Top Amazon Financing Solutions for Sellers
Growing an Amazon business presents its challenges, and obtaining financing is a key part of the growth journey. Without adequate funding, expanding your product offerings, boosting marketing campaigns, and recruiting skilled team members can be tough.
Carefully assessing each financing alternative, considering your company’s unique requirements, future objectives, and appetite for risk, is essential. Equally important is having a solid plan for the utilization of these funds and a method to guarantee returns.
Here are some financial resources and strategies to aid in the growth of your Amazon business.
What is inventory financing for Amazon sellers?
Inventory financing leverages the resources of a financing partner to pay for your Amazon inventory production. Funding can often be customized to address your business’s exact manufacturing, shipping, and sales timelines. Some providers require no payment on goods until the inventory sells. This works well with natural cash flow cycles.
The products produced typically act as the collateral for the financing, meaning that if the business reports an inability to repay the funding, the inventory can be sold to cover the debt.
Inventory financing proves particularly beneficial for Amazon businesses facing substantial gaps between purchasing inventory and generating revenue from future sales. It also aids companies looking to capitalize on bulk purchase discounts by placing larger orders to sustain their various sales channels. Implementing this strategy regularly, such as on a quarterly basis, can effectively mitigate stock shortages that hinder growth.
Amazon seller inventory financing options
As an Amazon business owner, it’s crucial to recognize your financial needs and investigate suitable financing solutions to make informed financial choices. Below, we outline several methods Amazon sellers use to secure inventory financing.
Amazon Lending
This financing program is offered by Amazon to eligible small and medium-sized businesses (SMBs) that sell on the marketplace. The program provides loans or lines of credit to help sellers fund their inventory purchases and grow their businesses.
Key Features and Details of Amazon Lending
Invitation-Only. Amazon Lending is currently an invitation-only funding program. Amazon extends offers to select sellers based on their performance metrics, sales history, account health, and other factors.
Inventory Financing. The primary purpose of Amazon Lending is to offer financing specifically for inventory purchases. Sellers can use the funds to replenish stock, expand their product lines, or invest in other inventory-related needs.
Simplified Application Process. Amazon streamlines the loan application process for invited sellers. The application is typically done through Amazon Seller Central, where brands can review the loan offer, select the desired loan amount, and accept the terms.
Sales Performance-Based Eligibility. Amazon Lending primarily evaluates sellers based on their sales performance and account health on the marketplace. Factors such as sales volume, account tenure, order defect rate, and customer feedback ratings may influence the loan eligibility and loan amount offered.
Customized Offers. Amazon tailors loan offers to individual sellers based on their specific financial needs and business performance. The loan amounts and terms can vary, and sellers have the option to accept or decline the offered loan.
Repayment through Sales Proceeds. Loan repayment is typically facilitated through an automated deduction from the seller’s Amazon seller account. As sellers generate sales on the marketplace, a portion of the proceeds is used to repay the loan until it is fully repaid.
Business Credit Cards
Business Credit cards can be a quick way to access funding. You can apply for a business credit card or use your personal credit card and payments don’t need to be made on the balance for 30 days.
However, much like your personal credit card, a business card includes annual fees and interest rates.
Business Credit Card Features
Quick access to funding. You can get approved and start using a credit card almost immediately.
Interest-free promotions. Some credit cards run promotions where you won’t accrue interest for months or even the first year. You can take advantage of that deal and earn a cash buffer while you pay down expenses. Or you can just pay off the balance each month to avoid interest.
Rewards/Points. With a business credit card, you can get cash back, airline or hotel rewards, and then use your rewards for business trips, conferences, trade shows, or business related events.
SBA Loans
An SBA loan is administered by the U.S. Small Business Administration (SBA), a government agency that supports and promotes the growth of small businesses.
The SBA itself does not directly lend money to businesses but instead provides guarantees to approved lenders, reducing the risk for those lenders and making it easier for small businesses to access capital.
Key Features of SBA Loans
Loan Guarantees. The SBA guarantees a portion of the loan amount provided by approved lenders, which helps mitigate the risk for lenders and encourages them to extend loans to small businesses that may not qualify for traditional financing.
Loan Programs. The SBA offers different loan programs to meet various business needs. For example:
7(a) Loan Program. This program provides general-purpose loans to small businesses. Funds can be used for working capital, purchasing inventory or equipment, refinancing existing debt, and other business purposes. Within the 7(a) program, there are specialized loan initiatives, such as the SBA Express Loan Program and the Export Loan Program, tailored for specific needs.
CDC/504 Loan Program. This program is designed to support long-term fixed asset financing, such as real estate or major equipment purchases. It involves a partnership between the borrower, a Certified Development Company (CDC), and a lender. The CDC provides a portion of the financing, the lender provides a portion, and the borrower contributes a down payment.
Eligibility Criteria. SBA loans have specific eligibility requirements set by the SBA and the participating lenders. Generally, businesses must meet certain size standards, operate for profit, have a reasonable owner equity investment, demonstrate the ability to repay the loan, and be in good financial standing.
Loan Terms and Conditions. SBA loans typically have favorable terms compared to conventional loans. The loan amounts, interest rates, and repayment terms may vary based on the program, the lender, and the specific circumstances of the business. Collateral requirements may be flexible, and the SBA sets maximum interest rates that lenders can charge.
Inventory Financing with Kickfurther
For physical product companies (CPG companies), or those producing shelf-stable consumables, a growth funding option that provides larger amounts than traditional financing and at faster speeds is inventory funding with Kickfurther.
Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you control. Kickfurther’s unique funding platform can fund your entire order(s) each time you need more inventory.
So, you can put your capital on hand to work growing your business without adding debt or giving up equity.
Why Kickfurther?
No immediate repayments. You don’t pay back until your product sells and you control your repayment schedule.
Non-dilutive. Kickfurther doesn’t take your equity.
Not a debt. Kickfurther is not a loan, so it does not put debt on your books, which can sometimes further constrain your access to additional capital providers and diminish your valuation if you approach venture capital firms.
Quick access. You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.
Interested in inventory funding through Kickfurther? See how much capital you can access by creating an account today.
Benefits of Inventory financing for Amazon Sellers
Securing financing for your Amazon inventory brings numerous advantages that can bolster your business’s growth and overall achievement. Highlighted below are the primary benefits of inventory financing for Amazon sellers.
Cash Flow Management
Inventory financing helps in optimizing your cash flow management. By leveraging financing to fund inventory, you avoid locking a large chunk of your working capital in your current inventory.
This approach frees up cash to address other operational demands, such as marketing initiatives, recruitment, or diversifying your product offerings.
Inventory Expansion
Financing allows you to capitalize on opportunities for expanding your inventory and diversifying your product range.
It enables investments in new product categories, the introduction of variations on current products, or the augmentation of stock levels to satisfy increasing customer needs.
Seasonal Demand and Inventory Management
Ecommerce businesses frequently encounter sales volume changes because of seasonal demand variations. Inventory financing offers a solution to navigate these fluctuations effectively by supplying the needed capital to accumulate stock in preparation for expected high-demand periods.
This strategy guarantees that you can fulfill customer orders on time, avoiding inventory deficits or excess stock issues.
Competitive Advantage
Access to inventory financing can give your business a significant competitive advantage. It allows you to swiftly capitalize on buying opportunities, acquire sought-after inventory, and outpace your competition.
Keeping an ideal inventory level and expanding your product range can draw in and keep customers, leading to increased sales and profit.
Final Thoughts
When exploring inventory financing, it’s crucial to assess your business’s requirements, expenses, and ability to repay. By comparing various financing choices, terms, and interest rates, you can identify the financing solution that best matches your expansion goals and financial targets.
Author
John Heberling is a Senior Partnerships Manager at Kickfurther. John has been with the company for more than three years. Prior to Kickfurther, he worked in the banking industry for both Citi and M&T.
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