Financing for Amazon sellers: Pros and cons of 7 alternatives

The right financing for Amazon sellers can redefine their business landscape. 

According to JungleScout’s State of the Amazon Seller 2024 report, 89% of sellers are profitable, yet managing finances remains one of their top challenges – cashflow constraints being a common problem. This can largely be attributed to the need to purchase inventory ahead of peak sales periods.

Fortunately, financing options for Amazon sellers can bridge this gap. Access to invoice financing, small business loans, lines of credit, and other financial instruments provide the necessary capital to not only sustain operations but also to spur growth.

In this article, you’ll learn whether or not Amazon offers loans to its sellers and explore seven financing options that can help you optimize your operations and boost growth.

Does Amazon give loans to sellers?

According to Fortune's website, Amazon stopped underwriting loans to sellers on its marketplace platform on March 6, 2024, ending a program that ran for over a decade. Sellers still in possession of existing loans won’t be affected by this change.

While Amazon's proprietary lending program has concluded, financing for Amazon sellers remains available through various third-party options. These alternatives include term loans, lines of credit, and merchant cash advances tailored for entrepreneurs selling on the Amazon marketplace.

Despite this announcement, Amazon's page still invites sellers to apply for Amazon Lending, describing it as an invite-only program. However, with the vast financing opportunities available, Amazon sellers don't need to rely solely on the marketplace offering.

7 financing options for Amazon sellers

Choosing the right funding alternative is crucial for business growth. This guide explores seven key financing options for Amazon sellers, including invoice financing, revenue-based financing, business line of credit, merchant cash advance, and others. 

Each offers unique benefits and challenges, tailored to meet different business needs. Understanding these alternatives will help you effectively navigate financial decisions to enhance your Amazon project.

• Revenue-Based Financing: Repay with a percentage of monthly sales
• Business Line of Credit: Flexible, revolving access to capital
• Merchant Cash Advance: Upfront cash in exchange for future sales
• Short-Term Loans: Fast working capital with quick approval
• SBA Microloans: Up to $50,000 in financing for startups and bad credit
• Inventory Financing: Borrow against the value of your stock

For each option, we'll outline the key benefits and drawbacks to help you determine the best fit for your Amazon business.

1. Revenue-based financing

Revenue-based financing (RBF), also called royalty-based financing, is an increasingly popular way to raise capital without giving up ownership or taking on debt. Instead of fixed loan payments, you pay a percentage of your monthly revenues. 

This alternative financing for Amazon sellers or other small and medium-sized businesses (SMBs) is rapidly growing – projected to reach over $42 billion globally by 2027 at a 61.8% annual rate, according to Allied Market Research.

With RBF, your repayments flex with your actual sales performance. When revenues are high, you pay more. When they dip, you pay less. This dynamic aligns repayment with your ability to afford it, avoiding the strain of inflexible debt obligations. 

In other words, you get growth capital upfront while only sharing a portion of the upside when your business succeeds in driving more sales.

Benefits of revenue-based financing

• Performance-based repayment: Weekly or monthly payments scale directly with your Amazon revenues, preventing cashflow strain
• No fixed obligations: There are no crippling interest charges, balloon payments, or debt schedules to worry about
• Reasonable cost: Revenue-based financing typically incurs more modest fees compared to equity investment options like angel investors
• No collateral required: Agreements are based solely on your performance potential, without requiring you to pledge business assets as security
• Rapid deployment: Approval and funding can happen within 48 hours after finalizing terms – much faster than traditional financing options

Learn more about a new approach to growth: Revenue-based financing demystified.

2. Business line of credit

A business line of credit (BLC) offers flexible financing for Amazon sellers, working similarly to a credit card with a pre-approved revolving credit limit. Interest only accrues on the outstanding balance, and sellers can pay it down and redraw it at any time.

This financing instrument puts Amazon sellers' growth ambitions in the driver's seat. Instead of waiting for loan approvals, they hold the keys to quickly unlocking capital for inventory, marketing, staffing expansions, or any other strategic investments.

Benefits of business line of credit

• Fast funding speed: Sellers can quickly get approved and funded with minimal documentation required
• Flexible qualification requirements: Poor credit, startups, and businesses with past financial difficulties may still qualify based primarily on their sales volumes rather than strict financial requirements
• Repayment tied to sales volumes: Remittances are automatically deducted as a percentage of the seller's Amazon sales, so repayment amounts adjust based on the business's performance

3. Merchant cash advance

Merchant cash advance empowers Amazon sellers to double down on their next big window by leveraging the sales it will generate down the road. It's a financing tool that provides near-instant access to upfront cash in exchange for a share of their future revenues.

Essentially, Amazon sellers trade a fixed percentage of their sales over a defined period – say 12 months – in return for a lump sum payment today. No restrictive debt obligations, no need for collateral, just fast cash to pour rocket fuel on their business.

Benefits of merchant cash advance

• Near-instant funding: After a brief review of sales data, cash can be deployed within days
• Repayment based on actual business sales: Remitting the advance occurs automatically as a fixed percentage deducted from Amazon sales. When sales are booming, more gets paid back. When volumes are slower, so are the deductions
• No stringent requirements: The Amazon seller’s credit score or collateral won't restrict access to capital

Find your perfect fit: What are the best alternative business financing options?

4. Short-term loans

Short-term loans are a popular financing option for Amazon sellers in need of quick working capital. These loans provide a fixed amount of funding with predetermined interest rates, designed to address and master your cashflow needs.

Short-term loans work by allowing small businesses to make manageable monthly payments over a short period to repay the loan amount and interest. No collateral is required, making them accessible to borrowers with less-than-perfect credit histories.

Benefits of short-term loans

• Quick cash access: Short-term loans provide a fast and convenient way to access cash when you need it, allowing Amazon sellers to address immediate financial needs for their business, such as restocking inventory or covering shipping costs
• Flexible borrowing options: There are various short-term loan providers and products available, giving sellers plenty of choices to find an alternative that best fits their specific requirements and circumstances
• Short repayment period: Unlike long-term loans that tie business into repayments for several years, short-term loans typically have repayment periods ranging from a few months to a year

5. SBA microloans

Serving as an effective financing option for Amazon sellers, the SBA microloan program provides up to $50,000 in capital for businesses to fortify operations and pursue expansion initiatives.

While backed by resources of the U.S. Small Business Administration, these microloans are facilitated through a network of specialized intermediary lenders. These lenders, often community-based nonprofits, ensure a localized and personalized approach, understanding the unique challenges and opportunities within your region.

Benefits of SBA microloans

• Versatile funding: SBA microloans can be used for various business purposes. They offer flexibility in how the funds are allocated
• Accessibility for startups and poor credit: Startups and small business owners with bad credit histories may still be eligible for the loans
• Favorable terms: These small business loans often come with competitive interest rates, low fees, and extended repayment periods

6. Inventory financing

Inventory financing for Amazon sellers is a type of short-term loan or revolving line of credit specifically designed for businesses to acquire products for resale. Also known as stock finance, the inventory itself serves as collateral, making it an attractive option for sellers who may have limited access to traditional financing.

Here's how it works: you secure an inventory loan from a lender, enabling you to purchase the necessary stock from your suppliers. As you sell the inventory on Amazon, the proceeds are used to repay the loan. This cycle continues, allowing you to maintain a steady flow of inventory without tying up your working capital.

Benefits of inventory financing

• Flexible payment: You can borrow capital as needed through inventory financing, rather than taking out a large lump sum loan upfront
• Streamlined access: The application process for inventory financing is easy and quick compared to traditional loan products
• Maximize funding: You can potentially be funded up to 100% of the value of your inventory assets

Secure funding for your Amazon business with Stenn

Traditional financing is stuck in the dark ages. Stenn is the alternative financing for Amazon sellers who are ready to break free. Backed by financial giants HSBC and Citi, we’ve already poured more than $20 billion into businesses around the globe.

Outstanding invoices got your cash trapped? We'll unlock it with invoice financing. Need upfront capital to seize that next opportunity? Revenue-based financing is your ticket. Stenn has the flexible alternatives you need to grow, on your terms.

Level up your Amazon game. Talk to us today.