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FBA Loans: Funding Your Amazon Fulfillment Business’ Startup Costs

July 30, 2021 • by shall

Amazon sellers can increase their sales by as much 30% to 50% by simply enrolling in FBA. As a seller, the increase in sales is good for your revenue and profits, but you need to keep inventory in stock if you want to meet the demand of consumers. FBA loans can help you:

  • Finance product purchases
  • Secure discounts from bulk purchases
  • Buy equipment, etc.

Covering your startup costs, especially in the initial growth stages, requires access to funding at the right time. A massive loan when you’re just starting out without many sales may help you secure products that no one is buying, leaving you in debt.

But if you have revenue coming in, you can leverage deals with vendors to increase profit margins.

5 FBA Loans to Help Fund Your Startup Costs

1. Amazon Lending

Amazon has a stake in your business’ success, and the company offers small- and medium-sized loans to help you grow your business. Amazon Lending has a lot of benefits:

  • Applications are all done online
  • If approved, funds are dispersed in five business days
  • Fees are all provided upfront

Funding can be used to expand your product line, purchase bulk inventory and reach more customers. You can secure a loan from Amazon Lending or a line of credit, which is funded by Marcus (Goldman Sachs).

Amazon will often reach out to you to offer lending options, and payments are deducted from earnings, making it easy to stay on top of your loan repayment.

You will need to be established on Amazon with a steady stream of revenue to be approved. For anyone that has been running an FBA business and has been slowly growing it during their first year, Amazon Lending is a great option when expanding and offers fantastic rates.

2.Kabbage Line of Credit

Kabbage is an online lender that offers small business loans up to $250,000. The lender offers lines of credit and states that they will look at a few important factors when you apply for the loan and not just your credit score.

The application process is fully automated, and they’ll review your business’ health to ensure a loan is a good option for you.

There’s no paperwork involved, and there’s no obligation to use the line of credit if you don’t need it. You can keep the line of credit open so that you have working capital when you need it most.

Secured and unsecured lines of credit and loans are available.

3. Peer-to-Peer Loans

A peer-to-peer, or P2P, loan is a good option because multiple people will be helping fund your business operations. There are a lot of companies offering this type of lending, including LendingClub, Peerform and Upstart.

When applying for these loans, you’ll be required to disclose how much you want to borrow and may need to put in your desired interest rate, too.

Supplying information on why you need the loan can also help. Investors want to know that you have revenue coming in and are using the loan wisely. If you’re planning to boost your operations, there’s less risk than someone that is just starting out and needs a loan to make their first sale.

If potential lenders bid on your loan, you’ll get the funding you need for your Amazon business. It’s important that you have a strong, personal credit history when applying for a P2P loan because it will play a major role in the loan being funded.

A major benefit of P2P lending is that you have a lot of control over the entire process. You can review terms and spend time deciding which loan is a good option for your business. The downside is that funding and approval times can be longer with a P2P loan than with other loan options listed.

4. SellersFunding

SellersFunding is designed to help eCommerce stores secure the capital they need in as little as 48 hours. When you use SellersFunding, it’s a company that was designed with Amazon sellers in mind.

A few of the key benefits of working with SellersFunding are:

  • You can receive up to $1 million in working capital
  • Daily advances up to 90% of the previous day’s sales are available

You’ll also have the option of paying your suppliers using 37 different currencies and can make payments to 180+ countries. SellersFunding has helped 12,000+ eCommerce businesses fund their operations.

5. Additional Forms of Funding to Consider

Lenders try and control their risks as much as possible. You may find some lenders willing to fund your startup costs before you make a sale, but you’ll likely need some alternative forms of funding, too:

  • Credit cards are a high-risk option for you, but they can also be used to help you buy the initial inventory you need to begin making sales.
  • Family may provide you with the capital you need to start your business. Jeff Bezos took investment money from his parents, which helped him turn his small business into the world’s largest online retailer.
  • Savings is another great way to fund your business, but you’re assuming all of the risk.

You can also take equity out of your home, apply for a personal loan or find other creative ways to finance your small business. But you need to consider your risks when choosing these funding options.

Wrapping Up

Expanding outside of Amazon is always a good thing. As you grow your business, it’s important to realize that you’re at the mercy of Amazon’s fees and rules. Using your loan to open up your own eCommerce store or even secure merchant services equipment, such as mobile payment processing solutions, can help you further expand operations.

When you have money coming in from FBA and outside sales, you’ll find that securing loans in the future is easier because you have multiple revenues streams.

FBA loans can help cover a lot of the startup costs during your initial growth phase as an FBA seller. Taking out a loan, when you’re planning to expand or opportunities arise, is good for business. But it’s ill-advised to take out a loan if sales are rolling in and you don’t have plans to expand.

Loans, when strategically used, can help you fuel your business growth and expand into new markets while also keeping your profit margins high.

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