About Amazon seller financing
Amazon sellers offer consumers all kinds of products, from beauty and healthcare to electronics. The possibilities are endless when it comes to choosing what to sell on the popular eCommerce platform. However, it’s important to remember that the algorithm favors those who sell the most. The best way to get to the top of the search results is to sell more products. In order to do that, you have to keep up with demand. Failing to stock enough inventory and going out of stock can harm your business. That’s where Amazon Seller financing comes in.
Finding a suitable funding partner will provide your business with necessary cash flow that you need for expenses like inventory procurement and advertising. These two elements of your business are vital when you’re selling on Amazon. Your budget can be hard to maintain with the day-to-day expenses and supply chain costs. There’s not much cash leftover for growth and unexpected expenses that inevitably arise from time to time. Amazon loans are a great way to make sure you have the working capital you need to succeed.
Amazon seller financing opportunities
When it comes to financing, there are many lenders and funding types to sift through. It can be overwhelming, especially for those who are just starting their Amazon seller journey. Each financing solution has different eligibility requirements, such as business history, revenue, and credit score. Some investors require you to put up collateral while others take equity in your company. It’s important to understand the various options available before signing a contract.
Amazon loans
Amazon has a few funding options available directly from their company and partners. However, they are invitation-only, so you can’t reach out and apply on your own. They do have reasonable financing options for the sellers they consider to be excelling at what they do. Let’s explore their loan types.
Amazon term loan: This type of loan is short-term, meaning that it’s repaid within a certain time period (usually one year). The value can range from $1,000 to $75,000 with an interest rate between 6-16%. You won’t have to worry about credit checks, as they look at your sales performance for reference. The funds are also provided to you within the business week.
Amazon line of credit:Â Amazon has a line of credit loan that offers you consistent funding. You only pay interest on the portion that you use, and the interest rate is between 7-20%. The loans typically range from $10,000 to $75,000 depending on your sales performance, however it can go higher.
Amazon merchant cash advance: This type of funding offers some flexibility to the seller, as it doesn’t involve any interest. You repay the loan by sacrificing a portion of your future sales to Amazon until the loan is repaid—a fixed capital fee. Again, they don’t check your credit history, and the loan limit will be between $500 and $10 million. There’s also no minimum monthly payment since your repayments are based on your sales.
Inventory financing
Inventory financing has one purpose — it helps you buy inventory for your business. It’s a short-term loan that offers you the chance to expand product lines and prepare for spikes in demand. This type of funding is known for being quick and easy to apply for. Credit history isn’t a deal-breaker when it comes to getting approved, and the amount you get approved for depends on your generated revenue and collateral.
The great part about inventory financing is that you don’t have to use property, company equipment, or vehicles as collateral. You can use the inventory you’re purchasing to secure the loan. The interest rates fluctuate according to the lender and business. You can apply for a term loan, which you pay back with fixed monthly payments or a line of credit that can offer you revolving credit as you repay it.
The downside is that inventory financing may not offer you the full amount requested to purchase all the inventory that’s needed. Since your collateral involves inventory, the lender will require regular check-ins, as it’s their money, too. Some lenders may even have minimums when it comes to borrowing, which can be more than you need or can afford.
Revolving line of credit
Lines of credit are for short-term or long-term uses. The bank or lender will provide you with a set limit, which depends on your business history and current revenue. However, unlike other loans, the money becomes available to you again as you pay it off — similar to a credit card. You can utilize it for day-to-day expenses, such as payroll, rent, and inventory. You can also keep it for emergencies, which every business should consider.
A line of credit improves your cash flow immensely, as you have access to it whenever it’s needed. The lender doesn’t dictate what you spend it on, as long as it’s business-related. Use it to boost your advertising budget, stock up on inventory, or even launch a new product.
If you’re looking for a large loan, then this isn’t the type of funding for you. Most lines of credit are for smaller amounts of capital. They also come with higher interest rates, as the eligibility requirements are lenient compared to most. Make sure to thoroughly read the contract to find out if the lender charges extra fees on top of the interest rate before signing on the dotted line.
Peer-to-peer financing
Peer-to-peer financing is the process of borrowing money from one or several private investors. This is not to be mistaken for crowdfunding, which involves securing money from numerous investors without having to pay it back. Peer-to-peer financing is a personal loan that you do have to pay back, regardless of the outcome. You will have to make monthly payments that are split amongst the investors. They charge you interest just like a bank or other lender would.
Brands often choose this type of funding because of the convenience. The interactions are entirely online, so you don’t have to worry about setting up in-person meetings to get approved. The approval rate is higher, too, as you’re dealing with private investors rather than large corporations. Interest rates and loan amounts all depend on the contract that you and the investor agree upon.
There are a few challenges to consider before going forward with peer-to-peer financing. Unlike banks and investors that offer their expertise, you will have to manage everything on your own. There is also a high risk of hidden fees, so review your contract carefully.
Equity financing
Equity financing involves selling shares of your company to willing investors. The money you receive in return can be used for anything you want, such as day-to-day expenses or expanding your business. Equity investors can include family, friends, venture capitalists, or angel investors. When your company has matured, you can even offer an IPO or an initial public offering, which makes shares available to the public.
With multiple owners comes many experienced voices. You can utilize their insights and improve your business operations. It’s a risky business for the investors, as their repayment hinges on your profits. However, the chances of growth are greater with more money and heads involved in the operations.
Remember that your brand’s ownership is diluted with every investor. You have to share profits among the shareholders, which may be more costly than paying interest on a traditional loan. You should also consider the fact that shareholder dividends aren’t tax-deductible. If you don’t qualify for other loan types, then this may be a good route to take, but choose your investors wisely.
Revenue-based financing
If you have a business with strong, continuous revenue, then this type of funding is a great option. Investors will provide you with funding to manage your business operations. Then, you repay the loan as a portion of future sales, and there’s no monthly limit. Completing your repayment can take a short or long time, depending on your sales volume. It’s a quick way to get the capital you need, especially if you don’t qualify for other loans.
With revenue-based financing, you keep complete control and ownership of your business. The investors may offer advice, which you should consider, but they don’t have sway when it comes to decisions. They’re trusting you to generate profits for everyone.
The cost of capital associated with your revenue-based financing may be more than the interest rate you pay on traditional funding. This type of funding isn’t available to all businesses either. It’s important that you do your research when comparing loan types against revenue-based financing. The only way this type of funding works is with steady revenue, so you have to stay on top of your budget and forecasting.
Merchant cash advance
Merchant cash advances are usually easy and quick loans to obtain. They offer much-needed cash flow to brands, and you retain complete control over the funds. The lender won’t interfere with your business plans as long as you make the agreed-upon payments. They’ll supply you with a lump sum that you’ll pay back with a percentage of future credit and debit card transactions.
Startups can benefit from this type of funding, as most lenders only require that you be in business for three months before applying. If you have a low credit score, don’t worry, it’s not always a factor in their decision. Lenders don’t even require collateral in order to secure the loan. You’ll just have to prove that you bring in steady revenue through credit and debit card sales.
One downside to merchant cash advances is that the cost of capital is often higher than other types of financing. If your sales aren’t performing well, they can still take money out of your account, depending on the contract you agree to. Keep in mind that this type of loan doesn’t build business credit, so it won’t help you get approved for a better loan later on.
8fig for Amazon seller financing
For those in need of Amazon loans, 8fig is one of the best alternative available. Our growth platform provides business owners with the ability to plan, manage, and improve your business operations. You’ll also be able to avoid the strict eligibility requirements that traditional banks have. 8fig works with you to build a customized plan and helps you every step of the way.
Why use 8fig for Amazon seller financing
Most funding options provide you with a large lump sum of capital, which you repay through regular payments. This is not always the most helpful or efficient use of funds. 8fig is different, providing you with consistent cash infusions into your business as you need it. This lowers the cost of capital and ensures that you’re optimizing your cash flow, enabling you to grow your business and generate as much revenue as possible. You can even change the details of your plan as you go, such as the payment schedule and funding amount.
How 8fig works
1. Apply
The application process is fast and easy. Answer some questions about your business and sales, and then provide basic information about your supply chain stages and expenses.
2. Connect your store and bank account
In order to provide you with an optimized Growth Plan, 8fig requires that you connect your store and bank account to the 8fig platform.
3. Get funded
With 8fig, you can get funded in just days. Since 8fig funding is continuous, you receive capital infusions into your business right when you need it.
4. Make adjustments
If something changes and you need to adjust your payments, remittance schedules, or even funding amount, you can always do so thanks to 8fig’s flexibility.
5. Grow your business
All that’s left to do is sell, sell, sell. With 8fig, businesses are able to scale 4X as fast.
What 8fig offers in addition to financing
8fig is more than just a funding platform. We provide you with tools to manage your cash flow, forecast your sales, and increase revenue. We are your business partner when it comes to growing your brand and succeeding as an eCommerce business owner, but 8fig funding is always equity free.
As an 8fig customer, you’ll get supply chain mapping tools, demand prediction software, and sales analytics. In addition, 8fig’s Growth Plans are designed to optimize your cash flow, ensuring you have the capital you need to stay in stock. Everything you need to grow your Amazon business is available through the 8fig platform.
Who is eligible for 8fig Amazon loans
There are lenient requirements involved when working with 8fig. If you’re an eCommerce business with at least 12 months of trading history, a yearly sales revenue of over $100,000, and have made an average of $8,000 in revenue per month for the last three months you’re welcome to apply for funding with 8fig. 8fig doesn’t even perform credit checks, which is a huge help to those with little history.
If you meet these requirements, you’re eligible to receive up to 90% of your supply chain costs. This capital can be used for everything from procuring inventory to platform fees to marketing campaigns and will come in handy when you’re planning your budget. 8fig’s decision about your application and approval are based solely on your brand’s business performance, so there’s no need to worry about intense evaluations, either.
How to apply for 8fig financing
It’s easy to apply for 8fig financing, and it only takes a few minutes. Simply answer the questions and follow the prompts and you’ll get funded in no time!