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Amazon Lending Offers Line of Credit to Select Sellers in Wake of COVID-19
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This month, Amazon announced an expansion to its Amazon Lending program, where the company will now offer a line of credit to select sellers through its partnership with Goldman Sachs.
This brand-new seller financing service, formally called the Marcus by Goldman Sachs Line of Credit, will allow U.S.-based Amazon businesses to withdraw money as needed to cover various operational costs, such as purchasing inventory, marketing, product development, staffing, and more.
This announcement is well-timed for Amazon sellers whose businesses may have been affected by the COVID-19 pandemic. It is a convenient option for quick cash, instead of utilizing the government-sponsored relief programs or small business loans being offered through the banks.
According to Feedvisor data, 42% of brands selling on Amazon make more than half of their e-commerce sales from the platform alone. For businesses that receive a large portion of their income through their Amazon sales, this can be seen as a seamless financing solution during a time of economic uncertainty.
How It Works
Amazon will share sellers’ financial data with Goldman Sachs only if the seller consents to it. Goldman Sachs will then analyze data based on Amazon revenue, how long they have been selling on the marketplace, and other qualifying factors, to determine which sellers are approved and for what amount of credit. Those merchants who qualify will receive invitations to participate via their Amazon Seller inboxes.
Goldman Sachs will only use seller’s data for credit line eligibility and is not permitted to make any other product offers. Amazon will not have access to the data that Goldman Sachs collects for its qualification process. After receiving the invite, sellers can submit their credit line applications online directly through the Seller Central platform and can be approved within minutes.
Under Amazon’s partnership with Marcus by Goldman Sachs, qualifying merchants can apply for lines of credit up to $1 million with APRs ranging from 6.99% to 20.99%. Borrowers will have to pay a maintenance fee if not using at least 30% of their available credit. Late or missed payments, of course, will also be subject to penalty fees.
Amazon Lending Background
The Marcus Line of Credit expands on the existing seller loan program, called Amazon Lending, which Amazon has been offering since 2011. This program was specifically designed to loan businesses money for inventory purchases. In 2019, Amazon loaned more than $1 billion to more than 14,000 U.S-based businesses
Amazon Lending offers merchants loans that range from $1,000 to $750,000 via invitation only for a specified amount. Sellers can accept all or a portion of the offered amount and choose their terms. Interest is calculated based on the terms chosen, and Amazon deposits funds directly into the seller’s bank account within a couple of days. Eligibility requirements are determined based on sales history, inventory position and maintenance, and seller performance metrics.
Amazon Lending loans are paid back automatically through the merchant’s Amazon sales income over a 12-month period. If sales do not cover the automatic payment, Amazon deducts the outstanding balance via ACH from the seller’s bank account. FBA inventory is also used as collateral and, if payments are not made, Amazon can take ownership of inventory and sell it to recoup the loan balance owed.
Amazon previously worked with Marcus by Goldman Sachs as the lead financier on its $13.7 billion merger with Whole Foods Market. As of May 2020, the Marcus brand of Goldman Sachs held more than $80 billion in global deposits and $7 billion in lending balances.
In addition to offering personal loans and deposits, it also has consumer credit partnerships with Apple and JetBlue, and loan products available through partnerships with Intuit and AARP.
As Amazon merchants typically get paid every two weeks, the Marcus Line of Credit provides merchants that much-needed flexibility to have cash on demand for inventory, marketing, product development, and other business needs.
Also, with the holiday sales period approaching in November, sellers typically place extra-large inventory orders in the late-summer to prepare. This line of credit comes at the perfect time for qualifying sellers to stock up in time for the holidays and also be prepared for when Prime Day 2020 is rescheduled.