BlogFinance
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4
min read
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Written by: 
Nikolaus Hilgenfeldt
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Category:
Finance

Financing for Your Amazon Store: 5 Ways to Fund an Amazon FBA Business

Oftentimes, Amazon FBA sellers are limited by the amount of capital they have access to. However, these merchants can secure external financing to boost their working capital and take advantage of growth opportunities as they arise. 

Let’s take a look at some of the main sources of funding for someone running an Amazon FBA business.

New to the world of small busines financing? Read our ultimate guide to getting funds for your online store!

Amazon Lending

One way for Amazon FBA sellers to secure capital is through Amazon’s proprietary lending platform. They offer both term loans and lines of credit to eligible merchants and generally provide a quick turnaround for approvals.

This is an option for sellers who have great customer reviews, no complaints within the past six months, and have at least $10,000 in sales over the last year. So, this may not be a great choice for those sellers just starting out. Plus, it’s an invitation-only program, so it may be difficult to access this funding.

Even still, these loans can range from $1,000 - $750,000, at interest rates around 10%. There is a relatively short repayment period for these loans, which leads to higher monthly payments, regardless of how many Amazon sales you’re bringing in.

It’s important to note that the term loans can only be used to restock Amazon inventory, while their line of credit has more flexibility like to fund staffing and advertising costs. 

Business Loans

Online merchants looking to boost their Amazon sales may consider business loans from a traditional bank. These may be harder to acquire, though there is more flexibility from this financing option regarding what the funds can be used for.

Most of the time, these institutions will require sellers to have a meaningful length of business history, a formal pitch deck, a business plan, and a loan proposal during the application process. Banks are generally risk-averse, so online sellers with limited sales history and performance may have a tough time being approved.

Additionally, banks will require the business owner to make a personal guarantee for the loan and put up collateral in the case that the Amazon FBA business fails so they can still recapture their funds. 

Revenue-Based Financing

Revenue-based financing is another source of e-commerce funding today and can be used by Amazon FBA sellers to fuel their business.

When securing revenue-based financing, a lender will approve applicants based on a number of factors, including sales history and revenue projections, in addition to other factors. Again, this means it may not be a good financing option for newer businesses with limited performance history.

In any case, lenders will provide the Amazon FBA seller with the capital, then collect an agreed-upon percentage of the monthly revenues until the loan has been fully paid off. One of the benefits of this arrangement is that the amount of the payments correlates to the Amazon sales the business brings in. So, during slower months the payment will be lower, and higher as sales ramp up. 

Merchant Cash Advances (MCA)

While typically associated with the hospitality and restaurant industry, merchant cash advances can also benefit Amazon FBA businesses. 

This type of funding allows borrowers to access a cash advance for up to a six-month period, which they can then use to purchase more inventory, pay for marketing campaigns, or any other use they see fit to grow their business. 

As repayment, the MCA providers will deduct a certain percentage from each of the store’s credit and debit card sales until the funds have been fully paid off. Again, like with the revenue-based financing model, the repayment schedule corresponds to the amount of sales the store brings in. 

Asset-Based Financing from Myos

Lastly, an alternative form of financing available to Amazon FBA sellers is asset-based financing.

This is a low-risk financing method, with the funds backed by the value of the seller’s inventory. Oftentimes, this financing route comes with flexible repayment plans and doesn’t require the seller to make a personal guarantee for the funds, unlike traditional financing methods.

The funds provided by asset-based lenders are flexible, so the seller can use capital however they’d like in order to grow their business.

When using a lender like Myos, Amazon FBA sellers can apply in minutes. They’ll share the risk of the financing with Myos, who requires lean documentation and business history requirements, doesn’t charge any annuities, and makes no credit checks. 

See how to boost your sales on Amazon with asset-based financing by Myos. 

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