In the past, setting up a retail business would require a lot of funds. These funds would include more than just purchasing costs. The funds also include store setup funds, hiring human resources, and repairs when needed. On the other hand, the e-retail segment has made it easy to set up shop online for sellers. With retail giants like Amazon, you can set up your brand store with minimal costs. The cost of starting an Amazon fulfilled business is way less than a traditional retail business. However, today, the costs can run up to thousands too. As a starting seller, you might have these thousands in your savings or might even have no protection at all. In such cases, you need some funding to back your business. Such funding either comes from investors or loan givers.
Taking a loan or some funding is useful because an Amazon-backed business rarely fails. Sellers on the Amazon fulfilled platform have reported nearly 66 percent growth in average profit in the initial 18 months. Therefore, if you have the opportunity to take a business loan for the startup, take it. However, there are chances that you may not be able to get a loan through traditional lenders because such companies do not offer many options to small-scale online businesses or Amazon business loans.
However, there are few unique options from which you can derive funding for your Amazon FBA business. Here are the few funding options discussed in detail to give your online business the perfect start.
3 Funding Options for Amazon FBA Businesses
Amazon Sellers Funding
There are many platforms online that provide funding to Amazon sellers. Such platforms check your existing store’s performance score to grant funding. These platforms use an artificial intelligence algorithm to ensure that the performance score is accurate. The platforms judge your business’ sales history and also look for your relationship with Amazon. If all these criteria are met, and everything is in order, you will get your loan.
Another positive aspect of this platform is the ease of application and taking only five minutes to complete. If the loan is approved, it reflects in the sellers’ account in one to two days. Thus, a seller can immediately start working on his business through the loan.
Moreover, Amazon offers a 90 day grace period before you need to repay the loan. Additionally, a seller can take another loan for the same business if 50 percent of the previous loan is repaid. Thus, the seller does not have to worry about funds if the industry advances at a steady, progressive rate. Even when you have hit a roadblock, you can get more funds with partial payment.
The Amazon seller funding is also preferred because it offers no hidden charges or prepayment hassles. Moreover, you do not have to give collateral like in the traditional system of lending. The platform takes a lot of other factors into consideration and even considers personal guarantees.
Lines of Credit
If Amazon Sellers funding does not offer you a loan or you need more than what is being given, you can look into other lines of credit. Other trusted online lending platforms like PayPal also offer lines of credit to sellers. With online lines of credit, you can apply for a loan in minutes and get a loan in minutes too.
Another tactic you can adopt is that if you have got an additional line of credit, you can keep it as a plan B. After this, you can turn to this line of funds when your business needs that extra financial impetus. With online lines of credit, you have minimal prepayment penalties and flexible terms. On the other hand, the rate of interest is also low and loose. Thus, it is good to depend on online lenders than traditional business loans.
Merchant Cash Advances
MCAs or Merchant cash advances are very speedy in processing. Thus, they offer a massive advantage to the sellers. The sellers can now easily apply for funds under this model and get them quickly too. The speed of some MCAs is such that many sellers get the requested funds within hours of applying and qualifying. MCAs can be used in the online mode and need significantly less paperwork. Therefore, it is convenient for new sellers.
Moreover, a seller does not require collateral to apply for MCA loans.
On the other hand, your credit score is also not the sole decider of your eligibility. The Merchant Cash Advance companies have a significant drawback of high-interest rates. However, if you are okay with the high-interest rate, you should apply for an MCA. But if it doesn't work out you may need to contact a law firm to get out of it.
With the right funding, an Amazon-backed business is nearly guaranteed success. Sellers on the Amazon fulfilled platform have reported a 66 percent growth in average profit in their first 18 months with this type of support from the company. If you’re looking for help growing your small online business or starting one up altogether, take advantage of these opportunities to get more loan options and find out how we can help!