Amazon Lending is a invitation-only short-term business loan that helps Amazon sellers fund inventory purchases. But it is not something growing sellers can tap for other business needs like advertisements, amenities, or staffing. For all these, sellers need to turn to funding sources like Payability, savings, or credit solutions.
Here’s what to anticipate from Amazon Lending, and 6 alternatives to think about.
| Funding option | Best for |
|---|---|
| Amazon Lending | Launched Amazon sellers needing to finance Amazon inventory buys. Loans are invitation-only. |
| Payability | Growing Amazon sellers who wish to get Amazon obligations daily, not on Amazon’s 14-day payout schedule. |
| Personal Income | New Amazon sellers that don’t have/want to utilize personal credit or savings to fund initial inventory purchases. |
| Personal or Retirement Savings | New Amazon sellers that don’t wish to run up loan or pay attention on initial inventory purchases. |
| Personal Credit | New Amazon sellers that don’t have/want to use personal savings to finance initial inventory purchases. |
| Business Line of Credit | Launched companies that need access to immediate cash for short-term funding like inventory purchases. |
| Business Loans | Launched companies That Have to fund longer-term projects, like facilities growth or equipment |
Now let’s explore each one of these 7 Amazon funding options in detail so you may determine the best fit for your startup or company development requirements.
1. Amazon Lending for Inventory Financing
Amazon Lending At-a-Glance:
| How to use | Invitation-only, delivered by Amazon through email and Seller Central messaging |
| Loan amount | $1000 to $800,000 |
| Costs | No closing fees, interest delegated by Amazon based on your sales volume and payment duration; normally according to a 6% – 13% APR |
| Limitations | Limited to Amazon inventory purchases only |
| Repayment | Up to 6 weeks, payments automatically taken from the Amazon sales payouts |
How it Works
You can’t apply for Amazon Lending, it’s invitation-only. Amazon invites established sellers to participate in Amazon Lending for the express goal of buying more inventory to sell on Amazon. Amazon pre-qualifies you based on sales volume and other information that Amazon tracks. You’ll know you are invited if you receive an Amazon Lending supply via Seller Central or email, like this:
Picture Source: SecondHalfDreams blog
As shown above, the Amazon Lending invite includes a loan offer up to a certain amount and a range of repayment terms to select from. You accept all or part of the offered amount and select your terms. The calculator figures your interest based on the terms you select so that you’ll know exactly what the loan will cost. Amazon then deposit funds in your bank account, typically within 1-2 days, which you can use to purchase additional Amazon inventory.
After financing, Amazon automatically deducts a set payment out of the Amazon payouts before the loan is repaid. The payment total can be displayed in your offer so there are no surprises. Amazon Lending is for short-term financing, so payment provisions are 6 months or less. If your earnings numbers met Amazon’s expectations, then you will probably receive more loan supplies during and after the duration of your loan.
Who it’s Ideal For
Only established sellers can be eligible for Amazon Lending, and Amazon determines your eligibility. If you get an invitation and you need a means to pay for more stock to sell on Amazon, Amazon Lending is a very simple and quick way to acquire short-term funding.
Prices
You pay only the interest rate that you choose when you accept your offer. Most Amazon Lending loans are based on a 6 percent — 13 percent APR, but some quantity sellers report prices provides as low as 2 percent to 3 percent APR.. There are no closing charges using Amazon Lending.
If your Amazon earnings payout will not cover the automated payment, then Amazon will deduct the outstanding amount via ACH from the bank account. You need to know about that to avoid bank overdrafts. If you can not repay the loan in terms, then Amazon will ultimately grab your FBA stock as payment and sell it themselves to settle the debt. That’s why Amazon mostly targets FBA vendors with Amazon Lending offers. Your FBA stock sits at Amazon’s warehouse and acts as security, so Amazon can’t lose.
Limitations
Amazon is very apparent that Amazon Lending funds are to be used to purchase stock to market on Amazon. You can not use it for other business expenses or for inventory that is being marketed in a retail shop on a different website. If you opt for the loan and Amazon does not see inventory added to your accounts, they could call in the loan for breaking the agreement.
2. Payability for Daily Cash Flow
Payability At-a-Glance:
| The best way to apply | Apply at Payability.com |
| Loan number | Not a loan. Turns your twice-monthly Amazon payments into daily payments |
| Prices | 2% commission based on overall Amazon sales |
| Limitations | Funding is limited to a daily Amazon earnings, but spend any way you need |
| Repayment | No repayment since it’s your own money, just paid faster than awaiting Amazon’s twice-monthly payments |
How it Works
Payability deposits your Amazon earnings income into your bank accounts on a daily basis. This process is called factoring and it is rather straightforward. Payability deposits 80% of your daily Amazon earnings to your own bank account or onto their prepaid MasterCard. 20% is held at a reserve to pay for returns or chargebacks and can be released to you on Amazon’s regular 14-day payment schedule.
Who it’s Right For
Any seller that wants to control their cash flow, not wait for Amazon’s 14-day payouts will probably appreciate Payability. Sellers who should move fast on inventory buys, or that have to cover due-on-receipt payments throughout the month may benefit from Payability’s daily residue.
Prices
Payability’s 2% fee is based on your total Amazon earnings, but that is all you pay. Payability has no startup or cancellation fees, and there is no loan to repay. Payability simply advances you your own Amazon income faster than Amazon pays out it.
Payability also gives you an option to get your deposits put on a prepaid MasterCard that pays 2% cash back on purchases. Going this route offsets much of Payability’s 2% fee.
Limitations
The only 2 requirements are that you’ve sold on Amazon for over 90 times and average at least $2,000 per month in earnings. But, Payability only advances your everyday sales revenues. You can not get more funds over what you make daily on your own Amazon sales.
3. Utilize Personal Income from a Job
Personal Income for Funding At-a-Glance:
| The best way to apply | No application |
| Loan number | Not a loan |
| Prices | Not one |
| Limitations | Not one |
| Repayment | At your discretion |
How it Works
Have you got some salary left over after your personal expenses are paid? Then you can put your private cash toward inventory purchases and save the interest rates which come with using credit. For most new Amazon vendors, this is ideal since startup inventory purchases can call for minimal investment.
Who it’s Ideal For
Sellers focusing on Retail Arbitrage, used goods, handmade, and collectibles usually get started this way because it doesn’t cost much to test a few items out on Amazon. Should you do your merchandise research using Amazon’s free cost scanner program and are careful with your ancient purchases, using private income allows you avoid tapping into savings or building up credit card bills until sales start rolling in.
Costs
You pay no interest or fees when you use personal income as startup Amazon funding, but you do need to track your expenses just as with any other business.
Limitations
You are limited by what you can afford to invest from your normal income, so you may not be able to afford bigger discounted inventory buys. But this should not be an issue on your startup phase since you don’t want to buy in bulk before doing lots of merchandise testing.
4. Use Personal Savings or a Retirement Rollover for Business Startup (ROBS)
Personal or Retirement Savings Funding Option At-a-Glance:
| How to apply | Schedule a free consultation |
| Loan amount | Not a loanneed 50k+ in 401k or IRA |
| Costs | Savings: $0, ROBS: $5k Setup + monthly fees based on account total |
| Limitations | None |
| Repayment | In your discretion |
How it Works
You’re able to tap personal savings and even specific types of retirements accounts to fund your startup business. Purchasing funds from your savings account are not simple. It is possible to invest them into your business by transferring them to your business account and keeping close track of your total investment for accounting functions.
In case you have a retirement accounts, like a 401k or a traditional IRA, you can get those funds to begin or help grow your Amazon company. You do this by setting up a Rollover for Business Startup (ROBS) accounts, which requires some setup and a minimum $50k investment. A ROBS allows you to obtain retirement savings for company purposes without paying taxes or early withdrawal penalties. Learn more in our Ultimate Guide to ROBS
Who it is Right For
Anyone that has sufficient savings to pay for startup inventory needs. Pulling from a basic savings account can be a perfect way to purchase some startup stock and give Amazon a move. A ROBS requires a lot more setup and requires that you pull at least $50K from your retirement accounts as a seed investment into your company. Therefore a ROBS is really for a bigger venture. But every enables you to invest in yourself and avoid paying out interest to creditors.
Costs
Pulling from economies just costs you the missing interest on your income. A ROBS is much pricier than normal savings. A ROBS supplier will charge startup costs of about $5k, plus monthly government fees.
Limitations
You’re confined to the funds you’ve got available in your savings to spend. If your retirement fund does not have $50k in value, you can’t roll it into a ROBS.
If you’ve at least $50k of retirement capital which you’d like to use to finance your startup business, you can schedule a free consultation with a ROBS specialist. Get all your questions answered and also make sure a rollover as business startups is ideal for you.
Schedule Free ROBS Consultation
5. Tap Into Personal Credit Cards & Lines of Credit
Personal Credit Funding Option At-a-Glance:
| The best way to use | Online or via credit card providers or your lender |
| Loan number | Varies |
| Prices | From 2% to over 4 percent for home equity lines of credit, 13 percent & up for credit cards |
| Limitations | Not one |
| Repayment | Monthly payments |
How it Works
It’s possible to make premature Amazon stock purchases on private credit cards or with a private loan, but it is important to thoroughly track these as business expenses for tax purposes. Having a credit line, like a home equity loan, you can move funds to a business bank account and use them to create your purchases. Tracking your own personal investment and business expenses is key to making this work when tax time rolls around.
Who it is Right For
New sellers with existing private credit cards or lines of credit, or personal credit ratings that permit them to acquire sufficient credit to cover early Amazon inventory buys.
Prices
From 2% to more than 4% to home equity lines of credit, 13% & up for credit cards. But be vigilant! When there are some 0% credit card offers, credit cards frequently have high interest rates. If you carry balances month-over-month, the curiosity can pile up and cancel out your Amazon gains.
Limitations
You are confined to the available balances on your credit cards or lines of credit, however it is crucial that you avoid going overboard buying unproven inventory. It is very easy to devote credit and end up in a bind when the bills come in. Balances, interest, and late fees can easily stack up and wreck your own cash flow and credit rating if you’re not careful. So tap into personal credit and with a hefty dose of reality.
For new companies, a small business credit card can be a great alternative. Not only do they have ample cash-back and travel rewards applications, but they can also help you build your business credit score. Additionally, you don’t need an EIN to apply.
Compare Best Small Business Credit Cards
6. Use a Business Line of Credit for Fast Cash
Business Lines of Credit At-a-Glance:
| How to apply | Online source like Kabbage or through your company banker |
| Loan amount | Kabbage: $2k – $150k; Traditional Bank $10k+ |
| Costs | Interest based on creditworthiness, can range from 12% to 50% APR |
| Limitations | None |
| Repayment | monthly obligations on the outstanding balance |
How it Works
With a business credit line, you can immediately transfer cash funds into your business checking account without incurring the greater cash advance interest rates that credit cards charge. This is very helpful for creating Amazon stock purchases as your business grows. You’ll find that providers prefer wire transfer or check payments because your orders get bigger. Some will discount your order should you create up-front payments. With immediate cash from your credit, you can take advantage of each possible thing.
You then just pay off your line of credit balance as your products sell. You’ll accrue interest and have a minimum amount due in your balance every month, like a charge card. But if you utilize Payability’s daily Amazon payouts, you can pay a little toward your balance every day or week to minimize your curiosity.
Who it is Right For
Established businesses with some banking history. You are able to start a revolving small business line of credit where you do your business banking, or use an online source like Kabbage. Lines of credit have been opened under your business entity, but oftentimes, your personal credit rating is used to ascertain your interest rate and credit limitation.
Prices
Business lines of credit interest is based on creditworthiness, can vary from 12% to 50 percent APR, based on the credit amount and other things. Bank lines of credit frequently have an yearly fee, too.
Limitations
You’re limited by your credit line, but otherwise, business lines of credit are really flexible and widely used for funding short-term working capital requirements or inventory purchases.
Prequalifying for a small business line of credit with Kabbage is fast and simple. If you’ve been in business for 1 year, then generate $50k+ in annual revenue, and also have a credit score above 550 (check here for free) you may qualify for up to $150k.
See Kabbage
7. Fund Long-term Needs with a Company Loan
Business Loans At-a-Glance:
| How to use | Online sources like OnDeck or in-person together with your bank |
| Loan number | Online lender like OnDeck $5k – $500k; traditional banks $10k+ |
| Prices | Bank loans 5 percent to 10 percent APR, lenders like OnDeck 30%-50% |
| Limitations | Not one |
| Repayment | Daily, Weekly, or Monthly payments to the outstanding balance |
How it Works
Business loans vary from a line of credit in a couple of ways. The application process can be more demanding and, once funded, you pay interest on the full amount of the loan from day one. Even if the capital sit unused in your bank accounts, you paying attention on the complete amount until you start paying down it. You also have a set term for repayment, for example monthly payments over 3, 12, or 36 months.
Who it is Right For
You require a business thing to acquire a business loan, but there are some startup business loan alternatives for comparatively new businesses. Secured loans, like those offered by OnDeck, are supposed to fund fast and be paid off quickly, usually under 3 decades. For Amazon inventory buys, Amazon Lending matches this function at much lower rates of interest. However, if your business should fund something other than Amazon inventory, like commercial real estate or equipment, a long-term small business loan can be the best choice.
Costs
While rates start at 9.9 percent, short-term loans from OnDeck typically have a 30%-50% APR, depending on your creditworthiness. You are going to receive lower rates with traditional longer-term Small Business Administration (SBA) loans or bank loans which run from 5 percent to 10% APR.. However, these generally require a detailed loan program and an established business record.
Limitations
Typically, you are totally free to use business loan funds to get any needed business expense. But some business loans for specific capital improvements or equipment finances limit utilization to stated functions.
Getting prequalified on line with OnDeck takes just a few minutes. Well qualified borrowers can qualify for $5k — $500K in small business financing with rates as low as 9.9%.
Visit OnDeck
The Bottom Line
Amazon Lending is a highly competitive inventory financing choice for Amazon sellers. Unfortunately for startups and fighting sellers, Amazon only invites the success stories to the Amazon Lending party. Until you get their attention, you are on your own when it comes to financing your stock purchases.
It’s possible to fill the funding gap a number of ways. Personal income, savings, and credit are what most sellers turn to original. Once sales start rolling in frequently, Payability makes it simpler to get your Amazon money faster, pay suppliers faster, and support growth by controlling your cash flow.
After you’ve proven your model, you’ll have more funds options available. By then, combining a few solutions can provide the flexible funding needed to chart a path for growth on Amazon and beyond, if that is where your business takes you.
Do you use Amazon Lending, Payability, personal funds, or lines or credit to fund your Amazon functioning? If this is the case, which financing solution or combination of methods works for your business? We would really like to learn about your experiences at the comments below.
