I don’t think there’s any question that one of the biggest challenges faced by small business is the need to finance working capital and fund growth. If you’re a small business and offer products through Amazon.com’s marketplace, it just got a little easier.
“Small merchants who generally lack capital to buy the inventory they would like to sell can apply for loans through the service [Amazon Lending],” reports Forbes. “The merchant whose application gets approved would have the funds transferred to his/her Amazon Seller Account. After that, a monthly payment will be taken out from their account until the loan gets paid off.”
Like most non-traditional financing, the interest rate is a little higher than what might be expected from a bank (13%), but then again, it possible some of these small business owners likely wouldn’t qualify for a loan from the bank. Amazon Lending funds approved loans within four days and stipulates that the capital be deployed for the Amazon sales channel vs. other company channels, but I have to applaud Amazon for seeing a need among their online vendors and coming up with a creative solution to keep the wheels of e-commerce turning.
The writers speculate that this could lure sellers from eBay and increase online sales as sellers list more items for sale with increased capital at their disposal.
Although banks and credit unions still provide traditional small business lending, many Main Street business owners are finding alternatives (like this proposal from Amazon.com) very attractive—the challenge is making the right connection to the lender best suited to the financing needs of the small business. In addition to a traditional small business loan or line of credit, there are a multiplicity of options available including specialized loans for running a restaurant, purchasing equipment, or buying a franchise just to name a few. Although I expect most business owners will continue to make their first stop at their local bank or credit union when looking for a loan, it would be a mistake to rule out alternative financing options that could be better suited to their particular needs and circumstances.