Amazon Financing: a comprehensive guide

It is very common for sellers to need to look for extra financing if what they want to do is to expand their business, they do this by diversifying their merchandise by acquiring new products. However, due to the complications and new challenges that the coronavirus pandemic has brought to businesses, you may well need additional funds to successfully overcome these challenging times.

While you may initially experience an increase in Amazon sales as more people shop online, in the long run, this could have an impact on supply chains and sellers that rely on retail arbitrage. Many predict that there will be a global recession but if this happens it would result in consumers spending less on goods they don’t consider as essential and that would cause most sales to fall and with it the seller’s business.

Having to decide when and how you will raise the small or large funds to maintain your business is a big and equally important step. But you should keep in mind that starting to have financing without first obtaining income can play a bad trick on you; you may end up getting into debt and not be able to pay the loan back. At the same time, waiting too long to obtain funds can also hurt your business: to give a small example, you may miss out on excellent growth opportunities or lose out on juicy offers from suppliers.

Cash flow vs cash flow management?

Cash flow refers to the monetary resources, both cash, and non-cash, that flow in and out of a company. It is responsible for indicating the cash inflow your company generates for a given period, for example, within a fiscal year. When cash flow is positive it means that more money is coming into your company than is going out, when cash flow is negative it means that less money is coming in than you need to cover your expenses.

Cash flow is an important indicator of how healthy your company is, financially speaking, and therefore has the power to reflect the extent to which your company can finance itself and sustain itself. Generally, cash flow should reflect the entire flow of financial resources that are moving within your company.

When cash flow management is well thought out, i.e. accurate planning of all income payments and results was made, it brings good results for the business because it can compensate for deficits, can secure reinvestments, and thus flexibly operate your business.

Good cash flow management often requires the use of external financing.

revenue based financing example

Things to consider

  • Be sure to check your credit score to help determine your level of risk.
  • Review your finances and your company’s cash flow to determine if it makes sense to borrow some funds for your business and if the answer is yes, ask yourself how much you can afford to borrow.
  • Determine early on what your objectives are for borrowing the money.
  • Determine how quickly you need to borrow the funds.
  • Determine, be realistic and think about how long it will take to be able to pay back the borrowed funds.

Once you have finished mulling over your decision and if you feel ready to seek outside financing, here are 2 financing options for your Amazon business.

Financing for Amazon sellers

Fortunately, Amazon sellers can find the funding solution they’re looking for at SellerFunding, which uses an artificial intelligence algorithm to make the most of your Amazon Store’s performance for qualification. Requirements for qualification include having at least six months of selling history on Amazon with sales of at least have a minimum of $30,000 during that period (or an average of $5,000 per month). It is also important that your business is in good standing with Amazon.

The application takes about 5 minutes, of which you can request a certain amount to grow your business. Amazon also offers a grace period of at least 90 days before you have to start repaying your loan. Once you’ve been approved, you can see the funds in your account in 1-2 days. And after you’ve paid 50% of your outstanding balance, you’re perfectly eligible for a new loan.

growth capital for amazon sellers

You should know that rates for SellersFunding range from 14.99-24% APR, with no hidden fees or any prepayment penalties. Amazon requires personal collateral rather than guarantees and, while it does look at credit, no minimum score is required. Rather, it is combined along with other factors to look at the overall health of your business.

Credit lines for Amazon Sellers

If you don’t qualify for SellersFunding, need more than you’ve been offered, or need capital that is delivered faster, lines of credit are also another excellent option for your business. Just like Amazon does, most online lenders look at a variety of factors to determine the health of your business (this includes all the services you use such as Paypal, Intuit, Square, etc). Typically the requirements include being in business for at least one year and having at least $50,000 in annual business revenue.

With online lenders’ lines of credit, you have the ease of submitting your application online in just minutes (and receiving approval just as quickly). However, just because you’ve been approved doesn’t mean you’re obligated to take the funds. You have the advantage that you can keep these funds tucked away in your back pocket for when your Amazon business needs them and only take them for when you need them. This way you only pay back what you borrow when you borrow it.

Most online lenders are accustomed to offering simple monthly rates, ranging from 1.5% and 10%, with an annual percentage rate that tends to vary from lender to lender (and depending on the overall health of the business). The advantage is that many lenders do not offer prepayment penalties and terms range from 16 to 18 months.

Why do you need financing?

There are several reasons why you would need financing in the form of a loan or upfront payment from Amazon Logistics.

Initial investments

If you are just starting your business and have not yet managed to make money with your Amazon business, and Amazon external financing solution might be what you need for you.

Every good entrepreneur knows that especially at the beginning of your business, you have to invest a considerable amount of money. This is because sourcing services, inventory and software purchases, warehouse and 3PL leases, and costs for other things will come up. This is why often your savings and financial help from family and friends are not enough for your business to make a successful take-off.

Being able to meet increased demand

Unfortunately, this is more common than you think. Thousands of Amazon sellers go through the following situation: everything is running smoothly with their first order, the money has been properly budgeted and everything is fully invested in their first batch of inventory.

Now the product is starting to sell as expected and, before they know it, they have to quickly reorder to avoid running out of stock for sale. This is not only to keep up with demand, but Amazon punishes you for not taking your supplies and having enough inventory on hand.

The first order must be funded before sufficient cash flow is generated from sales of existing products.

Amazon Financing resources

Here are a list of companies providing financing for Amazon Sellers:

  • Ritmo: Ecommerce and Amazon Growth Capital
  • Sellers Funding: Working Capital, Daily Advance, Global Digital Wallet, Business Prepaid Card, Sellers Signals and other options
  • Uncapped: Fast, flexible funding for online sellers
  • Amazon Lending: credits for Amazon Sellers directly from Amazon
  • Accrueme: growth capital for Amazon Sellers

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About the author

Jordi Ordonez
Amazon and ecommerce Consultant at | Website

I work as an independent eCommerce and Amazon consultant.

I work for: Estrella Damm, Intersport, Bella Aurora, Lladró, Textura Interiors, Nice Things Palomas, Castañer, Due-Home and many other clients.

I teach and have been a speaker at: Meet Magento, Prestashop, Prestashop Day, SEMRush, Cambra de Comerç Barcelona, ​​ClinicSEO, Ecommbeers, Ecommbrunch, Ecommercetour.com, Ecommfest, EOI, ESIC-ICEMD, Foxize, Generalitat de Catalunya, Inesdi, Quondos and The Valley.

In addition, I have done in-company trainings for brands such as Orange and Adidas.

Finally, I collaborate writing articles for Shopify, SEMRush, Prestashop´s official blog, Brainsins, La Vanguardia, eCommerce-news.es, Marketing4ecommerce and other blogs and media.