Amazon.com Inc.’s lending business is accelerating,
highlighting one more way the online retailer is making money from
e-commerce beyond simply selling products in its web store.
The company issued $1 billion in loans in the past year to
merchants selling on its marketplace. Amazon launched the lending
business in 2011 and uses data from more than 2 million merchants to
identify those it deems credit worthy. Transaction processing companies
PayPal Holdings Inc. and Square Inc. offer similar credit options using
data from their payments businesses, creating new financing options for
small merchants that could have trouble securing loans from banks.
Amazon charges merchants a commission on sales. PayPal and
Square receive fees for payments. The idea of the lending business is
that they will benefit by helping their customers grow. Amazon also
charges its merchants for storage in the company’s warehouses and
packaging and delivery services.
The Seattle-based e-commerce giant has lent $3 billion to
more than 20,000 small businesses in the U.S., U.K. and Japan, the
company announced Thursday. PayPal in May announced it has issued more
than $3 billion in loans to more than 115,000 businesses globally
through its PayPal Working Capital program launched in 2013. Square said
it has provided more than $1.5 billion in loans and merchant cash
advances since launching in 2014, including $251 million in the first
quarter.
Amazon uses algorithms to identify merchants with good
selling histories, who are offered loans ranging from $1,000 to
$750,000 payable within one year. Those taking loans repay the
company through sales made on the site.
Merchants often use the loans to buy more inventory and
expand their businesses with new products, said Peeyush Nahar, vice
president of Amazon’s marketplace, who speaks Thursday at the
Internet Retail Conference and Exhibition in Chicago. Amazon didn’t
disclose interest rates for its loans, but said they are lower than
credit cards and cash advances merchants would otherwise use.
“We give them access to capital when others don’t
because we get their business model when maybe others don’t,” Nahar
said.
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