If you’ve ever taken out a business loan from a bank, then you’ll know that the process is complex, and takes a long time to complete. There’s credit history checks, business plans to draw up, and even after all that effort, online sellers are often declined because the banks don’t understand their business model.
But now there is another way, thanks to the cutting-edge technology used by online lender SellersFunding. They understand online sellers, and offer features such as up to a 90-day grace period, which allows sellers to source, receive and start selling their products, before having to make repayments.
Better still, their algorithm can pre-approve your loan application in minutes, based on just your Amazon seller name. How is that possible?
SellersFunding is currently offering loans to Amazon sellers in the USA. Other ecommerce platforms and countries may be supported in the future.
How can borrowing help Amazon sellers?
Deciding if and when to take out a loan is a business decision like any other. There are pros and cons to consider, and a careful analysis can help you assess the situation. Generally speaking, there are three occasions when a loan can help.
1. Finance revenue growth
When your sales are growing, you need to keep buying new stock to maintain that momentum. Even as a profitable retailer, you may find, at some point, that the cash flow generated by current sales is not enough to finance your future growth.
This is one scenario where financing makes sense. When your business is strong and growing, a loan is a useful tool, just like the software tools you might use to research products or optimize your listings.
2. Even out sales fluctuations
Most online retailers find, unfortunately, that their sales go up and down. There will be months of successful growth and months of sluggish sales for almost every business, due to seasonality, product trends, the weather and many other factors.
These revenue variations can cause short-term cash flow problems. You have to generate cash to stay in business, and prepare for when sales pick up again. Discounts and sales are one option to keep going, but that can mean underselling inventory that would fetch a much better price in the future.
Another option is external financing. This bridges periods when sales are slow so inventory can be held and sold at a higher price when demand returns.
3. Finance buying opportunities
Buying opportunities can come at any time. A supplier might temporarily offer better prices for higher purchase volumes, or you might get the chance to buy a new product line before your competitors.
Maximizing your opportunities is crucial in business. If you react quickly, and take advantage of a few big opportunities a year, that can make the difference between an average business and a stellar business. But, you need financial resources that you can use when the opportunity arises. If you have to wait, you might miss out entirely.
The SellersFunding algorithm
Let’s say you have decided that the time is right for you to get external financing. What’s your next step?
SellersFunding have a unique offering, where they can assess your seller performance and make a provisional loan offer with nothing more than your Amazon seller name. That means you find out very quickly how much you can borrow, and for how long, and can make a well-informed decision about what that would mean for your business.
So how can SellersFunding pre-approve loans with so little information? Well, for the last 3 years, they have been collecting publicly available information on 1.5 million Amazon sellers, so they already know a lot about your business.
Using this data, the algorithm looks at the seller’s past and present performance, as well as predicting how they’ll do in the future. It does this by analyzing aspects such as the seller’s customer reviews, product range and prices, and compares this analysis with its lentire database.
The algorithm will then estimate the loan amount, term and interest rate that would be best for the seller, based on predicted sales over the next 90 days. SellersFunding have found this method to have a high level of accuracy as, in total, the database contains 15 billion data points on Amazon sellers.
What are the different financing options?
SellersFunding offers sellers two different financing options. The first is a term loan, where you receive your loan amount and have up to nine months to repay it. These loans have from a 15 to 90-day grace period and require a personal guarantee, so you are responsible for the loan personally if your company is unable to pay.
The second, is a revenue advance line. With this approach, you are granted a maximum amount you can borrow, based on a percentage of your estimated sales over the next 90 days. The amount you can borrow is adjusted every 30 days, based on estimated sales over the following 90 days.
The SellersFunding database has three years of data, so can identify seasonality accurately. This means that in September, the revenue projections will be much higher, and based on this, SellersFunding will increase your advance line.
The revenue advance line is a flexible form of credit. You don’t have to use the full amount that you are offered, and can choose to pay down the line completely, but then make use of it again when you need to.
Applying for a loan from SellersFunding is straightforward. The first step is to go to their website, choose the type of financing, and fill in a short form. Initially sellers only have to enter their name, email address, phone number, and most importantly, their Amazon seller name.
This information helps SellersFunding to find your record and understand your performance. Then you’ll need to complete the online application and provide information about your seller account and performance.
When this information has been provided, it takes minutes for them to calculate their final offer. This can take slightly longer if any flags or questions are raised when processing the information provided. In that case, SellersFunding will contact you to discuss these issues, and if they approve your application, will aim to make a final offer within a couple of hours.
If you’re happy with the final loan offer, then there are some documents that need to be signed electronically (online). Your loan will then be paid by ACH bank transfer, and should appear in your account within two business days.
Currently the loans are only available to sellers in the USA but they are exploring ways to offer them to sellers internationally.
The way that sellers repay their loans depends on the type of loan that they have taken out.
For term loans, the borrower agrees that SellersFunding will collect payments twice a month, using ACH bank transfers.
For revenue advance lines, SellersFunding have an escrow account. Within this account, each borrower is given a sub-account, and the seller sets up their Amazon disbursements to be paid directly into it. SellersFunding then pays over the funds to the seller, less interest, and sets the amount of credit available for the next 30 days.
If you have a loan outstanding and want to rollover into a new loan, or need to review the terms of your existing revenue advance line, then the best thing to do is talk to SellersFunding. In some cases, they are able to review their terms and make adjustments to the monthly payments, allowing sellers to manage their cash flow needs appropriately.
SellersFunding has big plans for the future. In terms of the application process, they plan to build direct API access to Amazon in the next few months. That will speed up the application process, and avoid the need to manually upload reports from Seller Central.
Alongside loans, they are considering offering a credit card, in response to growing demand from sellers for a more flexible credit option.
Their ultimate goal for the future though, is to offer loans to all marketplace sellers, not just Amazon sellers. As part of this process, they are aiming to expand their database from 1.5 million sellers to five million sellers, by adding data from marketplaces such as eBay and Etsy.
In the more immediate future, the team from SellersFunding will be at the Fort Lauderdale Sellers Summit in May, to answer questions from sellers. Watch out for them on TV, as a segment on SellersFunding was aired on Fox Business and Bloomberg International this April, and is available on their website and on YouTube.
This post was sponsored by SellersFunding.