Is Amazon’s Lending Platform the Best Option for Your Business?
- July 8, 2019
- By Aidan Dwyer
Amazon is one of the largest companies in the world. It acts as a selling platform for small and large businesses alike. Currently, over five million businesses use Amazonâ€™s seller platform. Many of the businesses that use Amazonâ€™s platform are relatively small businesses. Typically these businesses require financing to secure raw materials or inventory for the items that they sell on Amazon.
Amazon offers loans to sellers using their platform ranging from as little as $1,000 all the way up to $750,000. The businesses receive the funding in as little as 24 hours. Amazon also offers fixed monthly repayments up to 12 months. Payments are taken out of the borrowers’ Amazon account instead of out of a traditional bank account.
How Amazonâ€™s Lending Platform Began
Amazon realized many of the small businesses that use their selling platform would not qualify for traditional financing from a bank. As an opportunist, Amazon wanted to help. Amazon began to provide a lending service in 2001 through a partnership with Bank of America, Merrill Lynch.Â Â Businesses that sell on Amazon could now secure inventory and continue selling on their website. Amazon has helped over 20,000 businesses get the financing they need, funding over $3 billion dollars to sellers who use their platform.
While Amazon does offer great monthly payment options, they do not advertise their interest rates. There are many posts on Amazonâ€™s â€œSellercentralâ€ forum claiming that Amazonâ€™s lending program is more expensive than other loans available. There seems to be other deceptive tactics that Amazon uses to push their loans. In one comment on their seller central forum, a seller wrote; â€œAmazon described my rate on a 4-month loan as 5%, which really comes out to 15% APR.â€ Although, there are multiple sellers claiming that Amazon offered them a fairly low rate for their initial loan. But then, when it came time to renew their loan, Amazonâ€™s interest rate had drastically increased. It was almost doubling in some cases.
Is it the Best?
So the question still remains, is Amazon lending platform the best solution for your small business financing needs? There is no right answer to this question. It all depends on what exactly your business does and how you intend to use the money. Typically the businesses which benefit the most are e-commerce companies with a heavy percentage of their sales coming from Amazon.com.
Amazon does not base the amount of money that they will lend to you off of your credit score, but rather the number of sales you make on their platform. So if your business does the majority of its sales on Amazon, their lending platform is a very viable option for you. However, Amazonâ€™s loans are only available to sellers who use their platform and intended for an inventory that you sell strictly on their website.
As a small business owner, you most likely have multiple different mediums which you use to sell your products and services, as well as many different expenses that you could use working capital for. If this is the case for your business, Amazonâ€™s lending platform may not be the best fit for your financing needs.
Other Business Funding Options
Luckily, there are many alternative small business financing options out there. Here at REIL Capital, we have a variety of financing options available to suit your business needs. We understand all of the costs of running a small business. Also, we know how hard it can be to keep up with them without proper financing. Because of this, we offer flexible funds such as a line of credit or merchant cash advance. This can be used for more than just funding your Amazon inventory. If you want to find out how we can help fill your business financing needs, fill out our commitment free application today.