Amazon has proven to be an excellent platform for a wide range of retailers but, for many sellers, cash flow can be a problem.
This may be because sales on online marketplaces such as Amazon and eBay tend to be irregular and unpredictable and can’t always be relied upon to provide sufficient cash for paying Amazon fees, buying more inventory, and anything else you need to invest in to help grow your business.
For many sellers the answer is an Amazon business loan.
At one time obtaining such a loan tended to be problematic.
High Street Banks have gained a reputation for turning down business loan applications and even withdrawing credit facilities for established businesses.
Over recent years, however, many different lending platforms have emerged as an alternative to the banks.
In fact, the whole of the finance sector has changed remarkably.
Whilst at one time practically the only source of business loans was the main banks, across Europe the alternative finance sector has grown rapidly, reaching an estimated €7 billion during 2015.
These developments have proven to be a huge boon to Amazon sellers.
Rather than requiring a long term finance, sellers often need a short term Amazon loan which will be repaid within a year or even faster, and this is just the kind of loan in which than many of these new platforms specialize.
Here is a selection of the alternatives:
High Street Banks
Although as we have said, obtaining an Amazon business loan through a conventional lender such as a High Street bank could be problematic, it is still a possibility that might be worth considering.
If you can demonstrate that you have a viable Amazon business with regular sales volume and good trading history and you have a good personal credit rating then, you may qualify for an unsecured Amazon business loan, but even if you do the application process can be a protracted procedure.
If you simply need some short term cash for such things as busing inventory, this isn’t likely to be the best route, though if you have an excellent relationship with you bank short term finance might be available.
Be aware though that the bank may request collateral.
Kabbage | Amazon business loans for US sellers
Kabbage provides loans to eBay and Amazon sellers. To qualify for an Amazon business loan through Kabbage you will need to provide the platform with read only access to your Amazon and PayPal accounts.
The way in which these have been conducted will be used to provide you with a go/no go assessment for a loan. Loans are available from £1,000 to £40,000 and are provided as a credit line.
This means that you can draw down cash whenever you need it and, like a credit card, you only pay interest on the amount you borrow.
Kabbage loan periods are between one and ten months.
The major downside of a Kabbage Amazon business loan is its cost. Interest rates are particularly high; typically, with APRs of around 68%.
Fees are charged of between 2% and11% of the loan value which is payable in the first month and additional fees of 4% of the remaining balance over subsequent months.
As an example, if you borrowed £10,000 over 10 months you would repay around £12,900 over the period; an expensive way to borrow money.
Despite the high cost, the appeal of Kabbage business loans is that all you need are online business accounts such as Amazon, eBay and PayPal; it takes just minutes to apply for a loan, and approval can be granted immediately.
Once you are approved you can take as much as you need rather than the full lump sum.
To qualify for an Ezbob Amazon business loan you simply need to be resident in the UK with a UK bank account and to have been selling on Amazon for at least a year with annual sales of at least £10,000.
You will need to be a director, owner or partner in a registered UK business which can be a limited company, registered as a sole trader or partnership.
If you have less than a year’s trading history on Amazon but you have been operating as a business on other platforms, then you can use your business bank statements or VAT returns to qualify.
Loans of from £1,000 up to £120,000 are available with a maximum term of 15 months. To apply for an Ezbob Amazon business loan you will need to link your Amazon store to your application.
Completing the application process takes around 10 minutes and when approved you can usually access the cash within an hour.
Interest rates and fees are considerably less than those charged by Kabbage, for instance a £10,000 loan over 10 months will attract interest charges of £963, so you will repay a total of £10,963.
Iwoca, the name is derived from Instant WOrking CApital, provide provides short term eBay and Amazon business loans as well as loans to other businesses such as hotels and restaurants.
To apply for a loan, you will need to provide Iwoca with read only access to your online accounts. You can also upload VAT returns and business bank statements. It takes only minutes to apply and if you are approved you can draw down your loan within hours.
Loans of £1,000 to £100,000 are available, though your credit limit depends on your sales revenue from Amazon. Usually the limit is one month’s revenue, though if you are just starting your business you may qualify for £10,000 start-up loan.
The loan is available as a credit line, so once you have qualified and the loan has been approved you can draw down the cash when you need it.
Generally, loans are repaid over six months, though you can repay the loan and interest as a lump sum at any time in order to reduce interest charges.
Interest is charged on your outstanding balance on a daily basis with interest rates being dependent on your Amazon business profile.
Interest rates begin at 2% a month, though loans may cost as much as 6.0% a month. If you qualify for an interest rate of 3%, a £10,000 loan over six months will cost just over £1,000 of £1,650 if you choose to repay it over ten months. At 6% interest the same loan would cost you £3,300.
Bitbond | The perfect place for an Amazon business loan ✅
Bitbond is a great way for Amazon businesses to obtain working capital. A Bitbond Amazon business loan has helped many Amazon traders launch and expand their businesses. Bitbond facilitates business loans to a wide range of businesses, including businesses that don’t have formal credit ratings.
The Bitbond platform provides a brokering service so enabling bitcoin loans between Bitbond lenders who wish to lend bitcoins in return for earning interest and borrowers who need finance for their businesses.
All borrowers undergo a check on their credit worthiness. They are charged a small fee for this, and also pay a fee when their loan application is funded, however the fees are relatively small, much lower than the fees charged by more conventional lenders such as High Street banks.
Credit rating is assessed by taking into account your employment status and your income. Where credit bureau ratings are available, these are also used.
Online reputation is another important factor, and this is assessed by considering online accounts. Amazon sellers can connect their seller account to Bitbond, giving the platform read only access.
Bitbond will then review the account as part of the process for assessing the borrower’s credit worthiness; for instance, a high number of positive feedbacks will result in an improved credit rating and lower interest charges.
To apply for a Bitbond Amazon small business loan sellers must first register on the Bitbond platform and get their credit worthiness assessed; this will provide them with a Bitbond rating.
Once that has been received you simply post a loan request which lenders will review. This is an anonymous process as, except under special circumstances, the identities of both the lender and borrowers aren’t usually revealed; instead all participants are assigned identification numbers. Interest rates start at 7.7%.
When the loan markets were dominated by High Street banks, getting an Amazon business loan was difficult, and practically impossible after the global financial crisis.
However, just as nature will always fill an ecological niche, the result was a range of alternative finance providers arose to plug the gap, making the use of the latest technologies to streamline the process and reduce costs.
Today Amazon business loans are available through several alternative providers. Loan companies such as those reviewed here and peer-to-peer lending platforms such as Bitbond are now the first port of call for many Amazon sellers.
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