EcommerceBytes-NewsFlash, Number 2887 - September 07, 2012     2 of 5

Amazon Launches Program to Lend Sellers Cash

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Ecommerce giants as well as startups are seeing lucrative opportunities in offering financing to online shoppers and merchants, from PayPal's Bill Me Later service to - but, unknown to many, has entered the space as well.

Amazon has been sending letters to sellers this year offering them loans through "Amazon Lending by Amazon Capital Services, Inc." Online seller Skip McGrath who writes about selling on Amazon and eBay, received a letter from Amazon recently that offered him funds so he could purchase inventory and increase his sales on

According to the letter, the Amazon Lending loan works as follows: The seller registers for a loan, signing in with their Selling on Amazon Primary Account holder user ID and password. If approved, Amazon advances the funds to the seller's Amazon Seller Account within approximately five business days, at which time Amazon will "initiate a disbursement to your bank account on file." Amazon explains, "Your Amazon Lending monthly payment will be automatically deducted from your Amazon Seller Account."

McGrath uses another financing service targeting online sellers called Kabbage, which offers online sellers working capital advances. Kabbage uses automated data sources to underwrite its business customers including marketplace and PayPal transaction history, customer traffic and reviews, seller ratings and even social networking data. It targets online merchants operating on eBay, Amazon, Yahoo Stores, Etsy and Shopify, and earlier this year, Kabbage hired former Amazon executive Sam Wheeler.

McGrath was not impressed with Amazon's offer, saying Kabbage would lend him more than twice the amount that Amazon was offering. "And," he wrote in his current newsletter, "when I read the Amazon agreement you have to pledge to only use the money to support your Amazon business, whereas Kabbage doesn't monitor that and you can use the money for anything you like."

Other sellers discussed the letter they received from Amazon Lending by Amazon Capital Services. One seller writing on the company's discussion board in January called Amazon's annual interest rate of 13 percent "laughable," and copied some of the fine print from the offer:

Subject to applicable law, you will be in default under this Loan Agreement if any of the following events occur: ........
(iii) your gross merchandise sales on as reported in your Seller Account ("GMS") in any month is less than 50% of your lowest GMS on in any of the prior 12 months,

(iv) the collective value of your units stored in Amazon fulfillment centers in the US, based on your list price of those units on, ("FBA Inventory Value") in any month is less than 50% of your lowest FBA Inventory Value in any of the prior 12 months,

Except as otherwise required by applicable law, if you are in default, subject to any right you may have under applicable law to receive notice of and to cure such default, you agree that we may in our sole discretion exercise any remedy available to us at law or equity or take any or all of the following actions: (I) declare the unpaid balance of your Loan to be immediately due and payable, (II) enforce our rights as a secured party by directing Amazon Services LLC to reserve, hold, and pay to us an amount up to the unpaid balance of your Loan from your Seller Account disbursements until the unpaid balance of your debt under this Loan Agreement is paid in full, (III) enforce our rights as a secured party, by taking possession of your units stored in Amazon fulfillment centers and disposing of them in accordance with the Uniform Commercial Code,.................

If this Loan Agreement is referred to an attorney (who is not our salaried employee) to collect the amount you owe or otherwise enforce the terms of this Loan Agreement, you agree to pay our reasonable attorneys' fees, court costs and other costs of collection to the fullest extent not prohibited by applicable law.

6) Financing Statements. You authorize us to file and, as we may deem necessary or desirable, to sign your name on any documents and take any other actions that we deem necessary or desirable to ensure that our security interest in any item of inventory or your Seller Account is properly attached and perfected.

Other sellers said the 13-percent APR was not a bad interest rate - "13% is a better rate than many small businesses get on the only financing they can obtain, their credit cards," wrote one seller.

EcommerceBytes is awaiting a response from Amazon for more details.

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to

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