September 27, 2021

Amazon Lending Options: Are They Right For Your Business?

Amazon has since expanded its loan program, offering term loans, interest only loans, and lines of credit. You might even think of Amazon Lending as another alternative financing option. However, alternative financing has a few key distinctions from Amazon Lending. In this post, we’ll highlight the distinctions between a business loan from Amazon and alternative financing. To start, we’ll review the basics of Amazon small business loans, including:
  • What Amazon business loans are
  • How to qualify for Amazon business loans
  • How to apply for this loan program
  • The loan rates
Then, once you’re familiar with Amazon Lending, we’ll compare it to alternative financing.

The Basics of Amazon Small Business Loans

How to Qualify for Amazon Lending Options

Amazon Lending is an invitation only program, which means you have to be invited to apply for their loans. If you’re eligible for a loan from Amazon, they’ll send a message to your Amazon Seller account. To qualify for an Amazon small business loan, you'll need to meet these requirements:
  • Amazon sales history
  • Total Amazon sales
  • Customer satisfaction metrics
  • Listings that meet Amazon listing Style Guides
  • No outstanding copyright or trademark infringement complaints

Amazon Loan Application Process

Since their loan program is invitation only, Amazon does a lot of the heavy lifting for you in terms of application. Amazon identifies potential applicants based on their sales history on the platform. Therefore, you aren't typically required to submit as much financial and personal information to apply. For instance, when you apply for a traditional bank loan, you'll be required to complete a lengthy application progress. On processing times, the Amazon Lending page says this: “Once an application is submitted, we average five business days to review and provide a loan decision. As part of our application due diligence process, we may require additional documentation or information to approve your business’s loan. Additional processing time may be required to complete this review. For loans issued by third-party lenders, decision time may vary.”

Options, Rates, and Use of Funds

As mentioned, Amazon Lending offers term loans, lines of credit, and interest only loans. Amazon doesn’t publish interest rate information but according to Sales Backer, rates range from 6 to 18 percent. Perhaps the biggest drawback is that you can only use funds from Amazon loans for inventory you sell on Amazon. As a business owner, you might require more flexibility in how you utilize your loan amount. If you have other funding needs, this might not be the best loan program for your business.

Amazon Small Business Loans vs. Financing from Alternative Lenders

Alternative lenders are business financing lenders that aren’t a bank or credit union. These lenders have a wide variety of offerings, some similar to Amazon's funding programs. Examples of alternative lending options include: With that in mind, we’ll compare Amazon Lending to financing from alternative lenders on three important parameters. By comparing these loan programs, you can select a funding option that best fits your financing needs.

Business Financing Options

Assuming you’re eligible, Amazon provides three loan products:
  • Interest only loans
  • Term loans
  • Lines of credit
Alternative lenders, as we alluded to above, typically offer a wider range of funding programs. This could also include additional programs, such as: All this to say, compared to Amazon’s loans, financing from alternative lenders provides far more options. If flexibility is important to you, alternative lenders can better accommodate your needs. Alternative lenders also like to build relationships with their applicants. Due to this, you may be able to receive additional funding from them in the future. If your sole focus is growing your Amazon sales, this may not be the most important parameter for you. However, many business owners aren't focused on Amazon, and may sell on the platform in addition to selling through other methods. If Amazon isn't your primary platform, an Amazon loan probably won't benefit your business plans. New call-to-action

Use of Funds

As mentioned, Amazon loan programs must be used to purchase inventory that you’ll sell on Amazon. If you’re trying to expand beyond selling on Amazon, obviously this is an issue. Alternative lenders are far less restrictive about how you spend your loan amount. With funding programs from alternative lenders, you can use your loan funds on any business expense. The only exception is programs such as equipment and real estate loans, which must be used for equipment or real estate.

Qualifying and Application Process

Amazon only offers its loans to applicants that demonstrate a track record of sales success. While Amazon doesn’t weigh your credit history as heavily as alternative lenders, they do consider it when considering loan applicants. That said, a credit score of at least 500 is enough to meet some alternative lenders’ criteria. Therefore, if your credit score is good, Amazon business loans aren’t necessarily easier to qualify for than alternative financing. Finally, with both Amazon and alternative lenders, the application process is typically completed in a week or less. Of course, some alternative lenders may be faster or slower.

Amazon or Alternative Financing: Which is the Right Funding Option for You?

Due to the use of funds restrictions, Amazon Lending only makes sense if you want to grow your sales on Amazon. After all, that’s all you can do with a small business loan from Amazon. Still, even if Amazon sales are your priority, that doesn’t mean an Amazon business loan is a no-brainer. It may still be worth considering alternative financing if you need funds for expenses such as cash flow or equipment. If you don't qualify for Amazon financing, meet the program requirements so that you can be invited by Amazon to apply. In the meantime, you can still apply for installment loans and other funding programs from alternative lenders. Certain types of alternative financing have more lenient requirements that you may be able to meet. Whichever funding option you choose, it’s a good idea to familiarize yourself further with alternative loan options.