Amazon.com Inc. has decided to continue its Amazon Community Lending program, which it launched a year ago, as a long-term product to help sellers grow. It also partnered with downtown-based BSD Capital Inc., which operates under the name Lendistry, to help it support small businesses with short-term loans.
Since its launch, the program has lent more than $35 million and plans to lend more than $150 million to U.S. Amazon sellers over the next three years. Lendistry offers loans ranging from $10,000 to $250,000 with terms of up to 5 years.
Amazon sellers (who account for more than half of all items sold on Amazon) obtain loan approval through the program to use the funds to grow and meet other strategic business needs, such as staffing and operating costs, inventory, product development, and manufacturing and marketing efforts to build own brand and expand customer base.
“Amazon believes that businesses of all sizes should have access to financing, payment options and money management tools,” Tai Koottatep, director and general manager of Amazon B2B payments and lending, said in a statement. “The Amazon Community Loan Program is designed to help provide working capital for sellers in socially and economically disadvantaged communities as well as one-on-one mentoring, educational programs, webinars and courses to help them grow now and in the future.”
Much of the money Lendistry pays goes to traditionally low- and middle-income communities, minority businesses and other historically disadvantaged business owners. The program also provides small businesses with access to resources from Lendistry, including one-on-one consultations, webinars, and on-demand educational courses.
When Lendistry launched in 2015, the black-led company was designed with minority business owners in mind.
“When you think about community lending, it’s not a panacea, it’s not a panacea. You have to have multiple products to help a community get funding,” said Everett Sands, CEO of Lendistry. People who are struggling. “
Lendistry provides small business loans, commercial real estate loans, and assistance for government and private programs.
“We have a terminal that businesses typically use to improve their cash flow, to refinance higher debt … and a (revolving) line of credit that (small businesses) are using to make lease improvements (or ) tenant improvement,” Sands said. “We have SBAs that can be used for business acquisitions, debt consolidation[and]working capital expansion. Sometimes we have specialized products, like Amazon Community Loans, which are
Focus on one of our partners and provide access to capital for their constituents. “
Sands said Amazon recognizes that its constituents want access to funding and that a responsible lender understands the technology needed to create a streamlined process.
“What we’ve been able to do is work with Amazon, the key technology team, to automate the collection of data and pre-approve these small businesses,” Sands explained. “Once these small businesses are pre-approved in their Amazon seller dashboard, they will see their pre-approval. They can click a button and this red button will actually take them to the Lendistry application, and then they can apply for a loan.”
In addition to Lendistry, sellers can borrow directly from Amazon Lending or open a line of credit with Goldman Sachs’ Marcus.
“But as a seller, you have control over the debt you take on, but I think the real key to working together is that both the seller and Amazon know that this borrower is dealing with a responsible lender. Lenders that offer educational programs, there are lenders that offer different products, I think that’s really critical,” Sands said.
The success of the program depends on customer feedback, but more importantly on risk management, Sands said.
“Are the customers paying us back? Are we really able to build real repayment capacity? One of the things we want to do is launch another revenue-based financing in partnership with Amazon,” Sand explained. “So, with Amazon products, we don’t need two or four years of tax returns, we do those things with some of the more traditional loans. We’re actually using data from Amazon, like sales or returns and how much they Time spent on the platform. All of this goes into the ‘solvency’ equation.”
Sands added that looking at tax returns and personal financial statements is a good way to determine the right type of loan. When it comes to e-commerce borrowers, however, lenders can gain more protection by reviewing the financial health of small businesses.
The loan company’s revenue comes from initial fees and “spreads”.
“For Lendistry, we do have an origination fee…up to 3%. That’s a factor in the rise in interest rates that we’re trying to monitor now. We also spread on loans we borrow from banking institutions and then lend them out, so interest The difference is the difference between what we borrow and what we lend,” Sands said. “It also includes what we call loan loss provisions. We set aside some of that in case borrowers default.”
Small Business Perseveres
According to Angela Watts, a co-founder of San Clemente-based Slyde Handboards and an Amazon seller, the loan program helped her effectively borrow $29,900.
“The great thing about this program is that it’s just a click of a button. Business owners are very busy and it makes sense that they approve our loans based on our history of sales and relationships with Amazon. They can see that our historical data is already What. They have all the information on our income,” Watts said. “A lot of the loan programs, it’s on your own credit; you have to guarantee it yourself. (With Lendistry) it’s all through the business. Because of that, I went with them against another program.”
Watts, whose company sells handboards for body surfing, has been in business for 12 years, and she said she believes it’s in everyone’s interest for small businesses to get adequate funding, adding that she thinks government loans like those administered by the SBA are “outdated.” And a retrofit is needed to make it easier for borrowers to navigate.
“Amazon and Shopify, they need us to survive,” Watts said. “Hopefully, in the next year or two, the SBA will move with the times and help small businesses get funding, but at the same time, Amazon, Lendistry, and Shopify are the easiest, quickest options, and the least hassle.”
Small business owners still face challenges that have emerged during the pandemic, said Pat Nye, regional director of the Los Angeles Regional Small Business Development Center, a government-funded program that advises small businesses.
“Emergency resources such as (Emergency Injury Disaster Loans), (Paycheck Protection Program), relief grants during the pandemic have been great and have helped a lot of businesses, but right now there aren’t as many resources and businesses are still struggling,” Nye said. “They went from being shut down to high interest rates and inflation, so the economy never really improved in some ways, or got worse in some measures, but there weren’t as many emergency resources to try and fix that.”
Nye noted that repayments on EIDL loans will begin soon, but many businesses that have had to borrow are unable to repay them.
“I feel like people who are trying to weather the pandemic are about to have a hangover, and it’s really not getting better, or even worse. They’re going to have to make some tough decisions,” Nye said.
Another key issue facing small businesses is a tighter labor market. Nye said companies he has worked with have found it difficult to find and retain employees.
“During the pandemic, we’ve really seen a huge increase in the number of customers we serve.
Before the pandemic, in my region alone, we were seeing an average of about 7,000 customers per year. At the height of the pandemic, we saw about 15,000 people,” Nye said.
“The other thing I would say is that we tend to work with a lot of very diverse communities, and the impact of the pandemic has even exacerbated that. We’ve seen increases across all the different demographics. We’ve Seeing a lot of growth in historically underrepresented communities. I’m very optimistic that some of the changes brought about by the pandemic are driving some activity and our ability to follow up and focus on some communities that may not have the resources they should have.”