The Amazon lending program is available for specific sellers who meet sales thresholds and other conditions. Ecommerce sellers who don’t qualify for a loan from Amazon or seek alternatives have many lending options to consider. Each Amazon seller loan product offers a unique opportunity and features distinct requirements. Here’s an overview of five options and what you should know when applying for an Amazon loan:
1. Business Term Loans
A business term loan is one of the top options for sellers who need an Amazon seller loan. Sellers can find business term loans at their local banks, online banks, credit unions, and direct lenders. The loan is offered a lump sum credit bearing a fixed interest rate and regular monthly installations. Lenders have different loan terms and rates, so you can shop for the best deals. The lending terms depend on your credit score and other factors.
When applying for a business term loan, make sure you have a fairly good credit score. Most lenders look for a score above 600, so you should aim for a better rating. Business term loans are offered to long-serving ventures that have been around for at least a year. Each bank and lender have specific needs, so carefully review each offer.
2. Merchant Cash Advance
An MCA (merchant cash advance) loan is provided as a lump sum payment for a percentage of your future sales. The loan is given based on your sales patterns and inventory and deducted from future credit and debit card sales. Many eCommerce sellers consider MCA loans the best product because of the low factor rates.
Lenders who offer merchant cash advance have varying requirements but generally have a minimum credit and sales threshold. You need a good personal credit score and proof of steady monthly sales. The business must show monthly bank deposits that illustrate your profit growth. Merchant cash advance loans are perfect for funding your inventory as the payments are recovered when you make sales.
3. Credit Card Loans
Sellers looking for an Amazon loan can consider taking it directly from their credit card limits. Business credit card loans have existed for many years and offer another option when strapped for cash. Credit card loans tend to feature higher interest rates and are only recommended as the last option for your business. The loan can fund short-term expenses and unforeseen procurements. Most lenders require the business to have an excellent credit score.
The seller must demonstrate enough income (from sales) to cover the loan. If you prove excellent credit and repay all loans on time, you can negotiate with the credit card companies for lower interest rates. Remember to track all dates as late payments come with fees and can hurt your score. Lines of credit loans feature zero prepayment fees. You can increase your loan limit much faster.
4. Peer-to-Peer Loans
P2P financing is another lending option for eCommerce sellers looking for quick cash for their business. Unlike traditional loan products, P2P doesn’t involve applying for credit. The seller creates a profile with a reputable P2P platform and populates it with relevant information. Investors can then view the different profiles and choose businesses they want to invest in. if they’re interested in your business, they’ll make a proposal.
Ecommerce sellers can review the loan terms, interests, repayments, and other sections of the contract. P2P allows sellers to receive multiple bids from different investors interested in their pitch. Most lenders perform a hard credit check, so you should aim to have an excellent score and provable sales records. The caveat of P2P loans is how long it takes to receive funds. Your pitch may draw investors within minutes or take days or even weeks before someone bids.
5. Personal Loans
Sellers looking for an Amazon loan can consider personal loan products, which are more like business term loans and lines of credit. A personal loan is issued on the creditworthiness of the borrower. As an Amazon seller, you will want to have an extensive record of transactions to and from your bank account. You can qualify for a personal loan, although limits tend to be lower than business loans.
Lenders will review your personal and financial information to determine how much you qualify for and the terms. Some lenders allow borrowers to offer a security/collateral, so you can put your car or other assets on the line. Offering collateral gives you the chance to bargain better terms and lower interests. The drawback is you risk losing the asset if you fail to pay the loan as agreed in the contract.
Reliable Amazon Seller Loan Products
Amazon sellers have many lending options, including MCAs, lines of credit, and personal loans. You can leverage reputable lending platforms that offer working capital and other fast loans to small and medium businesses. Platforms can help you find the best Amazon seller loan for your business needs.