Amazon has debuted a cash advance solution for merchants selling on its site as small businesses seek more sources of growth capital.
According to a Tuesday (Nov. 1) news release sent to PYMNTS, the financing solution is provided by Parafin, a FinTech founded by veterans of Robinhood.
“This secure financing option ties payment on the cash advance to a portion of sellers’ future sales for a fixed capital fee and provides eligible Amazon sellers with easy and quick access to capital when they need it, paired with flexible payment plans,” the company said.
The program lets sellers access capital — anywhere from $500 to $10 million — in days with no credit checks or “excessive paperwork” and no late fees. It is launching Tuesday for some businesses in the U.S., and will become available to “hundreds of thousands” of sellers by early next year, Amazon said.
The program is open to sellers who have been selling on Amazon for at least three months.
Read more: Online Sellers Needing Capital Turn to FinTech Lenders Who Know the Terrain
Earlier this year, PYMNTS noted the changing landscape for online sellers trying to get financing in a conversation with Payability Co-founder and CEO Keith Smith.
“Five years ago, if you were an eCommerce seller, it was very, very difficult to be able to get financing,” Smith said. “You’re an online only business. That means banks and traditional finance companies aren’t going to be able to finance you, or even figure out how to be able to risk assess you.”
Considering that pandemic disruptions made it difficult for even major corporations to get access to capital the shock to marketplace entrepreneurs was far greater. However, the situation also created an opening for others.
“It’s difficult to find your footing at this point in time and figure out what is a normal [or] typical cycle, what is seasonality going to be for particular products this year, and not being able to necessarily compare to prior seasonality from the last couple of years,” Smith said. “It’s a bit of a challenge for us, and certainly challenging for our customers.”
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