Amazon Seller Loans

Businesses have to balance growth and ambitions with reality and cash flow.  For e-commerce businesses, re-investing to expand product line …

Businesses have to balance growth and ambitions with reality and cash flow.  For e-commerce businesses, re-investing to expand product line is a core part of going from a 3 and 4 monthly figure seller to a 5 and 6 monthly figure seller.

There might come a point during your career as a seller where you’re approached to be given a business loan, perhaps even by Amazon themselves.  Or maybe you’ve decided it’s time to take on some external funding to really help you scale to the next level.  If you find yourself in either of these positions the first thing you should be interested in is learning about all of the options available to you.

Here are some of the more common ways to get loans for your business:

  1. Credit Cards – probably the easiest way to quickly get some extra capital into your business.  Depending on your credit history and existing financial profile, you may be able to get $25-$50k (or more).  Be sure to pay close attention to the terms and agreements of any card you go with and make sure it makes financial sense given your projections.
  2. Crowd Funding – crowdfunding websites like Kickstarter and Indiegogo have sparked an entirely new way for businesses and ideas to be funded — through the power of the collective.  If you’ve got a novel product idea you may be able to bring it to life with a solid Kickstarter Campaign.  Thoroughly research successful crowdfunding campaigns to get a feel for what you’ll need (take a look at one of our favorites here).
  3. Small Business Loan – if your business has enough financial history and performance, it might be possible for you to sit down with a local bank in your city and negotiate a small business loan.  Ideally, you would avoid a personal guarantee for this loan and strictly have it under the business although that may not be an option given your individual circumstances.
  4. Amazon Loans – this may or may not come as a surprise but if you haven’t heard yet, Amazon themselves offers loans at varying rates to FBA sellers.  It makes sense seeing as they already have historical financial data for your business and an analyst or algorithm can quickly find “low risk” opportunities to loan money to sellers with a good track record.  Usually, these loans fall somewhere between 12-20% and your deal with be specific to you.  We always suggest trying multiple avenues and calculating what the best option for you and your business is after that.
  5. 3rd Party Loan Companies – just like shovel makers during the gold rush, the rise of e-commerce on Amazon has brought about numerous 3rd party companies selling services to these sellers and that includes loan companies.  Whether it be Kabbage, Payability or any other player that springs up, you should be objectively looking at all of your options and deciding where to get money once you have everything laid out in front of you.

With any of the options above (and any other options you stumble across) you’ll need to jump through a number of hoops such as:

  1. Bank statements for up to 6 months
  2. Utility bill, drivers license or proof of identity and residence
  3. Clean history from tax liens and bankruptcies
  4. At a very minimum, 3 months of business operation
  5. $10,000/mo in revenue at least
  6. Credit score of at least 600, ideally 650+

These are just a start and many lenders could have more stringent requirements.

Due to the fact that there are so many avenues and options for taking on debt to grow your Amazon business, you really need to analyze the financial specifics of your business and any loan you look at.  Specifically look at how much the loan is going to be once you pay it off, what time period it needs to be paid off in and how much realistic potential revenue you can gain from taking it on.  You’ll also want to be honest about any potential risks you face that may make it difficult or impossible to pay the loan off within the timeframe agreed upon and be absolutely certain you’re ok with the liability you sign on.

Taking a loan can be a great thing for your Amazon business or it can be a burden and stressful bump in your seller journey… make it the former by carefully analyzing your choices before signing.

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