for that next batch of inventory? These expenses add up, and sometimes you need a bit of help to make ends meet. Funding is often the best solution.

Amazon provides financing options for all kinds of Amazon Sellers. One of the benefits of working with Amazon is that they already have your business details. They know exactly what kind of business you own, how long you have been selling on the platform, and how you are performing. This goes a long way during the application process.

We’ll break down what you need to know about the various types of Amazon financing.

  1. Amazon Lending term loan
  2. Amazon Lending interest-only loan
  3. Amazon line of credit
  4. Amazon merchant cash advance program
  5. What are the advantages of a non-traditional lender?
  6. What if you’re a new seller who doesn’t qualify?
  7. What are the alternatives?

 

Amazon Lending Term Loan

Amazon term loans are short-term loans with fixed monthly payments. The interest rates vary, depending on your personal business account and sales metrics. Sadly, this type of Amazon loan is invitation-only. That means you’ll have to sell successfully on the platform for a while before they even consider you for this one.

Once you do receive an invitation, the application process is quick. Since they already have your business information and sales history, you won’t have to fill out any lengthy paperwork. All you have to do is apply through Seller Central.

What are the terms?

Amazon doesn’t like to disclose specific interest rates since they vary significantly by business and deal. They do reveal that the APR can be anywhere between 3 and 17%. In addition, loans start at a minimum of $1,000 and can reach a maximum of $1 million. As you can see, there’s a great deal of variation in their offerings. Therefore, pay close attention to your contract before signing and be careful which amount you agree to. Term loan lengths can be 3, 6, 9, or 12 months long.

  • 3-17% APR
  • Minimum Loan: $1000
  • Maximum Loan: $1,000,000
  • Term Loan Length: 3-12 months

What are the eligibility requirements?

There are a few ways you can improve your chances of becoming eligible for an Amazon Term Loan. First, you must be an active Amazon seller. You should also make sure you offer superb customer service. Good customer metrics are another basic requirement for eligibility. Finally, you need to show a steady increase in sales, proving to Amazon that you know how to run and grow an online business.

If you’re eligible, you’ll see it on your Seller Central dashboard. You don’t need to submit any applications or sign up for any service to find out.

  • Active Amazon seller
  • Good customer metrics
  • Steady increase in sales

What are the pros of an Amazon Lending term loan?

Here are some of the top benefits of an Amazon Lending term loan:

  • They don’t require credit checks for eligibility.
  • It usually takes about five days for approval, which is faster than other funding methods.
  • The money is transferred right into your seller account.
  • There are no hidden fees.
  • The amount of your loan and your terms are based on your sales history.
  • A lot of sellers report that they receive low rates.
  • It’s perfect for sellers who have a steady flow of customers.

What are the cons of an Amazon Lending term loan?

Despite the many benefits of this type of loan, it does come with some drawbacks.

  • Payments are taken out of your seller account even if sales are low that month.
  • It’s only for Amazon financing. You can’t use the money for anything else.
  • Short-term loans mean high monthly payments.
  • Even if you qualify, it doesn’t mean that you’ll be approved.
  • If your business starts to decline, you may have issues making the payments on the loan.
  • Eligibility is by invitation only

Amazon Lending Interest-Only Loan

An Amazon Lending interest-only loan is very similar to Amazon term loan with one vital difference. It’s still invitation only and there is no lengthy paperwork when it comes to the application process. However, this option allows you to make lower payments covering only the interest during the first few months, before your payments increase to cover both the interest and principal. This can give you some more time to pay off the loan, which is particularly helpful if you’re waiting for inventory to arrive in stock. It’s a more flexible option.

The eligibility requirements, loan amount and terms, and pros and cons are essentially the same as those of the Amazon Term Loan. However, Amazon’s Interest-Only Lending has the added benefit of lower monthly payments during the first few months.

Amazon wants those who have a steady increase of sales to take advantage of Amazon Lending loans. They want you to boost your inventory and move it faster. Again, you can’t apply for this type of loan until you receive an invitation from Amazon. Check your Seller Central account to find out if you’re eligible.

Amazon Business Line of Credit

Sometimes revolving credit is what your business needs to stabilize their cash flow. That’s why Amazon partnered with Goldman Sachs, creating their own business line of credit program. It’s hard to pay off a large lump sum, especially with high interest. With a line of credit, you’ll only pay interest on the portion you use. Plus, funds become available again as you pay off what you owe. It’s a great opportunity for those who prefer a more flexible choice.

What are the terms?

The terms for Amazon’s business line of credit are much more adaptable than a fixed loan. The APR ranges from 6.99% to 20.99%. The credit limit can go up to $1 million, and since it’s a revolving credit line, you don’t need to pay it off by a certain date. All they care about is that you make your monthly payments and use your money wisely.

  • 6.99-20.99% APR
  • No credit length limit
  • Maximum credit limit is $1 million

What are the eligibility requirements?

Amazon’s business lines of credit are invitation only, just like their other types of lending. Unfortunately, Amazon hasn’t released much information about eligibility requirements for their business lines of credit. Here’s what we do know about applying for an Amazon business line of credit:

  • It’s available by invitation only.
  • You’ll be directed to the Marcus by Goldman Sachs website when you’re invited. That is where you’ll be able to apply.
  • Amazon will share your data with Marcus. They’ll use that info to determine your eligibility and underwrite your loan.

What are the pros of an Amazon line of credit?

There are a number of benefits of choosing an Amazon business line of credit. These include:

  • It’s a flexible plan
  • You have the freedom to use the funds as you need them
  • Sellers can use the funds for staffing, operations, marketing, and inventory
  • The credit limit can be quite high, topping out at $1 million
  • The application process is digital and fast
  • Fixed interest rates

What are the cons of an Amazon line of credit?

Here are the downsides to choosing an Amazon line of credit to finance your Amazon store:

  • Since the rates are not available to the public, they may be very high
  • There are maintenance fees if you don’t use at least 30% of your limit
  • There are late-payment fees
  • Eligibility is by invitation only

Amazon Merchant Cash Advance Program

Amazon’s merchant cash advance program is fairly new and offers some flexibility in the way you pay back the loan. It doesn’t have any hidden fees or even interest. Instead of paying back the investment in fixed monthly payments, you pay it back as a portion of your future sales, plus a fixed capital fee. This is the cost of the capital that you receive. Merchant cash advances are great for businesses with seasonal sales, or those that struggle to make high monthly payments when sales are slow since payments are directly tied to revenue.

Your application doesn’t require a credit check, and is based solely on your sales performance. Amazon has partnered with Parafin to bring this new financing option into their assortment of eCommerce funding options.

What are the terms?

The terms for an Amazon merchant cash advance involve a fixed capital fee, meaning there is no interest to worry about. You don’t have to be bothered about it changing over time, and you will breathe easier knowing exactly how much will be taken out of your sales. The minimum loan amount is $500 while the maximum loan amount is $10 million. There are also no minimum payments.

  • No interest
  • Minimum loan amount: $500
  • Maximum loan amount: $10 million
  • Fixed capital fee
  • No minimum payments

What are the eligibility requirements?

Amazon’s merchant cash advance is another invitation-only program. It’s available to sellers who have been selling on Amazon for at least three months, making it more accessible than some of Amazon’s other lending programs.

  • At least three months selling on Amazon
  • Invitation-only

What are the pros of the Amazon merchant cash advance?

This program has a number of advantages including:

  • The flexible payment schedule protects your business during slow seasons
  • No minimum monthly payments
  • Fixed capital fee
  • No interest
  • No fixed term
  • No credit check required
  • Quick process
  • You can use the funds for anything involving your business

What are the cons of the Amazon merchant cash advance?

The list of downsides to the Amazon merchant cash advance include the following:

  • It’s available by invitation only
  • You have to sell on Amazon for at least three months
  • It may be more expensive than other types of funding.

What Are the Advantages of a Non-Traditional Lender?

Non-traditional lenders, such as Amazon, can benefit your business in many ways. For starters, they already understand your unique needs. They have all the information they need to determine your eligibility. This saves you time on unnecessary applications and dashed hopes. You also get your money much more quickly, since all the accounts are already connected. Your credit score isn’t essential, since they can see from your sales report just how much they can trust you. More often than not, you’ll get more flexible options with non-traditional lenders, too. Don’t forget that these types of lenders are made specifically for eCommerce businesses. They know exactly what you need and what you can provide in return.

Traditional lenders, on the other hand, often have much tougher eligibility requirements. Since they don’t have much of a background in eCommerce, their conditions might be harder to meet. For example, some banks require at least three years of trading before they’ll consider you for funding. Credit history, tax history, and collateral are all required to get a decent loan amount. Not to mention that the application process is often long and tedious. Once you are approved, it can take several weeks to get your money. There’s a reason non-traditional funding is growing in popularity.

What If You’re a New Seller Who Doesn’t Qualify?

If you’re new to selling on Amazon, you won’t be able to qualify for their lending program. It will take some time to build up a good balance and learn how to manage your budget.

In the meantime, there are a few different options for building up your business and increasing profits. Start small and reach outward. Try selling one, high quality product that requires little investment but has a great deal of demand. Use your profits to stay in stock, building up your selling history. Ask customers for reviews, which can help improve your conversion rate.  It’s also a good idea to put some thought into advertising. If you’re short on funds, SEO optimization and organic marketing can work wonders.

Amazon also has some great advertising programs that can help any business. Building up your sales and reinvesting in your business is a slow process, but a necessary one. After you put in some hard work, you’ll be surprised by the results. That’s when Amazon will invite you to participate in their lending program.

What Are the Alternatives to Amazon Lending?

There are many other funding solutions out there willing to help you grow at any stage of your business. 8fig is one of them.

8fig is a unique eCommerce growth and funding platform that helps sellers reach their full potential. We provide the tools and resources you need to plan, manage, and fund your business, including supply chain mapping software, sales analytics, benchmarks, and more. Plus, our funding is designed to optimize your cash flow. It’s both continuous and flexible, which means that instead of one-lump sum, we infuse capital into your business over and over again when you need it most. You can change any aspect of your plan in real time to reflect your current business needs. This includes your funding amount and remittance schedule.

Are you ready to take your business to the next level? Sign up for an 8fig Growth Plan today!

8fig Team

8fig Team

The 8fig Team is an experienced group of eCommerce writers and experts committed to helping online sellers grow their businesses through informative content and guides. Whether you're looking to increase sales or build your brand, we have the knowledge and expertise to help you succeed.