Amazon launches merchant cash advance program

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Diving Brief:

  • Adding another financial service for its sellers, Amazon has partnered with Parafin, a US-based financial services company, to offer cash advances to merchants, the e-commerce company announced on Tuesday.
  • Sellers can access between $500 million and $10 million to grow their business without fixed terms, credit checks, late fees, or cumbersome paperwork. Amazon will offer its sellers cash advances on a flexible payment schedule based on a fixed percentage of their gross merchandise sales until the loan is repaid.
  • Merchants won’t have to make minimum payments, pay interest and provide collateral for the loan, but they do have to pay fixed capital fees. Amazon is introducing the funding option to select U.S. businesses starting Tuesday, and it will make the service available to “hundreds of thousands of sellers by early 2023,” according to the announcement.

Overview of the dive:

Amazon is further entrenching itself in the financial services sector. The retailer has rolled out its cash advance option alongside its current financial products, including term loans, interest-only loans and lines of credit from Amazon and its third-party vendors.

“Today’s launch is another step in strengthening Amazon’s commitment to sellers and builds on the strong portfolio of financial solutions we already offer,” said Tai Koottatep, director and director. General Manager of Amazon WW B2B Payments & Lending, in a statement. “This latest offering dramatically expands sellers’ reach and capabilities, and broadens their access to capital in a flexible way, helping them control their cash flow and, by extension, their entire business.”

Besides the cash advance program, Amazon has meddled more with its sellers’ finances. In July, the company unveiled a digital wallet service to allow merchants to hold and transfer their wallet funds to their bank accounts. Aside from currency conversion and international transfer fees, the service was otherwise free.

The e-commerce giant has also meddled in buyers’ finances. In April, Amazon launched its “Buy with Prime” service, allowing customers to shop on non-Amazon websites using their saved payment information and access Prime benefits. Last month, the company announced that it start accepting Venmo payments through its website and mobile application.

Amazon is pursuing businesses outside of retail as it may not achieve profitability. In September, the company began offering sellers free access to its shipping technology to speed up their fulfillment operations and reduce delivery costs. In its second-quarter earnings report, the company saw net sales rise 7% among AWS’s cloud division and other services, but its online retail sales fell 4.3% to $50.9 billion.

But in the third quarter, the company’s e-commerce retail sales rose 7% from a year ago to $53.5 billion, and sales at its physical stores also rose 10% to $53.5 billion. reach $4.7 billion. However, its North American branch lost $412 million in revenue compared to 2021. During its third-quarter conference call, the company acknowledged the possibility that its profits could disappear in the next quarter and that its operating profit would be between 0 and 4 billion dollars.

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