By Rieva Lesonsky
Having a small business presence on Amazon just got easier as Amazon.com told its sellers the company is essentially offering small business loans to help increase sellers’ sales. According to the letter Amazon recently sent to its sellers: “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 prequalified for a loan up to [the amount here differs with each seller]. Use these funds to purchase inventory and increase your sales on Amazon.com.”
So what does this mean to you? For sellers it means more working capital to buy much-needed inventory, especially heading into the hopefully busy holiday season. Small business owners are looking for alternative sources for lines of credit, and this offer could spur them to sell more of their wares on Amazon. For Amazon, it could mean increasing its power as an Internet marketplace, as long as it can handle the credit risks.
According to the letter, once a loan is approved, the funds will be advanced to the seller’s Amazon Seller Account and disbursed to the bank account on file. Then the monthly payment will be automatically deducted from the Amazon Seller Account. The interest rate on these loans is 13 percent, which is higher than bank loan rates. Obviously Amazon is primarily targeting their marketplace. It’s well-known that banks don’t like small loans so this is likely a way to help grow their marketplace and extend loans to people who are not able to get bank loans or whose requests would be too small for the banks to consider. But this seems to be an attractive option.
Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at firstname.lastname@example.org, follow her on Google+ and Twitter.com/Rieva and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports