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Amazon.com has gone from selling books, to selling electronics, to now selling debt. A select few Amazon merchants are now being offered business loans by the online giant. Businesses may find that Amazon loans are available when traditional sources of financing remain closed.
A business needs financing to grow. However, in these tough economic times, you probably need a rock-solid business with several years of positive growth to receive any money from a bank.
So many businesses have turned to business credit cards (and their high interest rates) to fund the growth of their business. With Amazon joining the lending business, merchants may now be able to receive a loan with much more favorable terms than available elsewhere, reports The Wall Street Journal.
You can't get a lot of money with an Amazon loan, nor can most businesses access such loans. Through anecdotal evidence, the online company offers loans from $1,000 to $38,000 with interest rates at about 13.9%, reports the Journal.
By comparison, credit card interest rates typically start at 13% and range upwards to 19%. Typically, the only ones offered Amazon loans are heavy sellers on Amazon's website.
While Amazon loans may offer attractive rates, one may still question whether it is wise to accept such a loan.
A major concern is that businesses already so reliant on Amazon may find themselves tied to the company even more. Along with offering a forum for sellers to sell their wares, Amazon has gotten into the packaging and shipping business, delivering merchants' products for them. With this convenience also comes access. For example, if you default on a loan payment to Amazon, some merchants have expressed concern that the company could hold your inventory hostage upon default, reports the Journal.
In addition, with so many ties to the company, other merchants expressed concern that they may find it more difficult to sell their goods on platforms other than Amazon.