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Amazon Begins Lending to Its Sellers, Inc., the international electronic commerce giant with a cheerful smile logo, is giving many retailers another reason to grin this holiday season as they extend participation in a new short-term lending program.

Amazon Lending by Amazon Capital Services Inc. first began offering low-interest loans to their online merchants in late 2011 in an effort to stimulate growth and provide financial assistance during an otherwise challenging market.

Originally founded by Jeff Bezos in 1994 as an online bookstore, the company has diversified over the years into the world’s largest online retailer of anything and everything, including clothing, toys and electronics. Successful Amazon products include the Amazon Kindle e-book reader and Kindle Fire tablet computer.

Amazon Loan Details

Over the past few months, Amazon Lending has been approaching Amazon sellers of all sizes with installment loans ranging from $1,000 to $38,000 each. Scot Wingo, chief executive of the e-commerce advisory firm ChannelAdvisor, said in some cases, Amazon Lending extends up to $800,000 in loans to Amazon merchants.

According to online sellers interviewed by The Wall Street Journal, interest rates on these loans vary from less than 1 percent to 13.9 percent. These percentages are significantly lower than the average small business credit card interest rates, which typically fluctuate from 13 to 19 percent. Those merchants approached by Amazon Lending were said to be significant sellers of merchandise through the website. Currently, Amazon Lending is only extending loans to sellers based in the United States.

According to the lending program, those merchants approved for short-term loans receive the borrowed funds in their Amazon Seller accounts within five business days. Monthly payments are then automatically deducted from the sellers’ Amazon Seller account until the loans are paid in full.

Good for Amazon and Sellers Alike

The Amazon Lending program will further increase Amazon’s revenue. The company already collects a 6 to 15 percent commission on sales made through their marketplace as well as monthly membership fees for larger sellers. By lending to its own merchants, the company stands to earn more money as their sellers potentially gain more merchandise to market.

It is anticipated Amazon’s short-term loans will give merchants a chance to develop and flourish, especially ones new to the marketplace that may not be able to otherwise secure bank loans during a tight market. The company expects these prequalified loans to help merchants purchase inventory and ultimately increase sales, especially during the upcoming holiday season.

The Program’s Drawbacks

Some Amazon merchants, however, are hesitant to enter into a loan from a company they otherwise rely on to market and sell their products. There are concerns, for example, whether such a relationship would be too close for comfort in the event the loan goes into default. In addition, those who already pay Amazon to store, package and distribute their products fear they might ruin a good business relationship if they are suddenly unable to make payments.

Jordan Malik, founder of a product-sourcing service for merchants called, compared the short-term Amazon Lending loan to a typical car loan. If payments aren’t made, the bank can repossess the car, he said. Similarly, if a merchant is forced to default on the Amazon loan, Amazon has a connection to the seller’s account.

Those merchants who utilize additional outlets to sell products, such as eBay, have also voiced concerns about whether committing to a loan with Amazon would eventually prevent them from utilizing a different online company simultaneously in the future.

Economists, however, say access to short-term loans at a low interest rate may be the answer this holiday season, helping many small businesses increase their inventories without relying on bank loans or credit during a tight market.

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].

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    1. Barr, A. (2012, September 27). Amazon offering loans to its online sellers. Retrieved from
    2. Duryee, T. (2012, September 28). Amazon Quietly Jumps Into Another Business: Lending Money to Sellers. Retrieved from
    3. Needleman, S. & Bensinger, G. (2012, October 4). Small Businesses Are Finding An Unlikely Banker: Amazon. Retrieved from
    4. ChannelAdvisor. (2012, September 27). Amazon Lending - Amazon starts loaning capital to sellers to help them scale. Retrieved from