Amazon financing gives you the cash flow you need to keep your Amazon inventory stocked so you don’t miss out on any potential sales. If you have the buy box you know how important it is that you keep your inventory stocked, because it can take awhile to win back a buy box once you’ve lost it. In this article, we review your best Amazon financing options.
As an Amazon seller, you typically get paid on your sales once every two weeks. Getting daily payments from Payability can help you buy the inventory you need when you need it. Payability will forward you 80% of your Amazon earnings every business day at a 2% flat fee. The remaining 20% stays in a reserve to cover returns and chargebacks and is released to you on Amazon’s regular two week schedule. Their service is fast and is the most flexible option to finance your Amazon inventory.
Sellers who sign up will often receive their first payment the same day. If you elect to get paid on Payability’s prepaid Mastercard, you can earn 2% cashback on all purchases which can offset the 2% fee. You can put as much or as little of your balance as you want on the card, and signing up only takes a few minutes.
Amazon Financing Options at a Glance
|Who it's Best For||Costs|
|AR Financing With Payability||Amazon sellers wanting to grow their business quickly and stay in the buy box by getting immediately paid for their sales to replenish inventory.||2% of Gross Sales|
|Short Term Loans With OnDeck||Borrowers needing a one time cash infusion to purchase a large amount of inventory.||30-50% APR|
|Business Line of Credit With Kabbage||Borrowers with consistent cash flow needs that are bigger than buying inventory.||10-30% APR|
|Personal Loans With Prosper||Those who don't qualify for other financing options but have a temporary cash flow need.||6-36% APR|
*Updated November 2017
When to Use Amazon Financing to Pay For Inventory
The majority of Amazon sellers use their cashflow to pay for inventory. If you’re waiting for two weeks to get paid by Amazon you’re putting your business at risk of running out of inventory to sell. If you’re currently using your cash flow to replenish inventory and are worried about running out before you can buy more, then you probably need Amazon Financing, or an advance based on your Amazon sales.
Payability offers the most flexible solution to financing your Amazon inventory. Here’s how it works:
Who Needs Amazon Financing to Pay For Inventory
Most Amazon sellers could use financing to pay for inventory. It will help you grow your sales and keep your inventory stocked so that you don’t lose the buy box. An inventory financing solution is important for sellers because Amazon only pays sellers every two weeks. If your cash flow is tight and you can’t replace inventory until you’re paid for your sales, then financing new inventory can make all the difference for your store being a success.
The buy box is one of the most important factors when selling any product on Amazon. If you own the buy box for an item, then you’re likely the one that is going to get credit for a sale when someone purchases with Amazon Prime. When you run out of inventory, you lose the buy box. Losing that buy box could cost you thousands of dollars in sales, and even more during your busy seasons.
Amazon Financing Leads to More Sales
Keeping your inventory fully stocked is going to maximize your sales in any retail environment, and Amazon is no different. You never know when you’re going to have an influx in sales, which could cause your inventory to drop below expected levels. Low inventory can cost you almost as many sales as no inventory. Amazon financing will help you keep your inventory stocked all the time so that you never miss a sale.
According to Victoria Sullivan, the Marketing Manager at Payability:
“On Amazon, cash flow is scalability. Daily payments from Payability allow sellers to buy inventory at the speed inwhich its selling. The more inventory you can move, the higher your overall profits will be. Having cash on hand also gives sellers the competitive edge they need to negotiate with suppliers. Since sellers can pay their suppliers faster, sellers may be able to cut deals for free shipping, percentages off and/or buy in larger quantities.”
Moving large amounts of inventory is a necessity if you want to grow a sustainable business on Amazon. Amazon financing gives you the edge necessary to become and stay competitive in your marketplace. Without financing you could be missing out on a lot of money, and you might even lose ground to your competitors.
Let’s look at an example on how Amazon financing improves your sales. Let’s say you sell 1 product at a volume of $1,000 per day when it’s in stock. That means your revenue every two weeks would be $14,000, if you don’t run out of stock. When you’re starting out you’ll probably only be able to afford a fraction of that inventory to meet the customer’s demand.
So in this example, imagine you spend $2,000 on inventory. Assuming 50% mark up,you’ll be out of inventory within a four days and you’ll need to wait a week and a half before you can even place your next inventory run. During that time you’ll likely lose any momentum you had going towards a buy box, or you’ll lose the buy boxes you previously had. Risking stockouts is no way to build a brand and your daily sales could start to decrease when they could be increasing if you just had inventory.
Take a look at this video where a business owner used Payability’s financing product to fund their inventory. Using Amazon financing allowed her to keep the buy box, and kept the momentum her sales were creating. She’s tripled her sales since she started using Payability’s financing solution, and sees the 2% fee she pays as a worthwhile expense because she can make a lot more money in the long run by reinvesting it faster.
As you can see, using Amazon financing could be the difference between growing a successful business and being forced out of selling certain products by your competitors. If you’ve already made up your mind to finance your inventory, the only decision left is what type of financing to use.
Amazon Financing Options in Detail
Now let’s dive into each of your Amazon financing options in the table above to see which one is the best option for you. Each option can get you funded in as quick as 1 day, but each have varying benefits and costs.
It should be noted that we don’t talk about using credit cards here because we don’t believe it’s a good long term option for small businesses. While a credit card can be used as a supplemental line of credit product to other financing options, it’s not a good fit to fund your inventory as you grow. In fact, you’ll likely outgrow the amount you can put on your credit card pretty quickly. Credit cards can also be an expensive option for the limited credit line you’ll get access to.
Here are the 4 best options to finance your Amazon inventory:
1. Accounts Receivable Financing With Payability
Payability will pay you today for the sales you received yesterday. This is much better than the typical 2 weeks it takes for Amazon to pay you on the same sales. Payability takes a 2% fee for the advance they give you, but they offer the quickest and most flexible Amazon financing solution out there today.
The only costs to Payability’s product is a 2% flat fee on gross sales. It’s the only financing option that moves at the speed of your Amazon business. It allows sellers to finance their inventory with their own money rather than assuming the risk of credit cards or traditional loans. In our opinion Payability’s 2% fee is more than worth the potential for the increased sales you’ll likely get by maxing out your inventory.
The only two qualifications is that you have an average of $2K+ monthly Amazon sales and a minimum of 90 days in Amazon sales history. This is so that Payability can analyze your sales to determine whether their product can help you or not. This is much easier to qualify for than most business loans. There are no credit checks, business or personal.
Time to Funding & Application Process
Payability can fund you today for the Amazon sales you had yesterday. You can feel comfortable knowing that you’ll be able to get the money you need in 1 business day every time. Other financing options have a range of financing days and don’t guarantee anything. Payability gets you financed as fast as anyone, and they’re way more consistent about it.
Here’s a real seller’s story:
To apply you can fill out a quick online form and get started as quickly as today. Everything is automated and you receive the funds directly in your bank account without any additional fees. You can get the financing you need tomorrow to replenish your inventory and grow your business.
2. Short Term Loans With OnDeck
OnDeck is a good option for fast business loans up to $500K. While they’re an option to have cash available for inventory in your business, these loans are a better fit for large businesses with a one time short term cash flow need. If you have a consistent need to finance your inventory then this will be a very expensive option and you’ll have to apply over and over again.
You’ll be charged a mix of a fixed interest rate and fees. Your total APR will fall in the 30 – 50% range. This is by far the most expensive option on the list, and from a cost perspective doesn’t make a lot of sense when compared to Payability.
You can typically qualify if you’ve been in business for at least 1 year, have $100K+ in annual business revenue, and a 500+ credit score.
Time to Funding & Application Process
You can apply by filling out an online application that takes about 10 minutes. You’ll then connect your bank account or accounting software directly to OnDeck who will evaluate your financials and give you a decision within 1 day. You can be fully funded in as quick as 1 business day.
To learn more about a small business loan from OnDeck, you can read our OnDeck review.
3. Business Line of Credit With Kabbage
A business line of credit is the second best option to finance your inventory. It gives you access to a credit line that you can draw on again and again as you have inventory needs. These credit lines work just like a credit card, but they’re typically a little more expensive and fund larger amounts for small businesses.
A business line of credit with Kabbage is just as expensive as a short term loan, costing a total APR around 40%.
You can typically qualify for a line of credit at Kabbage if you’ve been in business for at least 1 year, have a 550+ credit score, and $50K+ in annual business revenue.
Time to Funding & Application Process
It’s simple to apply for a line of credit from Kabbage, filling out an online application that just takes a few minutes. You can be fully funded in as quick as 1 day. These loans are quick but they’re typically for larger cash flow problems and not just for replenishing inventory. It’s an expensive option to use this line of credit to fill your virtual shelves over and over again.
If you’re interested in learning more, you can read our Kabbage review.
4. Personal Loans With Prosper
A personal loan from Prosper is a good loan to get a business off the ground, but isn’t a good fit for consistent inventory needs. It’s an expensive option to fund your Amazon inventory, and it should be considered as a last resort. And you could be putting your personal assets at risk if you get a loan based on your personal assets.
Prosper loans carry an APR in the 6 – 36% range, but typically are closer to 36% than they are to 6%. They vary greatly based on your personal credit profile and assets.
You’ll typically qualify if you have a 640+ credit score and have verifiable household income that you can show is enough to make any potential debt payments with this loan. These loans are the hardest to qualify for, but could be your only option if you’re just starting your business.
Time to Funding & Application Process
You’ll typically get funded in 3 – 5 days after filling out an online application and submitting requested personal documentation to a loan advisor. To learn more, read our Prosper review.
The Smart Hack
While there are plenty of Amazon financing options to fund your inventory, none are as fast or as flexible as Payability. Financing from Payability is automated and only costs a flat 2% fee. You’ll get 80% of your sales up front, and the remaining (minus fees) once Amazon delivers your payments. You can sign up today by filling out a quick online form, and get the financing you need as quickly as tomorrow. Payability is the clear choice for all of your inventory financing needs at Amazon.