How Do I Qualify For an FBA Loan

The FBA (Fulfilled by Amazon) business model has seen tremendous success and features millions of sellers. FBA loans are also elaborate and customized to meet unique seller needs. Before applying for a loan, Amazon sellers should evaluate existing options and their suitability. Banks, credit companies, and lenders offer various loans, including merchant cash advances, P2P loans, line of credit loans, and more. Each has unique qualification procedures.

Qualifying for the Amazon’s ALP Loans

The Amazon Lending Program (ALP) is an exclusive loan product for registered FBA sellers. If you sell goods on Amazon, you may be invited to the lending program, which offers loans of up to $750,000. The Amazon Lending Program is invitation-only, so you’ll have the opportunity to apply for a loan of $1,000 if you meet the eligibility requirements. Amazon will send an invitation to your seller account.

Qualifying for an ALP loan involves the following:

  • Selling On Amazon: You must have a registered Amazon seller account and run an active FBA eCommerce. The loan is for your Amazon store inventory and is unusable on other platforms.
  • Meet Sales Threshold: Sellers must have annual gross sales exceeding $10,000, with a proven record of consistent sales growth.
  • Excellent Customer Service: Amazon Lending Program considers sellers with a growing reputation and demonstration of exceptional customer service. You’ll need high customer ratings and a track record of fast complaints resolution.
  • Follow Amazon Guidelines: Sellers found to violate Amazon guidelines risk getting their stores closed and accounts suspended from loan products.
  • Avoid Copyright Infringement: Amazon is strict on trademark and copyright laws. Stores with copyright infringement and complaints are excluded from the loan products.

Qualifying for Merchant Cash Advance Loans

A merchant cash advance loan is one of the best products for eCommerce sellers yet to be invited to the Amazon Lending Program. MCA loans are lump sum amounts offered in exchange for your future invoices/sales. The lender will deduct payments automatically from future credit and debit card sales.

Read Also: Pros and Cons: Different Types of Home Loans for First Time Buyers

Sellers looking for FBA loans can leverage the low factor rates of MCA loans. Eligibility is different for each lender but generally involves the following:

  • Minimum Credit: Most lenders have a set minimum credit threshold, so sellers must maintain good to excellent credit scores. The loan is based on a personal credit score, and most lenders require a score of 620 or better.
  • Sales Threshold: FBA sellers must demonstrate steady monthly sales to qualify for most merchant cash advance loans. Lenders have varying minimum sales thresholds and will request your monthly bank deposits to ensure you meet the minimum sales requirements.

Qualifying for Business Term Loans

Business term loans are perfect for FBA sellers and come with fewer restrictions. You can spend the loan on different aspects of your business, including marketing, advertising, inventory, or payroll. Sellers can find business term loans at local and online banks, credit unions, and direct lenders. The loan is a lump sum with fixed interest and monthly repayments. Lenders have unique requirements, interests, and terms. Qualifying for such loans involves the following:

  • Credit & Sales Threshold: You need to meet the lender’s minimum credit score and sales threshold. Most lenders require scores of 500 to 600 or more and gross sales of at least $100,000 per year. You’ll also need proof of business and address details.
  • Business Longevity: Most lenders offering business term loans need proof of longevity. FBA sellers with more than a year of active operation are considered for higher loan products. Startups may struggle to get a favorable term loan.

Other FBA Loans and How to Qualify Credit-Card Loans

Ecommerce sellers on Amazon have many other loan products, including credit cards, peer-to-peer, and personal loans. Line of credit loans are popular and involve using your business and personal credit limits to finance your Amazon store. You must apply for a credit card and work your limit through regular repayments. 
If credit card loans aren’t ideal, consider peer-to-peer financing, which involves signing up with a reputable P2P platform. You can then post your business and loan requirements, and investors can bid on the business. Each lender has unique eligibility requirements and loan terms so that you can choose the best deal from your bidders. 

FBA sellers can also apply for personal loans, including collateral secured products. Factoring and payday loans are other options, but not all loan products are excellent. Some offers feature high-interest rates, short repayment terms, and huge late repayment fees. FBA sellers should review each loan to find the best product for their business and finances. 

Finding the Best FBA Loans 

Ecommerce sellers can approach local banks, credit unions, direct lenders, P2P platforms, online lending businesses, and more for loan products. Finding a loan isn’t a problem regardless of your score, years of service, and gross sales. The challenge is identifying a suitable loan for your needs. Whether you sell on Amazon or other marketplaces, you should review each loan product to determine its implications for the business. 

Your store should comfortably fulfill the loan terms and benefit from the lump sum. Make sure you review the contract, disbursed amount, interest rate, repayment term and installations, late fees, etc. Using reputable lending platforms can help you identify the best FBA loans for your enterprise. The priority is to receive the needed cash with reasonable repayment terms.

By Manali