Amazon is getting into the finance business and started to offer loans to their US merchants on the condition it’s spent on stock to resell on the Amazon platform.
Known as “Amazon Lending”, the finance will be arranged through a company called Amazon Capital Services, Inc. The loans currently appear to be invitation only but there have been some fairly chunky loan offers for amounts as high as $50,000 with interest rates ranging up to 13%.
Text of the offer emails
Dear Seller,
Amazon is always looking for ways to help our sellers grow. We are excited to announce a new service: Amazon Lending by Amazon Capital Services, Inc.
Based on your Amazon selling performance you are pre-qualified for a loan up to $50,000. Use these funds to purchase inventory and increase your sales on Amazon.com.
How the Amazon Lending loan works:
• Register for a loan. Sign in with your Selling on Amazon Primary Account holder user id and password.
• If approved, the funds will be advanced to your Amazon Seller Account within approximately five business days, and we will initiate a disbursement to your bank account on file.
• Your Amazon Lending monthly payment will be automatically deducted from your Amazon Seller Account.
Go to Amazon Lending to complete your loan registration. You will need to sign in with your Selling on Amazon Primary Account holder user id and password. You may also sign into your Seller Central Account, look for the Amazon Lending offer in the right hand column of the home page and follow the links to 2Learn more” and “Register”.
If you have any questions, please contact us at [email protected].
Amazon loan terms
As you’d expect there are a whole load of terms attached to the loans, the offers for which are invitation only and valid for 30 days from the receipt of the emails. Some of the more interesting terms are;
Subject to applicable law, you will be in default under this Loan Agreement if any of the following events occur: • your gross merchandise sales on Amazon.com as reported in your Seller Account (“GMS”) in any month is less than 50% of your lowest GMS on Amazon.com in any of the prior 12 months,
• the collective value of your units stored in Amazon fulfillment centers in the US, based on your list price of those units on Amazon.com, (“FBA Inventory Value”) in any month is less than 50% of your lowest FBA Inventory Value in any of the prior 12 months
It’s understandable, Amazon want to make sure that if they lend you money then those funds are used to increase your trading on Amazon. If your Amazon sales start to drop then they want their cash back before you disappear. It’s also worth knowing that if you default on the loan the agreement gives permission for Amazon to whip funds from your seller account disbursements until the loan is paid as well as seize and sell any items you’ve got stored in FBA.
Should you take an Amazon loan
Don’t take a loan just because you’re offered it would be my first advice, whether for business or for personal matters. However if you’ve already got a solid business plan in place and were already actively looking for finance than an Amazon loan could be the one for you.
There are a lot of businesses looking for finance which they’ve been unable to raise from their banks. Companies such as iwoca, ezbob and in the US Kabbage have looked to fill the gap. Whilst eBay aren’t currently in the business of offering loans PayPal have had a stab at finance for businesses with the PayPal Merchant Cash Advance pilot.
The interesting thing about all of these loan options is that they consider your online sales history instead of purely your credit score. Amazon are better placed than any loan company to assess your trading history on their site so may be more generous in the amount they lend. However they want the loan to be used to increase your Amazon business, not for sales on other platforms or your own website… unless of course it’s an Amazon Webstore with product from FBA.
Would you take an Amazon loan? Is it a good thing for a marketplace to fund their third party sellers businesses? Amazon obviously think it will boost their already accelerating third party sales, but do you want to be tied financially to a marketplace who could limit your account if you get into financial difficulties? It may be better to keep your finances separate from the marketplaces as a missed payment is one thing, ending your business is quite another. On the other hand by knowing your business so intimately Amazon may offer you a higher loan amount than you could source elsewhere.
3 Responses
I would rather go for a walk on the M1 than be in debt to Amazon. My God the thought just bewilders me. They already screw you on about every aspect of their business – fees, feedback, AZ claims FBA fees, FBA stock going missing, FBA customers damaging goods and returning it.
Once you have paid VAT, fees and all the other overheads in today’s economic climate you would be doing well to achieve a net profit of 13%
Start paying 13% on a loan and what’s the point
Considering the restrictions on the loan, Amazon could easily bring this down to 2 or 3%.
If you are only borrowing to list on Amazon in order to generate sales on Amazon, then they only need cover administration and some insurance against bad debt.
If they included a requirement to use FBA with stock stored within fulfilment centres the risk virtually disappears.
2 or 3% would interest me, but 13% – NO Thanks
Definitely struggling to see the benefit of this – but no doubt they will see a positive take-up in the run up to Christmas, well timed for people wanting to increase stock levels and listings for Christmas trading.
Knowing how quickly the market can change, not something I would personally reccomend – I wonder whether they will decrease the % in the future or pursue a more active fulfillment tie in?