In 2012, when Amazon Lending began offering short-term business loans to its sellers in the U.S. and Japan, an Amazon spokesperson told the Wall Street Journal that lending to merchants outside the U.S. “is something we’ll certainly take a look at."
It took three years, but now the lending arm of the online marketplace will begin to extend such offers to its third-party sellers in Canada, China, France, Germany, India, Italy, Spain and the U.K., Reuters reported last night.
According to the exclusive Reuters report:
“Amazon offers three- to six-month loans of $1,000 to $600,000 to help merchants buy inventory. It makes money on interest and takes a cut of all sales on its marketplace, which now account for about 40 percent of total Amazon site sales. Amazon said it has offered hundreds of millions of dollars in loans since 2012, with more than half of its sellers opting for a repeat loan. The company declined to provide specific figures and also did not say how much it plans to lend this year.”
Reuters reports that Amazon “uses internal algorithms to choose sellers based on the frequency with which they run out of stock, the popularity of their products, and their inventory cycles.” The company collects payments on the invitation-only loans from sellers’ sales proceeds.
In a series of articles about decoding business loans, the financing resource Fundtastic.com informs readers that:
“Amazon loans are not technically loans. They don’t report to credit bureaus to help you build up your credit. If you fail to make the monthly payment, they also can’t really collect on you. Instead, they will take your inventory as collateral and sell them to recoup their losses if you have the inventory in their warehouse.”
Notes Fundtastic.com, typical lenders would be unable to liquidate the merchandise.
PayPal, which is held by eBay, and Alibaba, in which Yahoo holds a stake, also offer credit to vendors who sell through their platforms. The new Amazon Lending initiative is seen as a move to compete with Alibaba for sellers in China.