Amazon Loans Explained [Alternatives Included]

If you run a small or medium business (SME), you've likely faced financial challenges while trying to scale online. Now, imagine focusing solely on your online trade without worrying about capital.

Amazon small business loans are a game-changer for businesses like yours. Having lent millions of dollars to SMEs selling on the platform, an Amazon seller loan can pave the way for your online success, too.

So, don't let financial barriers slow you down. Say hello to accessible Amazon financing options. Read on to discover more about the Amazon seller loan — an opportunity you shouldn't miss.

If you’re considering streamlining your e-commerce finances before diving into Amazon loans, connect with us at Link My Books for seamless, automated bookkeeping solutions tailored for all your e-commerce sales channels.

What is Amazon Business Lending?

Amazon Business Lending is a hassle-free finance option for eligible US-based small and medium-sized businesses. The invite-only program offers a straightforward application process, no paperwork, and quick approval.

You can use the funds for your business needs — growing inventory, marketing, or getting new equipment.

Here's a quick look at how an Amazon seller loan works:

• Pick a loan term, get pre-qualified, and if eligible, you receive the loan upfront.
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• Once approved, the funds are deposited into your Seller Account for easy access.
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• Repayment is automatic from your Amazon sales, ensuring no late payments.
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• If your sales don't cover the repayment, Amazon charges the linked payment method.

As you explore Amazon seller loans, it's essential to maintain a clear understanding of your online business's financial health. You can use Amazon accounting to track and make informed decisions on pricing, inventory, and loan needs for scaling your Amazon store.

Amazon Lending Program vs. Amazon Inventory Financing

If you've heard about Amazon inventory financing, you might be curious how it differs from the lending program.

Let us provide you with a thoughtful comparison:

Essentially, the lending program is a short-term loan, while inventory financing is for long-term inventory needs.

Irrespective of your financing, you’ll need to maintain water-tight financial records to avoid any discrepancies. Schedule a free demo with Link My Books to discover how our solid accounting system can help you automate your e-commerce accounts while letting you focus on growth.

Amazon Small Business Lending

If you run a small online store on Amazon, traditional banks may not provide suitable loans because they focus on physical collateral.

Since 2011, Amazon has offered personalized working capital for Amazon sellers, with invitation-only access and competitive rates tied to your metrics.

Furthermore, if eligible, you could seek support through Amazon's Small Business Grants.

Amazon Grants for Small Business

In 2022, Amazon Business introduced the Small Business Grants program, which received 19K+ applications and awarded over $250,000 to small businesses. In 2023, 15 recipients, including a grand prize winner, shared a similar grant amount.

If you're an Amazon Business customer raking in up to $1M yearly, you could access up to $25,000 for your business dreams.

To participate, ensure you have an Amazon Business account, apply during open periods, and sign up for email updates for timely notifications.

Amazon Lending Eligibility

If you’re looking to tap into an Amazon seller loan, you need to fulfill certain criteria. 

To meet all the eligibility requirements, you should aim to:

• Maintain good customer metrics, a year's sales history, and a solid sales record.
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• Comply with Amazon guidelines.
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• Check your Seller Central homepage for eligibility. If you can see the option, your business is eligible.
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• Choose a financing option that matches your business up to the eligible amount.

Types of Amazon Seller Loans

Amazon Seller Loans are tailored to your business needs and help you accelerate your growth journey.

Ready to explore Amazon financing options? Let’s begin.

Amazon Term Loans and Community Lending

If you're searching for a lump-sum Amazon seller loan with a fixed interest rate and a precise payback period, a Term Loan could be the perfect match.

Here are the critical loan highlights so you can determine if they align with your needs:

• A term loan best suits sellers with long-term growth plans.
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• You'll make equal monthly payments for a fixed term covering the principal and interest. 
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• Straightforward application process through Seller Central. 

Furthermore, the Amazon Community Lending program, in partnership with Lendistry, provides access to term loans for small businesses in socially and economically distressed areas. 

According to information available online, the loans range from $10,000 to $250,000, with APRs (Annual Percentage Rates) between 8.00% and 9.90% and terms extending up to five years.

Amazon Merchant Cash Advance

If you prefer keeping things simple regarding your Amazon seller funding, a Merchant Cash Advance (MCA) could be just what you need. 

Let’s look at the features:

• A straightforward funding option with flexible payments. No personal collateral or late fees. 
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• Unlike regular loans, there's no interest, just a fixed capital fee linked to a portion of future sales.
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• Ideal for growing sellers who want payment flexibility based on monthly sales. 
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• Parafin, a business financing provider, offers tailored MCAs that prioritize and support small business growth.

Interest-Only Loans for Amazon Sellers

Amazon offers a unique financing option known as interest-only business term loans.

 Its distinctive features are:

• Initially, you make small payments covering only the interest on the borrowed amount.
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• Down the line, expect larger payments to settle the entire balance, which can pose a challenge.
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• Amazon doesn't disclose the interest-only repayment period, so understand the schedule before committing to the loan.

If you’re considering applying for interest-only loans, be sure to create a robust business plan, considering the Amazon seller fees and other costs. Sketch a clear path to boost your revenue and prepare for any large payment.

Amazon Business Line of Credit

Amazon's business credit line is like a credit card – you can borrow funds when needed and pay them back gradually.

Consider Amazon's Business Line of Credit for its convenient features, namely:

• A flexible loan that lets you borrow up to a certain amount.
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• You can request funds as needed, making it convenient to handle inventory, run your business, and leverage opportunities.
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• Ideal for covering your day-to-day costs or building an emergency fund.
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• Fixed interest rate that ensures you pay only for what you use.
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• Trusted partners like Marcus by Goldman Sachs and SellersFi offer reliable financing options to support your business growth.

Amazon Business Line of Credit Requirements

Amazon's Business Line of Credit is your go-to when your store needs a steady flow of capital without a fixed growth plan. While specific criteria for rates and fees remain undisclosed, remember:

• Eligibility centers around your Amazon sales performance and a $39.99 monthly fee for an active Seller account.
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• Enjoy a swift process—no credit checks, and decisions in about five business days. 
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• Start your application conveniently with an invite through your seller account, backed by minimal documentation requirements.

How to Make the Most of Amazon Business Line of Credit 

Boost your Amazon business success with a savvy online financial strategy! Follow these valuable tips to maximize your Amazon Business Line of Credit and ensure financial success!

Utilize Professional Bookkeeping Services

As an Amazon seller, tracking transactions and staying tax-compliant is crucial. Don't risk mistakes or missed deductions.

Consider exploring Link My Books for a free trial. We’ll help you automate your e-commerce accounting, saving time and money while still ensuring accurate transactions and compliance.

Leverage Financial Insights for Decision Making

Constantly monitor your finances — income, expenses, and profits to facilitate practical business decisions.

Link My Books simplifies Amazon FBA accounting so you can optimize your Amazon seller loans. Try our Xero Amazon Integration for top-notch financial management, or use our QuickBooks Amazon Integration to make your online store bookkeeping stress-free!

Assess Business Needs

Take a moment to evaluate your upcoming expenses, inventory requirements, and cash flow. Doing this will precisely tailor your Amazon Business Line of Credit to match your current and future financial demands.

Calculate ROI

Make the most of your Amazon Business Line of Credit by calculating your ROI. It helps measure how well your credit works for you.

To calculate ROI, use the following formula:

ROI = (Net Profit / Total Investment) x 100

A higher ROI means your money is doing its job, bringing you more success!

Maintain a Detailed Budget

A detailed budget is vital when using an Amazon Business Line of Credit for financial stability and growth. You can track expenses and make informed decisions on credit usage for inventory, marketing, and other upcoming costs.

A budget prevents overspending, aids debt management, and optimizes credit benefits by aligning spending with your business objectives. 

Regularly Monitor Cash Flow

Break down your expenses and income, so you always know where your money goes. For instance, free tools like Amazon Fee calculators can help you understand your costs and enable smarter decisions for your business.

Set Aside Repayment Funds

Regularly allocate a portion of your earnings towards clearing your Amazon Business Line of Credit. A proactive approach ensures you’ll meet repayment obligations on time, maintaining a positive financial standing for your online business.

Invest in High-Return Areas

To make the most of your Amazon Business Line of Credit, focus on investing in areas that directly contribute to your business's profitability and growth.

Whether it's expanding inventory, funding operations, seizing new opportunities, or investing in marketing campaigns, prioritize activities that generate revenue and drive business success. 

By strategically allocating your credit to these high-return areas, you can maximize the impact of your investment and accelerate the growth of your business on Amazon.

Consider Refinancing Options

You could replace your existing debt or consolidate multiple loans with an Amazon Business Line of Credit. The move will help you secure better terms, lower interest rates, and improve overall financial flexibility for your online store. 

Develop a Contingency Plan

Have an alternative plan in place to maximize your Line of Credit facility. Identify potential challenges and outline proactive steps to ensure smooth operations, enabling you to adapt swiftly to unforeseen circumstances.

Pros and Cons of Amazon Lending

Considering an Amazon seller loan to expand your online store?

Let's explore its potential benefits and challenges:

Advantages of Borrowing from Amazon Lending

When you borrow from Amazon Lending for your online store, you gain the following benefits:

• A great option for non-traditional credit, bypassing the need for conventional checks.
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• Approval typically occurs within five days; some sellers report approval in just two days.
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• Funds are credited directly to your seller account without origination or application fees.
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• Loan terms are tailored to your sales history and metrics.
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• The interest rate is notably lower than that of credit cards and other business loans.
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• Amazon loans offer flexibility with no origination fees or prepayment penalties.
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• Repaying early can result in significant long-term savings.

Disadvantages and Limitations of Amazon Lending

It would help if you also were mindful of the drawbacks that may accompany an Amazon seller loan:

• Sellers have to stick to the invite-only rule. You apply only for the product to which you're invited.
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• Heavy dependence on Amazon for sales and loans, locking businesses into the platform.
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• A set amount is regularly deducted from your seller account, irrespective of sales.
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• Repayment challenges during sales slumps. Furthermore, Amazon can claim inventory if you can't repay.
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• Amazon loans are exclusively for building or restocking inventory, limiting other business needs.
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• Short repayment terms mean higher, potentially unsustainable monthly payments.

Ensure you weigh these considerations carefully to make informed decisions regarding Amazon loans and their impact on your business.

Reasons to Choose Amazon Business Financing

Now that you have an idea about Amazon business financing, if you’re considering an Amazon seller loan, it could be the ideal fit if:

• You're a top-tier seller, exclusively on Amazon, maintaining a stellar record and adhering to guidelines.
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• Eager to scale your online store and enhance your inventory with the funds.
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• Possess a proven and consistent track record as a top-tier seller.
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• Conducting a significant portion of your sales on the Amazon platform.

Alternatives to Financing Through Amazon

Have you ever wondered what happens if your Amazon sales hit a bump or if you are keen to explore financial fallbacks beyond Amazon? 

Here are some alternatives to ensure your online business thrives, regardless of your Amazon journey. 

Small Business Administration (SBA) Microloans

If your Amazon Lending offer falls below $50,000, explore SBA microloans or those from nonprofit lenders like Lendistry. 

Ideal for newer or small businesses with evolving revenue, microloans generally offer lower interest rates and extended repayment terms compared to many other loan options.

Fintech Lenders for E-commerce Businesses

Fintech lending can boost your online business by offering fast approvals and quick access to funding. For instance, Payability, SellersFunding, and Kabbage utilize cutting-edge technology, including AI and data analytics, to swiftly analyze your sales data.

You won't need any collateral or face sky-high credit score requirements (some even skip it). You can elevate your e-commerce business with approval in 24-48 hours based on your business potential, not just numbers.

Personal Loans as a Financing Option

Personal loans can be your go-to when kicking off your online venture. Lenders allow you to use these loans for business needs, relying on your income and assets. 

Expect amounts from $2,000 to $50,000, with APRs ranging from approximately 8% to 36%. It's a monthly payback game over two to seven years.

Frequently Asked Questions (FAQs)

You'll likely have more questions about Amazon lending to small businesses. We've covered some common questions for you in our FAQs section.

How Do I Get Invited to Amazon Lending?

Amazon Lending is an invite-only program. Check your Seller Central Account for a direct invitation.

You’ll likely qualify if you've had steady sales on Amazon for a year or more. Log in to Amazon Seller Central for a message from Amazon Lending confirming your eligibility.

What is the Amazon Line of Credit Application?

The Amazon Line of Credit application is your gateway to securing financial support for your business on Amazon.

It's a straightforward process designed to help you access the funds you need and is based on your unique business metrics and sales history.

Conclusion

An Amazon seller loan can be a catalyst for your online business. With tailored financing options and competitive rates, you can scale and succeed.

If you want to optimize Amazon seller financing, Link My Books can streamline and automate your accounting. It’s easy to set up, integrates with your accounting software, and connects all your sales channels.

Register with us for a free trial today and take the next step toward financial success.