Amazon Lending offers short-term loans and lines of credit to grow your business. While it can be a great option for some sellers, it’s only available by invitation – making it out of reach for some. But even if you’ve received an Amazon Lending invitation, it’s a good idea to consider all your financing options to find the right fit.
Traditional business loans don’t always meet the needs of Amazon sellers. These financing alternatives may be more friendly to e-commerce businesses.
Amazon Lending offers financing to sellers through these programs:
You must receive an offer from Amazon to apply for these programs. Businesses that have used Amazon for at least one year and have consistent sales are typically eligible. Check to see if you’re eligible by logging on to Amazon Seller Central. You’ll see a message from Amazon Lending if you qualify.
But a major downside of Amazon Lending is that your funds are earmarked for Amazon alone. If you need capital to diversify your online store outside of the marketplace, you’ll have to look elsewhere.
Some lenders offer short-term loans backed by the inventory you’re purchasing. Typically you can borrow about 80% of the value of the inventory. Often, inventory financing providers can send the funds directly to your supplier — and in some cases, you can finance your inventory before it’s manufactured.
E-commerce inventory loan providers like Kickfurther are often more streamlined than other types of lenders that offer business loans. Rather than asking for paperwork, online inventory lenders connect with your Amazon seller account to underwrite the loan. Payments are paid back in monthly installments or as a percentage of sales. Often you’re charged a fixed fee instead of interest, with APRs that can exceed 100%.
Business lines of credit are designed to cover recurring expenses like stocking up on inventory. Much like a credit card, these give you access to a revolving credit line for purchases or cash withdrawals whenever you need it. Many online business lenders, like BlueVine, offer lines of credit with fast applications with e-commerce sellers in mind.
You can use the money for almost any purpose — unlike Amazon lending, it’s not limited to your online inventory. Available in credit limits from $5,000 up to $500,000, a credit line can be a handy tool to pay for marketing services or hire seasonal help to fulfill your orders. Most providers charge an annual fee and interest on the funds you withdraw.
For one-time expenses, short-term business loans from providers like OnDeck could be a better option than a credit line. While term loans from banks are difficult for e-commerce sellers to qualify for, online lenders often have more flexible credit and revenue requirements. And they offer loan amounts that better meet the needs of Amazon sellers, usually from $5,000 to $500,000.
Most charge interest plus fees, which you pay back in fixed monthly repayments — usually over three to 28 months. The main drawback is that rates can get high, especially if you only have a small online store. Rates over 60% APR are common for this type of financing.
With this option, you borrow a lump sum based on your credit card sales and repay it as a percentage of your daily or weekly sales, plus a fixed fee. Since it’s an advance on future sales, it’s not based on your credit score. A merchant cash advance from a lender like Fora Financial could help if you’re having cash flow issues.
You can often borrow from $2,500 to $250,000 and get funds in just a couple of days. But this is the most expensive type of financing available to small business lenders, and rates sometimes top 300% APR. And it can be difficult to meet the repayment schedule if your business makes only a couple of large sales a month.
A peer-to-peer (P2P) business loan is similar to a business term loan, except it’s funded by investors rather than a direct lender. Some small business owners prefer this option because it’s easier to qualify for than a bank loan. P2P platforms act as the middlemen between borrowers and investors: They oversee the application process, underwriting and repayment, but they don’t actually fund your loan.
You pay back these loans with interest and fees in monthly installments that can be expensive. Because P2P platforms don’t have the same return on investment as direct lenders, they typically charge higher origination fees. Funding Circle is one P2P lender that specializes in business loans.
Personal loans are good for online merchants just starting on Amazon, as many lenders allow you to use a personal loan for business expenses. This type of financing relies on your personal income and assets rather than your business’s, with loans typically ranging from $2,000 to $50,000.
APRs on personal loans currently range from 6% to 36% APR — sometimes including an origination fee of 1% to 10%. Like business term loans, you’re charged principal and interest that you pay back in monthly installments over two to seven years.
These online providers may be a better option for Amazon sellers than a traditional bank loan. Compare personalized results by filling out the form with information about yourself and your Amazon store.
The best loan offer is the one with the lowest rates and fees with payments you can afford. If you qualify, Amazon Lending offers solid terms for its sellers. However, if you’re new to Amazon or have other e-commerce websites, you may want to consider these other options:
You might find it hard to get financing for your business through traditional lenders unless you have a proven track record of sales and revenue. The good news is that nontraditional lenders may offer loans to Amazon sellers, although you’ll have to meet certain criteria.
Look for loans designed for new startups and small businesses. Merchant loans, short-term loans and P2P loans generally have less stringent lending criteria than traditional loans. You can also investigate getting a business or personal loan from a lender specializing in bad credit – although they charge origination fees to offset risk.
The more you narrow your lender search to those likely to work with your type of business, the better your chances of approval. After gaining traction, develop a detailed business plan with a financial adviser to help you secure lower-cost financing.
If you’re eager for financing, signing the first loan you’re offered may be tempting. But building a business plan and comparing different lenders first is key to finding the best rates and terms you’re eligible for.
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