What Is Amazon Lending? And How Does It Work?

Anyone running an Amazon business - or any business - knows that you have to spend money to make money, but sometimes you just don’t have the capital available on hand to capture the market opportunities there may be out there. 

Amazon Lending is a program available to all eligible small and medium-sized businesses and can make available anywhere up to three-quarters of a million dollars to give your operations a boost. 

This sets up an alternative not just to banks, from which it tends to be difficult for small businesses to get financing, but also from other lenders who are not necessarily as attuned to the needs of Amazon sellers. 

So how does it work and who is eligible? 

Borrowing From Amazon Lending

Amazon Lending is an invitation-based service offered to pre-qualified sellers, meaning that you can’t enroll yourself. However, unlike other loans you may take out, for example from a bank, Amazon Lending does not check your credit, meaning that the money is virtually guaranteed as long as you meet the eligibility criteria and is usually disbursed within five days of an application being approved. 

From a set of pre-calculated options, you choose the amount of the loan - up to the maximum that you are prequalified for - as well as the length of the payback period according to your needs. 

The loans are typically short-term and anywhere between $1,000 and $750,000 in size, depending on eligibility, and there is no penalty for early repayment, no application fee, and no origination fee.

Amazon makes the application process itself as simple and streamlined as possible - just one page filled with information from your existing Amazon account.

The cash injection can be deployed across numerous parts of your business, including: 

• Bulk buying: To stock up on inventory, particularly in the lead-up to a sale or seasonal event. Having that “out of stock” label on your products could cost you thousands upon thousands and may have a knock-on effect on your Inventory Performance Index. 
• Improving production efficiency
• Growing your product offerings: establishing relationships with new suppliers does not come free, and neither does doing research into potential new products.  
• Padding out your advertising budget: This could include higher advertising spend if you think there’s an opportunity or niche that you could capitalize on if you make a targeted push at a set of keywords. 
• Professionalize your product pages: Making your product description pages look more professional is not cheap - it requires contracting photographers, designers, and others to make your product pop. Much of the time, this is not something you want to do in-house if you don’t have the capabilities but will put you in a much better position to make money. 
• Scale your business: Growing your team, bringing on new people to oversee parts of your business if it is growing to a level where you are overstretched. Doing everything yourself can oftentimes slow you down, but it takes money to scale.

Employed correctly, a well-placed loan can help your business increase visibility, improve sales conversions, reduce lead times, and generally optimize your operations. 

When it comes time to pay back the loan, Amazon will automatically make withdrawals from your sales disbursement on Seller Central - though if the first disbursement is not enough to cover the loan amount, the balance will be taken from the next disbursement. 

Other Lending Options for Funding Your Business

If Amazon lending doesn’t strike your fancy, there are some other ways you can raise debt to achieve short-term objectives: 

• Amazon Line of Credit: This is a result of a recent partnership struck between Amazon and investment bank Goldman Sachs, designed for businesses that are seeing steady sales growth. Like Amazon Lending, this is an invitation-only program that gives you access to revolving credit of up to $1m. Unlike a loan, which you obtain and then pay back, revolving credit means that as long as you keep paying it back, the line will remain available to you to use as much as you want without needing to reapply for a new loan. Amazon Line of Credit has no annual fee and an APR of between 6.99%-20.99%.

• Term loan: A simple business loan from a bank. These tend to be quite a bit larger - typically up to $5m - and take far longer to pay back because of the size. This means a longer-term commitment and higher difficulty in obtaining approval. If you are in the US, you can also apply for a microloan from the Small Business Administration - this will typically be for up to $50,000 for a payback of up to six years.

• ‍Credit card: Straightforward one but can be risky. Credit cards will only be viable if you can pay them back within a month, otherwise, the interest payments will take a likely toll and not be worth it.

FAQs About Amazon’s Lending Program

How do I get invited to Amazon Lending? What factors affect participation?

The specific criteria aren't shared, but sales performance, account health, and business metrics likely matter. Sellers get invites based on pre-qualification and Amazon's assessment.

Are there restrictions on how I use Amazon Lending funds?

You can use the funds for various business needs like inventory, production, ads, and improving product pages. This flexibility helps address specific business goals and growth opportunities.

What's the difference between Amazon Line of Credit and Amazon Lending?

Amazon Line of Credit, unlike Amazon Lending, offers up to $1 million in revolving credit. It's a partnership with Goldman Sachs, allowing businesses to borrow and repay as needed, with different repayment terms and APR options.

What are the pros and cons of Amazon Lending?

Amazon Lending offers easy access to funds, quick disbursement, and flexibility for business growth. However, drawbacks include unclear eligibility criteria, potential reliance on debt, and risks of misuse.

Does Amazon Lending affect credit scores?

No, Amazon Lending doesn't affect credit scores as there are no credit checks. Eligibility is based on sales performance, and repayments are deducted from future sales proceeds, avoiding a direct impact on credit scores.

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