Online Sellers Could Get Loans from Amazon

Sep 28, 2012 9:23 PM  By

In a move that could boost growth to its internet marketplace, Amazon.com will launch Amazon Lending, a new business that offers loans to some of its online sellers, according to Reuters.

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Reuters states that “sellers on the company’s marketplace have been sent emails offering loans from Amazon Capital Services Inc, a unit of Amazon.”

ChannelAdviser posted one of those emails distributed to sellers on its blog earlier this week, which read:

“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___. 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 “Learn more” and “Register.”

If you have any questions, please contact us at support@amazoncapital.com.”

Although Amazon declined to comment to Reuters, the article states that the move to getting into the lending business “is a big step for Amazon that will expose it to more credit risk but may also fuel more sales by merchants on its marketplace.” Reuters states that Amazon will take a cut of those sales, which will lead to enhanced revenue and profits.

Due to the declining economy, Scot Wingo, chief executive of ecommerce advisory firm ChannelAdviser, told Reuters, “Some of these businesses are only constrained by cash flow…These spot loans will help these folks grow by getting them extra cash to buy more product.”

In its blog, ChannelAdviser states that the “interest rate on these loans is 13% which is pretty expensive, but with a four day clearance, this is definitely cheaper than credit cards and faster/easier than banks, so may fill a big hole for sellers.”

The blog also advised, “that the 13% is what we’ve seen offered across a couple of sellers, there could be some variance there that we haven’t seen.”

“One of our long-standing recommendations to sellers is to diversify and avoid putting all your eggs in one basket. While we think this is a novel program from Amazon, consider carefully whether it makes sense for your business for your distribution partner to also be your lender,” the ChannelAdviser blog states.

Erin Lynch is the associate editor at Multichannel Merchant. Erin can be reached at 203-358-3755 or by emailing her at erin.lynch@penton.com. You can also follow her on Twitter at @LynchMCM or on LinkedIn.