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Financing For Amazon Sellers: What Are Your Options?

Amazon has always been one of the largest markets on the internet. One may even argue that it far surpasses other physical marketplaces. Hence, it’s not surprising that there are millions of sellers on the platform. While it’s a sign that the marketplace is thriving, it also proves that not just anyone can find success in the platform, especially considering the number of competitors. 

If you want to succeed in Amazon, you would eventually need to take your brand to the next level, and you can do so in several ways, such as expanding your inventory or reducing your prices. 

Unfortunately, these steps typically require sellers to have sufficient funds, which can be difficult if you don’t have any sponsors. Fortunately, if you’re an Amazon seller, there are other options. 

  • Merchant Funding Agency 

Your first option is to look for a merchant funding agency. These are establishments built specifically to provide financing for Amazon Sellers and other types of merchants. 

One of the main reasons you might want to go for this option is that most merchant funding agencies don’t look at your credit score when approving loans. Instead, they look at other factors, such as business metrics (e.g., turnover rate, revenue, etc.). This is particularly useful if you don’t necessarily have an exceptional score to show to the agency.  

Moreover, since there are countless agencies in this category, they often compete by lowering their interest rates; the terms (e.g., interest rate, collateral, etc.) are generally better than what you can expect from loans offered by credit card companies, banks, or Amazon itself. 

  • Peer-to-Peer Financing (P2P) 

As the name suggests, peer-to-peer financing, also known as P2P lending, enables individuals to secure a loan from other individuals that act as lenders. 

If you want to obtain a loan with this option, you’ll have to connect to a P2P platform. The platform will then connect you with several investors, and you can take your pick from their offers. Lenders often use P2P platforms since these platforms tend to have higher interest rates than savings account. Hence, they can earn more money from their investments. 

Similarly, P2P platforms are excellent for borrowers since the interest rate is generally lower than other financial institutions. Perhaps the only disadvantage is the fact that they look into your credit score, so qualifying for loans may be a bit more difficult as opposed to the previous option. 

  • Merchant Cash Advances (MCA) 

A merchant cash advance is very much like any other loan. It involves two entities, the lender and the borrower. The loan comes at an interest rate, so the lender earns money from the transaction. 

However, the mechanics concerning payments is fairly unique. Rather than sending the payment monthly, the lender connects with the borrower’s card terminal. The lender then deducts a portion of the money the business receives from every transaction. With the terminal, the lender can track your business performance. And with the information they gather, they can adjust the interest rates, which often ends with a lower rate. This is the main advantage of MCA. 

  • SBA Microloan 

Small Business Administration (SBA) Microloan is a program in the United States (US) that allows individuals or intermediaries to borrow money at a discounted rate. The intermediary will then use the borrowed money to lend it to small businesses. The terms or interest rate for this option isn’t necessarily good or bad, but its eligibility requirements are what makes SBA microloans good. 

This is mainly because the SBA doesn’t review applications according to creditworthiness, meaning you don’t need an exceptional credit score. You only need an average score which should be greater than 575. 

However, it’s worth noting that SBA microloans are restricted to USD$50,000 or less, so it’s a program created specifically for small businesses and startups. If your Amazon account is under this category, then an SBA microloan is definitely worth the consideration. 

  • Amazon Lending 

Amazon Lending is a program that offers business loans to qualified sellers. It works pretty much like other loans. You can use the money for any purpose whatsoever, as long as you pay it back. 

Take note that this program is designed specifically to provide short-term business loans, so you have to pay the money back within 12 months or less. This is perhaps the main disadvantage of the program. On the bright side, Amazon doesn’t check the applicant’s credit score, so qualifying for the program is relatively easy. Moreover, you can borrow from USD$1,000 to USD$750,000. Overall, it’s a surprisingly excellent option for Amazon sellers. 

Wrapping Up 

It’s no question that there are countless Amazon sellers out there, and there’s a good chance that most of them are yet to obtain stable financing for their store. So, not only are you competing for customers, but you’re also competing for low-interest loans. That’s precisely why you should have as many options as possible, and with this guide, that shouldn’t be too big of an issue.

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