Amazon Offering Loans to Sellers

September 29, 2012, By Sanjeev Ramachandran

Business is a dynamic field and you have to be on your toes to be a step ahead of others.

Amazon is doing just that to expand its sales with a new trick up its sleeve.

The online retailer is now giving out funding to businesses selling on its marketplace. This move, apart from increasing its sales, could expose Amazon to possible credit default risks.

The venture is termed “Amazon Lending” and sellers have received mails offering loans from Amazon Capital Services. Some sellers have been offered funding up to $800,000, while interest rates are charged between 1 and 13 percent.

The chief executive of e-commerce advisory firm ChannelAdvisor, Scot Wingo, said that this move on Amazon’s part will help people grow and help them to get more cash for buying more products. “Some of these businesses are only constrained by cash flow,” he said.

Credit worthiness and loan amounts are determined based on the performance on Amazon’s marketplace. The thing to understand here is that the money received can be used to expand inventory and increase sales only on Amazon.com.

If you have merchant accounts on the online retail site, then you can sign up for loans, which will be scrutinized for approval. Once approved, the money will be deposited in your bank account within five business days.

Monthly interest payments will be deducted automatically from the Amazon seller accounts. The whole process does look to be good, and it might be some good way to increase sales.

We don’t know what Amazon  would do if a seller who has the loan is unable to repay it back. Amazon hasn’t come out with the full details yet, but everything is expected to be disclosed soon, so hang around here.

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