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Amazon offering loans to its online sellers, just in time for holidays

The proliferation of the Amazon marketplace is taking the market by storm. Merchants flock to the site to sell their wares, but now the online retailer is offering financing options that may make it even easier to grow their business.

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The burgeoning Amazon marketplace

The Amazon marketplace is exploding with popularity. With its signature Kindle Fire e-readers and tablets and efforts to improve customer convenience and satisfaction by providing the option to have merchandise sent to delivery lockers, the company known for the smile on the box is high in the ranks of online retailers.

Amazon’s marketplace atmosphere is an ideal platform for merchants to reach interested customers and sell their products. And now, the retailer is giving even more incentive for merchants to sell their wares on the site as it launches a new business offering loans to some of its online sellers.

As discussed in yesterday’s annual budget article, from time to time, merchants can be constricted by low cash flow as funds are tied up in other projects. In order to remove the financial barrier that this presents, Amazon Capital Services will begin offering loans to its online merchants in order for them to purchase inventory, thereby increasing sales in Amazon’s marketplace and increasing seller revenue.

Just in time for the holiday season

This also comes in time for the holiday season when consumer demand goes up and merchants must over-buy, in order to keep popular items in stock but might not have enough cash upfront to do so. Sellers can sign up for loans via their merchant account and receive money deposited into their bank account within five business days if approved. The offering is only available for merchandise sold on Amazon.com, unlike offerings from its competitor, Kabbage, which provides cash advances to sellers on Amazon.com, Etsy, Ebay and Yahoo!

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Amazon’s financing options are a great opportunity for small business owners to get their merchandise in front of the eyes of a large consumer base and purchase enough inventory to meet customer demand. As banks and other lenders have cut financing and lending options, it can be difficult for some business owners to find funds to meet inventory costs.

Rates on Amazon loans vary from 1.0 to 13.0 percent, according to Scot Wingo, chief executive of e-commerce at ChannelAdvisor. “This is definitely cheaper than credit cards and faster and easier than banks, so it may fill a big hole for sellers,” Wingo said. While this could pose potential credit risks for Amazon, the new business division will boost the site’s internet marketplace, and merchants have another financing option if they don’t have enough upfront cash to purchase the inventory they need.

Destiny Bennett is a journalist who has earned double communications' degrees in Journalism and Public Relations, as well as a certification in Business from The University of Texas at Austin. She has written stories for AustinWoman Magazine as well as various University of Texas publications and enjoys the art of telling a story. Her interests include finance, technology, social media...and watching HGTV religiously.

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