Choosing the best ecommerce loan - Is Amazon Lending right for you?

May 5, 2022

Learn about Amazon Lending, and what it means for your books and taxes - in words you can understand.

Choosing the best ecommerce loan - Is Amazon Lending right for you?

Starting way back in 2011, Amazon understood the importance of providing small business loans to their sellers to grow both your business as well as their marketplace. 

Since then, Amazon and its partners have lent over $800 million dollars in loans to small businesses like yours.

Let’s talk a bit about how Amazon Lending works, how to understand if you are eligible, and what it means for your books and taxes.


What is Amazon Lending?

Amazon loans are invitation-only with amounts ranging from $1,000 to $1,500,000. If you receive an invitation, it's not a guarantee that you can get a loan but rather an invitation to apply.

Amazon determines if you are eligible based on a set of criteria, such as your sales volume and other performance metrics. Essentially, Amazon sizes up your business to determine if a loan to you would be relatively low risk.

Here are two types of loans that Amazon offers: 

1. Interest-only loan

With this loan, you have a lower monthly payment for the first 3 months, which covers interest only. The monthly payments between months 4 and 12 increase to cover both principal and interest.

2. Term loan

With this loan, you pay down the amount borrowed and interest with equal monthly payments throughout the term of the loan. Each payment consists of both principal and interest.


Amazon Lending highlights

Here are some of Amazon Lending’s main highlights:

  • Applicable to Amazon Marketplace sellers only
  • Fast application process
  • Loans are granted for a period of 3, 6, 9, or 12 months
  • Amazon offers the loan by invite-only to sellers that meet certain metrics 
  • Terms of each loan invitation are fixed and cannot be negotiated
  • Amazon does not publicly disclose the interest rates but they are generally between 3% - 18% APR
  • Amazon doesn't charge origination fees or prepayment penalties
  • Amazon tends to offer a lower interest rate for your first loan borrowed
  • You can only use the funds to build or restock inventory for your Amazon business
  • Your Amazon inventory serves as collateral for the amount you borrow


Amazon deducts the payments directly from your periodic settlement as an Amazon seller.

You can also initiate additional loan payments at any given time to decrease the principal, reducing the cost of the interest as well. And they won’t charge you a prepayment penalty. That's refreshing.

Eligibility factors

You can only get an Amazon loan if you’re an Amazon seller. While Amazon does not reveal their specific qualification factors, sellers have previously reported receiving an email from Amazon, mentioning the following pre-qualification requirements:

  • Amazon selling history of at least 12 months
  • Total sales of at least $10,000 in the past 12 months
  • Customer satisfaction metrics
  • No serious customer complaints in the past six months
  • No outstanding copyright or trademark infringement complaints
  • Compliance with Amazon listing style guides


Pros and cons of using Amazon Lending

Let's review Amazon Lending's main pros and cons:

Amazon Lending Pros and Cons

Accounting treatment

Amazon's loan is a traditional loan where the interest expenses are determined based on an interest rate (percentage), the loan principal outstanding, and the time period.

How does Amazon Lending impact your books?

Upon receiving the loan advance, you should record a short-term liability on your balance sheet. There is no effect on your income statement.

Under both accrual and cash accounting methods, the repayment of the loan principal should reduce the loan liability on your balance sheet with no impact on your net income.

You incur the interest expenses daily and pay monthly, together with a monthly repayment of the loan principal. The accounting treatment for those monthly payments will depend on whether you manage your books under the accrual or cash method of accounting.

Accrual method

The interest expenses that you accrue (i.e., owe) but have not yet paid should hit your income statement throughout  the loan. Until you pay these expenses, you should record the balance owed as a short-term liability in an accrued interest account on your balance sheet. Your actual monthly payments will not impact your income statement but instead will reduce the accrued interest liability on your balance sheet.

Cash method

If you report on a cash method of accounting, you should record the interest expenses in your income statement when you pay them every month. You won’t have an accrued interest account on your balance sheet.


Does Amazon Lending impact your taxes?

Your interest expenses are tax-deductible and reduce your taxable income. 

Since you’re paying interest every month, there is no significant difference between the accrual method of accounting and cash method of accounting on your tax return.


Final thoughts on Amazon Lending

Growing an Amazon business often requires steep marketing costs, inventory investments, and other cash outlays. Amazon Lending can be a great option to help you get the funding you need but there are a lot of factors that should be considered. 


How can you evaluate Amazon Lending against other financing options?

It's important to find the best financing option for your business by comparing one universal rate to understand the real costs of each alternative.

While rates and fees are often offered differently from different lenders, you can check out our free ecommerce loan calculator in order to calculate the annual percentage rate (APR) for your funding options, compare different APRs (e.g., Shopify Capital, ClearCo, Paypal Working Capital), and choose the best option for you! 


About Finaloop

We are a technology company providing automated end-to-end accounting services to ecommerce businesses. Our system connects to your apps, syncs all your data, and reconciles your books in real-time, replacing your bookkeeper. We offer reconciled books available 24/7, tax-saving insights, and a single place for all your financial data.

*The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. Readers are advised to consult with their attorney or accountant with any questions or concerns.*

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