5 Things To Consider Before Applying For Amazon Seller Financing

Amazon Seller

As one of the leading online eCommerce platforms globally, Amazon has over 9.5 million sellers worldwide fighting for the attention of billions of global users, making it a highly competitive platform. 

And it’s not cheap either! From your marketing efforts to increasing inventory to purchasing business equipment, growing and keeping your Amazon business competitive and thriving will require a significant amount of funds. 

Fortunately, there are available financing options for Amazon sellers. But before you apply for an Amazon seller loan, there are several factors you need to consider. 

1. Understand Your Store’s Current Performance

When you’re considering getting a loan for your Amazon business, an essential factor you need to consider is your business itself. 

You must review your business financial statement, looking at yearly and monthly budgets that can help you understand just how much you can afford, helping you decide on the loan amount you need. 

It’s a good idea to check your Amazon store’s current performance and set your financing goals. While increased capital can give your Amazon business an immediate boost, taking out too much can be bad for your financials. In contrast, taking out less than what you need might not be enough to satisfy your financing goals. 

Several analytical tools are available for Amazon sellers, including Sellers Signal from Sellers Funding. This all-in-one analytics platform allows you to stay on top of your Amazon store’s numbers. Moreover, you can track your store’s main KPIs, including business valuation, sales forecast, and profitability.  You also get access to suitable financing solutions from industry-leading Amazon partners. 

2. Know Your Options

You might first think of banks and traditional lending institutions in financing your business. Unfortunately, it’s challenging to get approved by these lending institutions. Often, they consider online businesses as less financially secure than traditional, brick-and-mortar businesses. Thus, most Amazon sellers should look for alternative, non-traditional lenders to keep them going.  

That said, here are your financing options to provide you with extra funding for your Amazon business.   

  • Amazon Lending

Amazon Lending is an invitation-only financing program to help small- and medium-sized businesses scale and expand on Amazon. This program offers various short-term financing options to qualified Amazon sellers that best fit their business needs and can only use the funds for growing their inventory.

  • Merchant Cash Advance

A merchant cash advance is a speedy way to access funds when you need them. With this type of loan, you can be approved within hours and receive the fund within a day or two. A merchant cash advance is based on the concept of ‘future paycheck’ where a lender offers you a cash advance against your future sales, making it ideal for Amazon sellers. 

  • Business Credit Line

As an Amazon seller, you can also opt for the Amazon Line of Credit. Recently, Amazon partnered with Goldman Sachs to offer sellers the option of a business line of credit financing. This line provides flexibility and can request funding whenever you need it, rather than taking a large lump sum.  

This means you can hold on to this funding, borrowing only what you need and only paying for what you owe.  

  • Peer-To-Peer Loans

Peer-to-peer (P2P) lending is an innovative financing option that helps you get the funds you need without applying to a lender. Instead, you only need to create a profile on a P2P lending site and create a business pitch. If a lender likes your profile and pitch after careful consideration, they can offer you the funds you need.

  • Personal Loan

If your Amazon business does not qualify for financing, you should consider applying for a personal loan. However, take note that here, your personal assets and income are considered instead of your business’s. Just make sure that you have a good credit score to qualify. 

3. Interest Rate Vs Annual Percentage Rate

Interest rates and annual percentage rate (APR) are two frequently used terms that refer to similar financing concepts but have slight differences in calculation.  

When you want to evaluate the costs of a loan, it’s essential to understand the difference between the marketed interest rate and the APR, including any additional fees or charges.  

The market is the cost of borrowing the principal, whereas the APR includes other costs associated with borrowing the money. These fees may consist of closing costs, broker fees, discount points, rebates, and more, often expressed as a percentage.  

Thus, APR is the most effective rate to consider when you’re comparing financing options for your Amazon business. 

4. Take Note Of Loan Length And Repayment Terms

Consider how long the Amazon financing arrangement is structured to last.  

Choosing longer loans can incur a significant amount of interest over time. Meanwhile, financing options with shorter terms may require larger periodic payments.  

In addition, you want to take note of the payment amount and how often you should pay. Some sellers prefer to pay weekly or monthly terms to have enough funds compared to daily repayments, which can be too challenging for an Amazon seller’s business cash flow.  

Also, consider the allocation of each payment to the interest and principal. Consider looking for loans with a higher principal allocation to minimize the total long-term costs. 

  1. Funding Time And Convenience

Suppose you need extra cash flow as soon as possible to increase your Amazon business’s inventory or purchase equipment. In that case, you want a lender that can provide speedy application approval and funding.  

How quickly you can apply and the time it takes to get the funds can rule out specific lenders.  

Fortunately, most non-traditional financing options allow you to apply online conveniently, process your application for a few hours and transfer the funds in a matter of a day or two.   

Take Away

Growing your Amazon business can be challenging, particularly if you don’t have enough funds to back it up.  

While various loan options are available for Amazon sellers, you must consider the abovementioned points before applying for a loan. Doing so can help you make strategic and well-informed decisions for your business growth.