Yes, you read that right. Not content to offer you blu-rays, digital downloads, kettles and cakes, Amazon are now planning to offer loans too – but only if you’re one of their specially selected third party merchants.
Amazon Lending was founded in 2012 and has already been offering loans to entrepreneurs in the US and Japan. But now they’re looking to widen the net.
New Service for Sellers
The short-term working capital loans will be on an invite-only basis, and Amazon Lending plans to extend these invites not just to selected marketplace sellers in the UK, but also, later in the year, to sellers in Canada, France, Germany, India, Italy, Spain and China too.
While some financial aspects doubt the wisdom of this venture, pointing to the high failure rate of small businesses, particularly in India and China, other e-retailers that run third-party marketplaces, such as eBayInc’s (EBAY.O) PayPal and the Alibaba Group, are also moving into the business loan arena to boost their vendor base.
But Amazon said it can safely offer loans based on internal data, and because loan repayments are taken directly from the sales proceeds it pays sellers.
“We know a lot about our sellers’ business and invite only those who we think are in the best position to take capital and grow,” said Peter Faricy, the head of Amazon Marketplace.
Give and Take
Amazon’s loans, which are for between $1,000 and $600,000 (£636 to £381,454), are designed to help their marketplace sellers buy inventory. Amazon charges interest on these three to six month long loans and also takes a cut of all sales on its marketplace – sales that now account for around 40 percent of total sales on the site.
While the company hasn’t released specific figures on either the amount it has lent so far or how much it plans to lend this year, Amazon has said it’s offered hundreds of millions of dollars in loans since 2012, with more than half of its sellers opting for a repeat loan.
Chat on the internet indicates that the loans are simple to apply for and that the money is available in a few days, but invites so far seem to be for high-volume sellers. Reports on interest rates vary, with some claiming that 14 percent seems to be an average and others claiming some merchants are paying far less. Business funding hub ezbob.com quotes the rates as between 10.9 and 12.9 percent.
It could present an interesting opportunity for ecommerce merchants planning to make Amazon their main point of sale – if they’re one of the chosen, of course.