The sum of the cash and liquid investments that a business has on hand to manage daily operations is regarded as its working capital. For Amazon sellers, working capital is the amount of available money and assets for doing business on Amazon. Since the COVID-19 pandemic struck, most retail stores have been on the ropes, needing more financing to sustain their businesses.
Sellers on Amazon are most likely to increase their product line and expand operations to cope with the disruptions. Still, insufficient working capital for Amazon sellers poses a significant challenge. However, through the following existing options, they can obtain working capital to enhance business operations.
- SBA Microloans
The Small Business Administration (SBA) Microloan is a popular loan program open to small businesses. Though not limited to Amazon sellers, the program can help Amazon sellers get started and expand their operations.
Amazon sellers with limited credit or lower credit scores will find microloans a good fit for their business. Potential sellers with little or no business experience can also access the loan. These loans are funded through SBA-approved lenders.
The minimum loan amount offered to qualified applicants is USD$500, the average amount is USD$13,000, and the maximum amount is USD$50,000. SBA microloans have a full term of six years, with the annual rate payment ranging from 8-13%. To qualify for this loan, a business must be for-profit and have no record of bankruptcies and foreclosures in the last two years.
- Amazon Lending
Most Amazon sellers wonder if Amazon lends money to businesses. The truth is, it does. Through a novel approach, Amazon invites small and medium-sized growing Amazon businesses to participate in a merchant financing program.
The primary goal of the program is to help them grow. Businesses that qualify for the program have several short-term financing options to choose from. The caveat is that small businesses that have only existed for a short time or aren’t generating enough revenue can find it challenging to qualify. However, for a company that matches the stated criteria, this can be an excellent avenue to source working capital.
Amazon sellers can check eligibility in their seller central dashboard. The minimum amount offered is USD$1,000 while the maximum is USD$750,000. Interest rates are not disclosed. However, they vary, depending on the business’ strength.
- Fintech Lending
Though this is a relatively new form of business financing, Amazon sellers can find it helpful. Fintech lending utilizes the latest financial technologies to streamline the lending process. It seeks to save business owners the hassle of securing loans from traditional lenders, such as banks and credit unions. Lenders give loans or credit lines to e-commerce businesses and provide Amazon sellers with working capital.
However, fintech lenders often look out for businesses with a good cashflow and trackable financial performance. But this shouldn’t be a challenge for Amazon sellers because their Amazon sales history can provide necessary metrics.
Furthermore, fintech loans can be approved and released fast. Small businesses can receive up to USD$250,000 within 24 hours. However, credibility criteria for fintech loans vary from lender to lender.
- Amazon Line Of Credit
This is a more recent model of Amazon merchant financing, created for Amazon sellers only. It’s a product of Amazon in partnership with Goldman Sachs and is highly recommended for Amazon sellers with a record of a steady increase in sales. Small business owners can qualify for up to a USD$1million credit limit.
The uniqueness of this program is that it’s by invitation only. Eligible business owners will see their invitations in the seller central dashboard. The loan has a fixed interest rate. However, late payments will cost some charges.
Unlike the Amazon seller, the Amazon line of credit is more flexible, allowing business owners to use the loan for various business operations.
- Personal Loans
Online personal loans are usually unsecured loans that can serve various purposes, including consolidating debt and paying for a large purchase. An unsecured loan requires no collateral while a secured loan requires collateral.
For Amazon sellers without any sales history that are just starting to boost their eligibility for other loan programs, a personal loan can be a good option. The credit limit for this type of loan ranges from USD$1,000 to USD$35,000. The typical loan duration is two to seven years while the interest rates are based on the seller’s credit. Businesses with better credits get better rates.
Conclusion
Amazon sellers, with the options above, can get working capital that helps them build successful online businesses. However, owners need to figure out the needs and goals of their business before securing loans. More so, they should only borrow what they need.
