You may have heard of the retail giant Amazon, but did you know that since 2012, they have been offering loans to Amazon sellers?
Or that in the last 12 months, they have loaned out over £1 billion to sellers in the US?
Amazon sellers in the UK will soon also be able to benefit from these loans, with some case studies seeing sellers go from £0 to a monthly revenue of £15,000 after taking out one of their loans.
This guide will tell you everything that you need to know about the Amazon loans, including what they are and the most commonly asked questions, answered.
Who is Amazon?
Amazon is undoubtedly a titan of industry, with annual revenue of around £178 billion in 2017, making them one of the most profitable companies in the world, far beating the vast majority of banks.
They started as an online book-store in 1994, but Amazon quickly started stocking other favourite items such as DVD’s, clothes, games.
In just a few short years, the founder Jeff Bezos won Time Magazine’s “Person of the Year” in 1999 for his efforts and company success.
Amazon quickly expanded, with the ability for individuals and companies to sign up and start selling products through their platform, while Amazon would package and deliver these products for a price.
As this is the way that Amazon has gone from a simple e-commerce website to a globally recognised and trusted brand, the more their sellers sell, the more money they make.
It’s unsurprising, then, that they have been offering Amazon sellers loans for their business since 2012, with reports stating that in the last year alone Amazon has lent around $1 billion in the US.
This allows sellers to invest in stock and anything else to make them more profitable.
Essentially, a win-win scenario for both parties.
How does it work?
Reports state that sellers are invited to take out a loan with Amazon, and each of these invitations will typically stipulate how much you are allowed to borrow, what you can use it for and your terms.
This is likely because Amazon is keeping in mind that each business and seller is unique.
How much can I borrow?
According to Amazon, it appears that so far the amount that sellers can borrow is between $1,000 to $750,000.
It seems that you are allowed to borrow less than you are offered, so it’s entirely up to your discretion whether the full amount is affordable or right for your company.
What are the loan terms?
These loans are intended to be short-term only, which is why they cap the repayment terms at around 12 months.
What are the interest rates?
As your invitation will have a bespoke interest rate depending on your business, it’s hard to say what a typical interest rate might be.
However, some sources have stipulated that an Amazon loan will be between 6% and 16% which is less than some credit cards or merchant cash advances.
How can I benefit?
Amazon sellers can benefit from getting quick access to essential funds, which could help you to bolster your current stock or change it depending on what the consumer market is saying.
With relatively low-interest rates available and large funds on offer, Amazon has an aim to help you make as much money as possible.
Will I be eligible?
Although Amazon sellers are the only people eligible for this loan, it’s not going to be available to all sellers.
It seems that Amazon will decide whether you are eligible depending on your specific sales history, your customer rating and things like your stock information.
So, you won’t necessarily know unless you receive an invitation.
Once the program has been rolled out to the UK, it’s likely that you will find out quickly.
What can I use the money for?
Reports state that you’ll probably be only able to spend the money from the loan to either stock up on your products or change direction regarding the types of products that you are stocking.
So, what exactly are quick or short-term loans?
What are business loans?
In short, it’s when you ask a lender like a bank to loan you some money so you can pay for things like more employees – in return, you will pay back this money often over a set period.
You might also have to pay a certain amount of interest.
Interest is when you have to pay back a little extra, as a sort of payment for borrowing that amount of money.
Often, a business loan can come from many different places, so as a business owner you should always try and consider as many possible solutions as possible to find the best deal.
What is a quick business loan?
For your business, a quick business loan gives you fast access to cash that can help your company thrive, or even expand.
This could be launching another branch, hiring employees or purchasing things such as a business phone system or other office supplies.
Plus, you can make manageable monthly repayments that are typically under two years in loan lengths, instead of other loans that might take years to pay back.
So while your repayment amounts might be high, you might be able to pay it off in a few months which will let your budget more manageable.
What are the benefits to a quick business loan?
- These types of loans are often more flexible.
- They are quicker to access.
- You can get a quick business loan from most providers.
- Usually, you won’t need to put up your assets as collateral.
- The interest rates are sometimes lower.
- An emergency financial boost can mean the difference between fulfilling a critical order or not.
What is a short-term business loan?
A short-term business loan refers to a loan that you need to repay in a very short amount of time, usually within two years.
This means that while you will end up paying less interest because you won’t be incurring it over a long time, like some loans that you can borrow for around five years, the interest rate will likely be higher.
In other words, don’t be put off by high-interest rates because it still might be cheaper than a more extended length loan.
Often, modern loans will require a lot of information from you to trust that you will be able to make your repayments.
So, not only will you likely need to have a good credit score, but you may also need to produce full business plans or personal guarantees that you can pay the money back.
This can mean putting your assets up as collateral, like your home or a car for instance.
What’s the difference between a short-term, mid-term and long-term loan?
Like the name’s suggestion, the difference between a short-term, mid-term or long-term loan is merely the time that you are allowed to borrow the money, and how long you have to pay it back.
For instance, a long-term loan might be for around ten years which means that you have a long time to pay off your loan; however, you will also be earning ten years of interest which can end up adding hundreds if not thousands onto your final bill.
Mid-term loans are typically over two years in length, and your repayments will be lower than with a shorter length loan, and you’ll have enough money to either set up your business successfully or help it to expand.
Short-term loans require more substantial repayments over a shorter period. However, you’ll end up paying less overall than with a more extended loan because you’ll be incurring less interest, even if the interest rate seems higher.
What is an example of a short-term loan?
According to the Ultimate Finance website, this is a representative example of what customers can expect from a short-term loan.
Borrowing £25,000 at an interest rate of 1.5% over six months would mean that you would make six monthly payments of £4,451 and it would mean your final amount to pay back would total £27,250.
Are these loans good for bad credit ratings?
Yes, they can be.
Borrowing a short-term loan can make the first step in proving that you can borrow money, and pay it back.
This can help you to repair or build your credit score, as long as you are entirely sure that you can make those repayments as if you fail you could end up damaging your score even more.
Best short-term loans available today
|Company||Trustpilot Score||Loan Amount||Loan Term||Typical APR|
|Alius Finance||No Data||£10,000 to £1 million||Three months to 60 months||11.28%|
|Yorkshire Bank||★||£10,000 to £150,000||Six months to 60 months||12.80%|
|Spotcap||★★★★★||£50,000 to £250,000||One month to 24 months||22.80%|
|Ultimate Finance||★★★★★||£5,000 to £100,000||Up to 12 months||36.80%|
Amazon sellers in the UK can look forward to benefitting from Amazon’s loans shortly, but you should always compare your options to make sure that you are getting the best deal.
Take a look at the ExpertSure guides to find out more about your finances, or fill out the form at the top of the page to look at your loan options.