Getting an Amazon Business Loan: What You Need to Know

by | Jan 25, 2022 | e-Commerce | 0 comments

One of the fastest-growing retail selling models is that of the Amazon business. More and more people are throwing their hat into the online selling ring, specifically selling on Amazon. And why not? In 2020, Amazon reported nearly $400 billion in sales. It was the fourth country to reach a $1 trillion market cap and is now on its way to $2 trillion. From its humble beginnings in 1995 as a bookseller, Amazon has grown into the dominant online selling platform without question. This is why so many people want to get in on it.

Growing your Amazon business takes work, it takes time, and yes, it takes money. How do you get your Amazon business to the next level? For many entrepreneurs, this might mean taking out an Amazon business loan. The question is, what loan type will be ideal for your online retail store? In this article, we look at several funding options that e-commerce sellers have when it comes to getting Amazon business loans.

Are You Ready to Grow Your Amazon Business?

Before you apply for your Amazon business loan or any commercial financing, you need to stop and take stock of where you are right now. Remember, a lender is going to scrutinize your application. They don’t want to risk lending money to a company that isn’t going to be around a year or two years from now or five years from now. They want to make sure that you are a safe bet, in a manner of speaking.

Ask yourself the following questions:

How much revenue do you bring in per year? Per month?

What type of demand is there for your products now? Will there be a year from now?

Do you have your processes down? In other words, from marketing to selling to shipping, is your retail business streamlined enough to be sustainable?

What do you need the money for? Are you planning to expand your product offerings? Are you planning to purchase a warehouse or storage facility? Are you thinking about broadening your marketing efforts?

Where does your cash flow currently stand? Do you have enough money coming in every month to repay an Amazon business loan comfortably?

Types of Business Loans for Amazon Sellers

While there is no one lending solution for an online retail seller, there are various options from which to choose. These opportunities will give you money now so that you can start expanding your Amazon business. Below are a few of the more popular options for e-commerce businesses regarding commercial lending.

1. Merchant cash advance. This type of financing involves borrowing money from a lender based on your future credit card sales. Especially when it comes to Amazon selling, most entrepreneurs do the bulk of their business in credit cards transactions. With a merchant cash advance, you pay as the money comes in; in other words, the lender gets a percentage of your daily sales. When sales are higher, they get more. Conversely, when sales are a bit sluggish, you pay less.

2. Invoice factoring. This is when you essentially sell your accounts receivable to get the money you need now. So, if you do have outstanding invoices, you basically will sell these to a lender who will give you the money upfront and then proceed to try and collect on those unpaid invoices. Keep in mind this can have higher rates than other types of financing.

3. Credit cards. Using a credit card is sometimes their only option for many smaller businesses. This could be a great way to build up your business credit if you pay off your card monthly. Don’t charge beyond the point of what you can pay. Make sure you are responsible for that card. When using credit cards, keep in mind that the amount you have available is generally less than if you got another type of Amazon business loan.

4. Line of credit. Many lenders, especially alternative and online lenders, will offer Amazon sellers generous lines of credit for their business. The great thing about a line of credit is that you only pay interest on what you take out. You do not deliver on the entire amount available. And when you do repay the money that you borrow from the line, it again becomes available for you to use. This is what is called a revolving line of credit.

5. Short-term loans. Many alternative lenders will offer short-term loans to Amazon sellers. As the name suggests, a short-term loan is usually designed to be paid back within 6 to 18 months. While the interest rates can be higher, you pay it back over a shorter period. These can be ideal for projects you have coming up in the immediate future. So, for example, let’s say you need money to develop and launch a new product.

First Union Lending Works with Small Businesses Throughout the US

We work with numerous Amazon businesses, getting them the cash they need when needed, not weeks or months from now. Our small business loans are fast, flexible, and designed with each client in mind. In other words, no one size fits all approach with us. If you need additional working capital for your online selling business, we can help. Call today, and let’s get started together.