Amazon Will Provide Lines of Credit to Small Businesses on Its Marketplace

Amazon will soon provide third-party sellers with credit lines through a partnership with Goldman Sachs.

As first reported by CNBC, small business owners who sell items through Amazon will soon have the opportunity to apply for credit lines up to $1 million through Goldman’s digital-banking offshoot, which is called Marcus.

According to CNBC, potential borrowers can apply to the program via a two-step long process through the Amazon merchant hub Seller Central.

The credit lines will have a fixed annual interest rate ranging from 6.99% to 20.99%, the report says, and the lines can be drawn and repaid similar to a traditional credit card. If sellers consent, Goldman will gain access to data regarding their businesses’ revenue and tenure in order to make decisions regarding approval, CNBC says.

Since 2011, Amazon has offered loans to small and medium-sized businesses through its Amazon Lending program. The invitation-only program, which operates in partnership with Bank of America, offers between $1,000 and $750,000 to merchants seeking cash to expand product lines, buy inventory and advertise on Amazon.com. Amazon Lending loan terms range from three to 12 months and carrying interest rates of between 6% and 19.99%.

In June 2017, the e-tailer said more than 20,000 merchants had been financed through the lending program and that it had issued more than $1 billion loans over the prior 12-month period, versus $1.5 billion in lending over the four years before that. By the end of 2019, the Seattle-based company was slated to receive $863 million from sellers who took its loans, according to a regulatory filing.

Following the coronavirus crisis, many businesses are looking for additional capital to keep operations running after experiencing dips in sales, and some merchants may have found themselves stuck with excess inventory.

Although Amazon experienced heightened demand in certain categories during the pandemic as shoppers stocked up on household goods and other essentials, other nonessential categories saw declines as panicked consumers saved their dollars for nondiscretionary items.

Merchants were also contending with shipping delays for some products this spring as Amazon prioritized the shipment of essentials amid a strain on its warehouse operations. With discretionary spending down and shipments delayed, some third-party sellers saw their income significantly decline during the public health crisis.

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