Financing Options for SMB Ecommerce Merchants

After a year-long trial, Amazon plans to move forward with a lending program for marketplace sellers operating within socially or economically distressed communities.

Amazon has partnered with Lendistry, a minority-led community development institution. Together, Amazon and Lendistry provided $35 million in loans to about 800 qualifying marketplace sellers during the program’s initial phase, which began in September 2021.

Pilot Program

According to an Amazon post at the pilot program’s inception, small and midsized businesses could apply for up to $100,000. Loan terms could be as long as two years, and annual interest rates ranged from 8% to 9.9%.

Colsen, an ecommerce business in Miami, Florida, received a loan during the trial. The company, which makes and sells home accessories, qualified as a business operating in a socially or economically distressed community.

Colsen was one of the marketplace sellers included in the Amazon Community Lending program’s year-long pilot.

“At Colsen, we have big ambitions to grow the business but a need for capital to facilitate it was critical,” said Armando Colimodio, co-owner of Colsen. “By working with Amazon Community Lending, we’ve been able to invest in our business and expand our great product selection through the program’s simple and quick loan acceptance process. We expect to double our sales this year and remain committed to growing our product portfolio.”

Amazon sellers and small business owners Armando Colimodio and Eduardo Rodriguez, co-owners of Colsen, received a loan from the Community Lending program. Photo: Amazon.

Now Ongoing

Based on the pilot program’s success, Amazon has made community lending one of its ongoing financial offerings, alongside interest-only loans and a business line-of-credit partnership with Marcus by Goldman Sachs, an online platform offering personal loans and savings accounts to retail clients.

The Amazon Community Lending program will offer loans of $10,000 to $250,000 at “competitive and affordable rates” for five years or shorter to select Amazon sellers in distressed U.S. communities.

The program should lend about $150 million over the next three years, according to Amazon.

Businesses that want to learn more about the program can obtain details in their Seller Central account. But the program is by invitation only at the time of writing.

Lots of Options

This addition to Amazon’s lending programs is not the only way small and medium-sized businesses, in distressed communities or not, can gain access to capital.

For example, Shopify Capital has provided financing for ecommerce businesses since April 2016. The program uses machine learning in the loan approval process, presumably considering ecommerce sales performance. Shopify Capital says it provides hundreds of millions of dollars in financing each quarter.

Kabbage offers lines of credit up to $250,000 for small businesses. The company, now part of American Express, has lent over $5 billion since its founding in 2009.

Other small-business lenders include Kickfurther, Wayflyer, and Clearco.

Considering a Loan?

Whether or not a business should take on debt is a decision that’s best made by each owner.

In general, if the company is doing well, a loan could facilitate expansion, product development, marketing campaigns, inventory, and more.

But if your business is struggling, taking on debt may not be the best choice. In that case, grants and equity investors might be a better option.

Lastly, remember how potential lenders will judge you.

Most loan programs, such as Amazon Community Lending, require a business and its owners to meet financial and other criteria, such as:

• Credit history,
• Cash flow,
• Sales history,
• Asset value,
• And a plan for the funds.