Amazon Lending only provides short-term business loans of up to 12 months to help small and medium-sized enterprises on the platform grow their business. Amazon Vice President Peeyush Nahar said the Amazon Lending program is designed to help promising small businesses obtain business loans.
What is Amazon Lending?
Amazon advances you a sum of cash, which you then pay back, plus interest, of course.
Term: Short term, within one year.
Interest rate: depends on the loan term, up to 14%.
Amount: $1,000 to $750,000.
Repayment: Amazon deducts your payment directly from your seller account every month.
Use: Can only be used to purchase inventory.
Advantages: Simple procedures, low interest rates, and no other fees (such as handling fees).
Disadvantage: It makes you more dependent on Amazon, and repayments are deducted directly from your account regardless of your sales.
What if you can’t pay back the money when it’s due? Then your future sales will be taken directly by Amazon and will not be deposited into your seller account, or Amazon will use your inventory as collateral.
What is the reason for the emergence of Amazon Lending?
There are more than 2 million sellers on the Amazon platform (data from 2013), many of which are small businesses. Half of the products on the platform are provided by them. Without them, Amazon would not be Amazon.
Like every other small business, Amazon sellers need business financing to keep their business running and thriving. However, getting a small business loan is not that easy.
Taking the situation in China as an example, it is a consensus that small and micro enterprises have difficulty in obtaining loans, and there are not many channels for loans. Among them, corporate mortgage loans usually require real estate or factory buildings under the name of the enterprise, corporate credit loans have high requirements for the company's daily average cash flow, and merchant joint guarantees require three individual industrial and commercial households or sole proprietors holding business licenses to form a joint guarantee group.
Given the difficulty of small business loans and Amazon's pursuit of product diversity, Amazon Lending came into being, providing their sellers with loans of at least $1,000 and up to $750,000. So far, more than 20,000 sellers have accepted Amazon loans, and in the past year alone, Amazon has provided more than $1 billion in loans.
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